Weeze

As you may know from reading the "what has pissed you off today thread", we are trying to buy our first US home.

We have found a brilliant property, but the sellers don't want to move out until end May. We are concerned about having such a long period as if anything happens to make it fall through at the last minute, we would be stuck with a very short period of time to find another property, or be stuck with the whole suing option.

The seller has suggested we complete at the end April, and allow them to rent it for the additional month. Our realtor said he draws up paperwork for around 6 of see a year and in his thoughts, they are a safer option than an extended period before closing.

Has anyone done one of these and are they as scary as they initially sound?

ian-mstm

When do you leave your current place? If it's at the end of April, suggest to them that you'll let them rent, if they pay the storage costs for your furniture and your hotel for the month. One way or the other, make it a good deal for both of you, and if it's reasonable, go for it. Perhaps your attorney can write in some sort of clause in the contract that will protect you should something happen between the end of April and the end of May.

Ian

Michael

I did it one time without problems. The rent money goes into an escrow account and is paid to you. In theory everything should go ok but the biggest problem is that the seller may decide not to move out on the agreed upon date and then you have to start eviction proceedings which can take a lot of time and cost money.

To try to keep this from happening, I'd suggest that the escrow account be funded by the seller to the tune of $10,00-$30,000 along plus additional rent that will be forfeited to you if he doesn't move out by the specified date. Real estate agents don't like to stipulate such a clause since they think that may turn off the seller but it is the safest way. Personally I don't consider that unreasonable since you put good faith money down when you make an offer on the house (maybe the good faith money would remain in the escrow account until he moves out).

Weeze

Ian, thanks for responding.
We can stay in our current place until whenever we like so that's not an issue. Our realtor suggested writing into the contract that they paid $5k rent for the month of May and then $1k per day thereafter. That way in the very unlikely event they tried to change their mind, it would be crippling financially for them. He is saying it's very unlikely anything would go wrong either with the sale or the lease back. But, if the worst happened, it would be much easier to evict with a huge financial penalty than sue for the sale collapsing.

Weeze

Michael, thanks, that's another thing to consider.

Michael

That should work if the seller agrees to the terms. Just make sure there is enough money in the escrow account to cover the agreement otherwise you may be chasing him around the country trying to collect and it would likely have to be done in Superior Court (very expensive) and not small claims court since the amount money could be very large.

lansbury

The house we are living in now the seller rented from us for a month. The agreement stipulated that if they over stayed they paid for another full month. It suited us as we were in England and were going to rent it out anyway for a year.

Weeze

Right thank you people. We have decided to go with it so hopefully the next post about it will be in the "what made you smile today" thread at the end May.

scrubbedexpat097

Or the "hey, house warming at my new gaff" thread

thinbrit

That is a long period of time. I'd tell them to rent somewhere and move out.

We bought a property in DFW and wanted to close ASAP. We allowed the previous owners to 'rent' the home for 2 weeks for a token fee of $1, effectively rent free. We were moving from CA, and the extra 2 weeks meant the home wouldn't be empty.

I can't imagine letting them stay for 3 months. A lot can happen to a property in 3 months. Who is responsible for damage? If it is them then perhaps they will be unwilling to report it to you. Unless you bought the property to become landlords, kick them out of your home and start enjoying it yourself.

Check your home insurance policy to make sure you are covered whilst your 'tenants' are there. It may require different coverage.

Nutmegger

But the rental is only for the final month. From now until the end of April, the house will be owner occupied. The day of the closing, the purchaser always has the opportunity for a walk through with their realtor to ensure that nothing has changed in the condition of the property between the time it went to contract and the closing. Let's face it, things can go wrong in four weeks as easily as in twelve!

I also once went to contract on a sale in February, but didn't close until almost the end of May, at which time I rented back to the prior owner for another month. It was no problem as I wasn't closing on my home sale until the end of June. In fact the old owner ended up not needing all the time she had asked for, but had still paid for the full month. The rental agreement was part of the paperwork executed at closing, so everyone was protected.

Perhaps it helps to get a feel for what the people you are buying from are like -- we developed a good relationship with this seller, so felt comfortable with the rent back.

Weeze

Yes Nutmegger is right, the lease back is just for the month of May. We have already had confirmation on the mortgage and insurance side of things. Also they are providing a years home warranty and as its done as part of the purchase agreement, the property is required to be in the same condition from survey through to June.

thinbrit

You mean I need to read the whole post, and understand it before replying

Rete

Our family has needed to do this several times over the last 30 years. My sis had to do it when she relocated to NJ from NY. The NJ owners needed 60 days in order to move into the condo they purchased. Unfortunately, the 60 days because 90 and then 120 and sis had to institute eviction charges to get them removed. Some of the neighbors never spoke with her and her family because of this and it is over 30 years now.

My nephew needed to do this last April when he sold his condo and was moving to a single family home. The new owners of the condo would not give them a lease back for a month and the old owners of the home needed to stay for 30 days for their home to be finished. Nephew moved to a hotel which the owners of the single home paid for and they had to pay for storage of their furniture and rent for the 30 days.

TimNiceBut

We've done this for a couple of months with our current house. Make sure that the rental contract the realtor draws up is the "correct" one for a lease back - those tend to have somewhat different clauses regarding damage to the property, appliances that conk out thirty seconds after closing etc.

Our realtor also recommended that I take a camera to the walkthrough before closing so you can document the current condition of the place. That's even more important when the PO stays in the house for another month or three.