seller lease backs in a hot market

seller lease backs in a hot market

Member since 2019 · 172 posts · 93 votes

I recently had a deal fall through for a SFR purchase in Indiana after a lease back request from the seller. I was frustrated that this desire wasnt communicated to myself and my agent during our communication with the seller agent beforehand but nevertheless I was okay with it and countered their lease back request with a 30 day rent amount that was roughly half of the market rent rate. I thought this was beyond generous yet the seller refused this demanding to not pay.

I hate to see a deal fall through for such a relatively small amount but my gut says if they made a big deal over something so reasonable imagine the issues once the deal closes and I technically become their landlord.

Well anyway, I was curious what is the going arrangement for lease backs in a hot market?  Are buyers really letting sellers do 30 day lease backs at no rent amount??

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Peter MckernanBusiness Member
Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
5y

@Nathan Williams this market has brought the seller into the fold as calling all the shots not just a couple of them (i.e. no closing cost coverage), and this means they can and will ask for rent back due to them not being able to find a move-up or move-down property as quickly as their home sales. Due to the low inventory it allows the conversation to be had to get a rent back for free (I have had clients do that just recently, only had a $1,500 security deposit for a $1.2M house), or renting back at the PITI for the new buyers.

The best option for a buyer/seller rent back is the PITI of the new buyer, however, if the seller does not agree to that I would suggest whatever you both agree to that you are comfortable with while they stay there and also have a security deposit held in escrow including the rent. These dollar amounts can be prorated if the lease back ends early.

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  • Real Estate Agent · Tampa, FL · Member since 2020 · 411 posts · 373 votes
    5y

    Thirsty residential buyers flush with equity cash from their own big sale are generally pretty magnanimous with terms like a rent-back at no cost.  It is unfortunately what some sellers have become accustomed to demanding in this market.  Next they're going to start making buyers grovel and dance while shooting at their feet with six-guns.

  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    5y

    I wouldn't let them live there for 30 days rent free for many reasons.  If they need the cash to buy another place, then they can pay rent and hold back some of the money.  If they don't need the cash, but need the time, then move back the closing date.

  • Peter MckernanBusiness Member
    Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
    5y

    @Nathan Williams this market has brought the seller into the fold as calling all the shots not just a couple of them (i.e. no closing cost coverage), and this means they can and will ask for rent back due to them not being able to find a move-up or move-down property as quickly as their home sales. Due to the low inventory it allows the conversation to be had to get a rent back for free (I have had clients do that just recently, only had a $1,500 security deposit for a $1.2M house), or renting back at the PITI for the new buyers.

    The best option for a buyer/seller rent back is the PITI of the new buyer, however, if the seller does not agree to that I would suggest whatever you both agree to that you are comfortable with while they stay there and also have a security deposit held in escrow including the rent. These dollar amounts can be prorated if the lease back ends early.

    The McKernan Group4.957 Reviews
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