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When you sell a home but still need time to move out, a lease back might be the ideal solution. A “Lease Back” means you sell your house to the buyer but rent it back from them for a short time. In other words, you stay in the home as a renter for an agreed period after the sale is complete.
Why Would Someone “Lease Back” a Home?
- More Time to Move If your new home isn’t ready yet, leasing back gives you extra time to pack, plan, and move.
- Avoid Moving Twice It’s easier to stay in one place until your next home is ready instead of moving into a temporary spot.
- Flexibility If you sell quickly but need more time to find a new home, leasing back keeps things simple.
How Does It Work?
- You and the Buyer Make an Agreement – Before the sale is final, you both agree on how long you’ll stay and how much rent you’ll pay.
- Rent Is Usually Based on Market Rates. – The rent is often similar to what someone else would pay to rent the home in your area, and sometimes a bit more to address the inconvenience the the buyer. That little extra can sweeten the deal.
- There’s a Set Move-Out Date – You agree to leave by a specific day, giving the buyer a clear timeline.
Things to Know:
- It’s Temporary – A lease-back is usually short-term, like a few weeks or months.
- The Buyer Becomes Your Landlord – After the sale, the buyer owns the house, and you’re just renting it.
- You Need a Clear Agreement – It’s important to put everything in writing so there’s no confusion about rent, move-out dates, or responsibilities.
There Are Risks
Buyer Risks: Buyer is Now a Landlord
- What if Seller Stays Longer Than Agreed? – If the seller doesn’t move out on time, it can cause problems, especially if the buyer is planning to move in. Evictions can be costly and stressful.
- What if Damage Happens? – Since the seller is now renting, there’s a chance they could damage the home or not take care of it properly.
- Who is Liable? – As the owner, the buyer could be held responsible if the seller gets hurt on the property during the lease-back period.
- How About Disagreements? – Without a clear written agreement, disputes over rent, utilities, or responsibilities (like lawn care or maintenance) can arise.
Seller Risks: Seller is Now a Renter
- Abiding By the Move-Out Timeline – If the seller can’t find a new home or delays their plans, they might be forced to move out quickly, creating stress.
- Making On-Time Rent Payments – The seller must pay rent on time. If they fall behind, it could harm their relationship with the buyer and even result in legal action.
- Only Having Limited Control – Since they no longer own the home, the seller must follow the buyer’s rules, which can feel restrictive.
- Being Liable for Damages – If something breaks or gets damaged while the seller is renting, they might be responsible for fixing or replacing it.
How to Reduce Those Risks
- Put Everything in Writing – A lease-back agreement should clearly outline the rent amount, move-out date, and responsibilities for maintenance, utilities, and damages.
- Set an Adequate Security Deposit – The buyer can ask for a deposit to cover potential damages or unpaid rent, just like a regular rental.
- Work with Professionals – Real estate agents and attorneys can help ensure the lease-back is fair and legally sound.
Additional Resources
- Info about the NFIP, a partnership between the federal government, property owners, and other organizations
- Read more Plain Language Explanations
- Contact me to get started on your home buying or selling journey
