Realtors: How do rent-backs work in this hot Austin sellers' market? (Howe: extended stay, sale) - Texas (TX) - City-Data Forum

Idlewile · 02-17-2015, 07:30 AM

Are rent-backs common in this hot Austin sellers' market? There have been more than a few homes in my neighborhood that have closed (a 30-day escrow) but the sellers stayed in them for another few weeks/a month. Maybe this is more common that I think? Perhaps the seller's new home isn't ready... or maybe they are moving out of state and need to wait for their interstate move to line up?

Are Austin buyers generally amenable to this considering it's a seller's market and sellers tend to have more leverage than buyers right now? What about cash buyers?

Do sellers need to state that they want a rent-back before offers come in or do they make that know when they accept/counter?

Who determines the rental price? Do buyers divide out their new monthly mortgage payment (if it includes prop taxes and insurance) and then determine the daily rental rate?

Do sellers stop their home owners' insurance on the close date and have a temporary renter's policy issued to cover them just in case?

TIA for your insight.

Aquitaine · 02-17-2015, 07:36 AM

I've heard of this happening on a fairly short term basis, like days or a week, and there was nothing odd about it. For that amount of time the price is usually going to be a) high and b) not an issue.

For a couple days, I'd just keep the homeowners' policy. For 2+ weeks, I'd get a renter's policy.

10scoachrick · 02-17-2015, 08:16 AM

We leased back for three weeks after selling our house in a matter of hours(OK...it took a weekend). Buyer was ready to close quickly and was keeping the home he was already in; so the timing worked out fine. The contract was written for 21 days(before we figured out what the real 'need' was time-wise); but we should have been out sooner. Turns out we got our new place closed and could have saved the rent for a week or maybe 10 days. At nearly $100/day(his mortgage rate), it was a bit spendy to stay in the $450K house; but the contract was signed. As it turned out(of course), we ended up staying(finishing everything) until the last day of the contract!

I know I'm bad at procrastinating; but I'll wait a while to work on that.

We ended up with a renters' insurance contract per our agent's suggestion.

There was no mention of needing a lease-back until the rapid-fire transaction presented itself. We were buying a new place and didn't want to put off closing the sale of the original house...so we closed as soon as we could and THEN looked at the need for a lease-back. I'm sure the transaction could have been MUCH more complicated if things hadn't 'fallen into place'. IF he had wanted to close 30 days later, we would not have needed the lease-back at all...YMMV and all that.

eirenecat · 02-17-2015, 09:24 AM

We just did this--we had already bought our new home which was being renovated, and we made sure the listing agent for our old home made it clear a lease back would probably be needed. We actually got the last month in our old home for free, and paid the new owners a $500 deposit. My insurance agent told me renter's insurance was not necessary since we already had homeowners on our new home.

riaelise · 02-17-2015, 10:57 AM

The sellers of our new home requested a 14 day leaseback due to the nature of our transaction. However, we are not going to screw our current home buyers by requesting a similar leaseback. Just because it's a seller's market, we still want to be reasonable since these folks desire to move in quickly and they probably have made arrangements accordingly (terminating lease, etc.)

If everything goes smoothly, the sellers of our new home will probably not need the leaseback. I'm hoping that will be the case. I'll be honest, once the deal closes I'd prefer to get the keys to the home and move in.

eirenecat · 02-17-2015, 11:11 AM

Idlewile, I meant to add that our buyers for our old home *were* cash buyers; they were investors who planned to rent our home.

Idlewile · 02-17-2015, 11:12 AM

Quote:

Originally Posted by 10scoachrick

There was no mention of needing a lease-back until the rapid-fire transaction presented itself. We were buying a new place and didn't want to put off closing the sale of the original house...so we closed as soon as we could and THEN looked at the need for a lease-back. I'm sure the transaction could have been MUCH more complicated if things hadn't 'fallen into place'. IF he had wanted to close 30 days later, we would not have needed the lease-back at all...YMMV and all that.

Great info, Rick, thank you. But I assume neither party really would want to extend escrow for fear of 'something happening and not getting the deal done' thus you both preferred to close a quickly as possible (?)... Also, maybe the rate lock on the mortgage could be pushed further out for the buyers if you built in extra escrow time like and many buyers might be uncomfortable with that?

Idlewile · 02-17-2015, 11:16 AM

Quote:

Originally Posted by eirenecat

Idlewile, I meant to add that our buyers for our old home *were* cash buyers; they were investors who planned to rent our home.

Oh, that's very interesting. On the one hand, they had cash and could have gotten in quickly since they didn't have a mortgage (one of the big benefits of a cash sale) but on the other hand, they were just going to rent it out and may not be in as big of hurry to move in as, say, a family would.

I wonder if cash buyers that plan to live in a home would be generally amenable to a lease back situation....

eirenecat · 02-17-2015, 03:57 PM

We looked at several houses in our search where the sellers had done something similar; made it clear with their agent that a leaseback of a month or so (usually less but one house was a 6 week leaseback) was going to be necessary. From my recent experience (we closed December 2014) I would say it is somewhat common. We had 4 different investors who wanted our home and offered cash, and none of them balked at the leaseback.

I don't really feel like requesting a leaseback "screws" anyone except the impatient. Yes, it's a sellers market, but not every buyer even in this market is a Californian with a full cash payment. I think it's unrealistic to expect that the dates for selling and buying will align 100% perfectly and as a family of four (including 2 young children) and 2 large dogs, we couldn't do the "move in an extended stay hotel" thing while our new home was renovated. We knew when the renovation would be complete (it wasn't exactly complete, of course--we had to move in with a semi-functional kitchen and only one working bathroom) and we did the best we could to accommodate the buyer.

G Grasshopper · 02-17-2015, 05:46 PM

When we bought our house in CA, the sellers wanted a month lease-back. The house had sold more quickly than they had expected, and the wedding reception for their daughter was going to be held at the house 2 weeks later. We were renting, and didn't care. It was not a problem to arrange this as a condition of the sale. Actually, it turned out nicely, since the they had really spruced up the house, not just for the sale, but for the reception. The yard was all landscaped to the hilt, filled with flowers, etc.