What Is a Rent-Back?

Here’s how you can differentiate your offer with a seller rent-back.

In this hot seller’s market, we’re seeing many seller rent-backs or leasebacks (they amount to the same thing). Right now, we’re seeing cash offers over appraisals, appraisal contingencies and home inspections waived, and the like. So if that’s the norm, how do you differentiate yourself? One way to do that is to provide the seller the opportunity to lease the house back. 

For example, the seller doesn’t need to move until August, but you love this property and want to close now to take advantage of the low interest rates. You can buy the house, then rent it back to the seller for a while, meaning they become your tenant. The terms of a rent-back are very negotiable, and one of the main things we look at is what your loan allows. For this to be legal, the lender has to know it’s happening, and some of them have limits. They may say they can only allow this for two weeks, or you might have six months; it depends on your lender and your loan type. 

If you’re going to charge the seller rent, it’s usually about equal to what your new PITI is, or what your new mortgage payment will be. In the current hot market, we’re seeing buyers giving sellers free rent-backs for a certain amount of time. That way the seller stays in their home a bit longer, can close on their next house, and have time to move out of this one. This situation works out well for everyone because the seller doesn’t have to move twice or load up a moving truck hastily, and you get the home you want at a great rate.

The terms of a rent-back are very negotiable.

This is a common thing we see when the market’s hot, and by having a conversation with the listing agent before writing your offer, we’ll find out if this is something the seller wants. 

If you’re writing offers for homes and you’re striking out, we can help you negotiate a rent-back to help get your offer accepted. If you need our help or have any questions, give us a call or send an email. We’d be more than happy to speak with you.