Need help with a real estate question (extended stay, sales)

[gabbarsingh]

Dear All,

I am about to sign the contract to buy a house. The seller has agreed to our offer with the condition that we would let them stay in the house for about two months past the closing date. They would pay us a rent equal to the monthly mortgage payment (BUYERS PITI) for those two months.

Two questions:
1. In the temporary lease addendum to the residential contract, the sellers have indicated a deposit of 60$. This amount looks really small to us given that the monthly rent would be in the vicinity of 1500$. Since we do not have any prior experience with such a structure, I am writing to request some advice from the many experienced folks here. Do you think that a deposit of 60$ is reasonable or should I ask for a bigger amount as deposit?

2. Just adding BUYERS PITI as the rental amount per day looks pretty vague to me? Is there a way to make this more specific?

Thanks in advance for all your help.
gs

[SmartGXL]

Originally Posted by gabbarsingh

Dear All,

I am about to sign the contract to buy a house. The seller has agreed to our offer with the condition that we would let them stay in the house for about two months past the closing date. They would pay us a rent equal to the monthly mortgage payment (BUYERS PITI) for those two months.

Two questions:
1. In the temporary lease addendum to the residential contract, the sellers have indicated a deposit of 60$. This amount looks really small to us given that the monthly rent would be in the vicinity of 1500$. Since we do not have any prior experience with such a structure, I am writing to request some advice from the many experienced folks here. Do you think that a deposit of 60$ is reasonable or should I ask for a bigger amount as deposit?

2. Just adding BUYERS PITI as the rental amount per day looks pretty vague to me? Is there a way to make this more specific?

Thanks in advance for all your help.
gs

1. I would ask for a refundable one month's rent as a Security Deposit, IN ADDITION to the two months rent that they would be paying you.

2. I would edit the contract, so that the per diem rent is specified as a dollar amount - for example, if your PITI is $1500, then the per diem rent needs to be $50. This needs to be written into the contract. Just stating BUYERS PITI is too vague and open to interpretation.

[llkltk]

Not a real estate agent, but I would sign the contract with the $60 deposit. It's not like they are going to ruin the house all of a sudden. Just have faith.

[atxcio]

I think it's a bad idea. Too many potential pitfalls. Do you want to become a landlord? Are you prepared to go through the eviction process if they decide they just want to stay and not pay you rent? How about your homeowners isnurance? Will you be set up with enough liability in case something happens on the property while the tenants are there? That deposit is ridiculous, too... might as well be 0 deposit.

You are not getting your expenses covered, BTW, with just PITI. What about the money you have to pay to stay where you are at?

Better to credit them some $$$ to go stay at an extended stay or something, while you move in right away.

[TexasHorseLady]

I'm assuming, since you're in Texas, that you're talking about the standard lease-back form that's used along with the sales contract for such situations when the sellers can't move out right away for some reason and moving to an extended stay would mean that they would be moving twice and would be paying to store their belongings, which can get very pricey very fast. It's usually written as a per diem amount, though, rather than monthly - but, then, again, it's usually for a much shorter period of time than two months.

What does your agent say about it? Why do they need to stay? What amount would you feel comfortable with? If you haven't executed the contract (signed off on everything), this is still in negotiations and some compromise might be possible.

[funkie Laurie]

Lots of god advice here. Bottom line: Only agree to what you are comfortable with and get everything in the contract.

Consider the seller's point of view:
1) They just sold the house to you (hopefully for more than it was purchased for!)

2) Obviously not ready to move and looking to save money prior to going somewhere else

If they were to move out first:
Would need to come up with a deposit... e.g. $1000)
Pay a mover... (e.g. $500)
Pay rent for a few months... (e.g. $1000)
Possibly put belongings in storage for a few months... (e.g. $200)
Pay a mover AGAIN for the new place... (e.g. $500)

As long as your option costs less (this example $3200) it should be attractive for them to stay.

[gabbarsingh]

Thank you SmartGXL, llktlk, atxcio and TexasHorseLady:

To answer all your questions in one post.:
SmartGXL: thanks a lot for your comment regarding asking for one month of security. We also are thinking along the same lines. How does one accurately calculate one's PITI when we have not finalized our lender? I am in discussions with multiple loan providers and would finalize one sometime next week.

atxcio: We are living in an apartment and it is easy for us to therefore extend the lease for the additional period. The difference in price for them to move right away and 45 days-two months after closing was too much and we therefore, decided to have them stay and essentially pay for our mortgage. I have not thought about the homeowner's insurance issue. Please enlighten me on what you mean by additional expense for us? The additional expense for us would have been if we bought the house and still lived in the apartment and thereby, have the additional expense of the mortgage payment in addition to our apartment rent. In this case, they are paying the mortgage payment and thus are covering the additional expense.

TexasHorseLady: Yes, i am in Texas and I am indeed talking about the standard-lease form. It is indeed written as a per diem amount with the per diem amount being stated as buyer's PITI. I am trying to figure out how to exactly calculate my PITI before the financing is finalized and the transaction closed. Thus, if the friendly folks here can share some tips about how to calculate the PITI, it would be great. And I have not executed the contract yet and am looking over it in detail again before I go back to the sellers/listing agent with my comments/compromise. The sellers need to stay as their planned purchase of a house has gotten delayed due to some foreclosure related delays.

Thanks a million for all your time, your help and your patience in helping me obtain answers to my questions.

[StockTrader6080]

If you just bought the house, then I would have them take out the 2-months of rent at escrow (signing time). That we you have already been paid the rent for the 2 months.

You should still do the renters agreement to cover the many other legal stuff associated with renters.

Keith

[G Grasshopper]

I can't add anything to the legal/financial discussion here. But this kind of thing is not always negative. When we bought our current house, the former owners wanted to rent back for 2 months because their daughter was getting married, and they wanted a small reception for her in the home she grew up in. It actually worked well for us because the house was cleaned and freshened beautifully and the garden areas were freshly planted and trimmed for the event. It was also really nice to know that such a happy occasion happened there just before we moved in. That was over 20 years ago, and I remember there was a deposit, but don't remember the amount.

[gabbarsingh]

Originally Posted by StockTrader6080

If you just bought the house, then I would have them take out the 2-months of rent at escrow (signing time). That we you have already been paid the rent for the 2 months.

You should still do the renters agreement to cover the many other legal stuff associated with renters.

Keith

Good idea.. Will keep this in mind..