Is It Possible To Sell My House & Rent it Back?
In most cases, when you sell your house you are doing it because you want to move. But there are circumstances in which you might want to rent your house back after you sell, either for a short period or a long one. It is certainly possible to do this. The key is advanced planning. (References 1 and 2)
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Short-term Lease Back
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It is not uncommon for a home seller who is purchasing another home to ask the buyer to lease the house for a short period of time. This accommodates the buyer's closing date on his new home. A typical rental term for this kind of lease back is under 30 days. In cases like this, the rent amount is subtracted from the buyer's closing proceeds and a security deposit is kept in escrow until the seller move.
Mid-term Lease Back
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In areas of the country where it can take between six months and a year to sell a home, it can be difficult for the seller to coordinate the closing date with other important benchmarks like the end of a school term or a planned retirement date. In cases like this, the seller may ask to rent his house back through that benchmark date.
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Long-term Lease Back
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In some cases the seller wants to live in his home for up to a year after he sells. This circumstance arises when he has a longer-term plan to move but wants the profit realized from the home sale now. He could believe the market will decline in the coming year or that tax laws will become less favorable. He could have an immediate investment opportunity. If, as a seller, you find yourself in this position it is best to advertise the listing for the house with a desire to rent back. You can make the house sale contingent upon the buyer agreeing to a one-year rental agreement with you since you control all details of the sale. Some investors would find the sale attractive because the property comes with a tenant.
Reverse Mortgage Alternative
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A reverse mortgage is a home loan available to seniors that does not have to be repaid until the borrower dies, sells the home or moves out for a period of 12 consecutive months. The home is then sold to repay the loan. There are two notable problems with reverse mortgages: One is the very high closing costs, and the other is that because interest accrues and compounds on the principal loan balance, it is entirely possible that little or no equity will remain in the home after it is sold to repay the loan. If the home has not appreciated enough to cover the loan balance, Federal Housing Administration mortgage insurance pays the lender the difference between sale proceeds and loan balance and heirs are left with nothing. Selling the home in early retirement and leasing it back is a viable option.
Contract
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Unless you are selling your home as a short sale, you alone are in the driver's seat in setting sale conditions. If you know you will want to lease back the house before putting it on the market, advertise this fact in the listing and make the lease terms a contingency of the sale. This will help ensure you get a buyer who wants to rent the home to you and settles lease terms before the sale. If during the negotiations you find you will need to lease the home back for a short period because of the negotiations on your replacement home, add the request to a counter-offer on your first house. If you wait until your initial contract is ratified, the buyer will have the option of renting or not renting to you. In a short sale, you may find a contract addendum prohibits renting back, but you can try listing the house with the lease-back contingency to see if it flies with your lender and buyer.
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References
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