How to Rent Back Your Home After Closing

When you sell a home, it’s possible to rent it back after closing if you need a temporary place to live. A rent-back agreement allows you to remain in the house for a set period and pay rent to the new owner while transitioning into your next place. 

Rent-back agreements benefit sellers who may not want the hassle of moving multiple times. The new homeowner, meanwhile, can pocket short-term rental income. We’ll walk you through how to rent back after closing if you’re planning a home sale but don’t have a new property lined up. 

How does a seller rent-back agreement work? 

Seller rent-back agreements, also referred to as leaseback agreements, allow you to rent your home from its new owner after closing. If you know you’ll need time to move after the home sells, you may add a contingency in the purchase agreement requiring the buyer to agree to a rent-back. 

You and the buyer will agree on these details:

• Rent-back period. Your agreement should specify how long you’ll remain in the home after closing and your expected move-out date. 
• Rental amount. Include how much you’ll pay in rent, either daily or monthly, to the new homeowner for the duration of the rent-back agreement. 
• Security deposit. Your buyer may require a security deposit. If so, your agreement should include the amount, whether the funds will be held in escrow, and under what conditions you can get the money back. 
• Utilities and maintenance. Your agreement should detail whether you or the buyer will cover these costs while you live in the home. 
• Insurance. The new owner may have property insurance for the home, but you might need renters insurance to cover your property until you move out. 

The buyer’s lender must know you’re entering a rent-back agreement. It may have a say in how long you can stay in the home. Sixty days is typically the maximum for rent-back agreements, but some lenders may allow you to extend the agreement further. 

Once the rent-back period ends, you must vacate the home so the new owners can move in. If your agreement specified that you would be responsible for any damage to the home during the rent-back period, you may need to make an additional payment to the buyer. 

It helps to consult a real estate attorney when determining the details of a rent-back agreement. An attorney can ensure the contract is legal and includes provisions protecting both you and the buyer. 

How much does it cost to lease back your home after closing? 

The buyer can determine what to charge when allowing you to rent back after closing. At a minimum, they may want you to pay an amount equivalent to their monthly mortgage payment. 

Say the buyer’s mortgage payment is $2,000, and you need to stay in the home for 45 days after closing. Here are two examples of what you might pay. 

• Daily rent: Assuming a 30-day month, you’d pay $67 per day to rent the home back. The total amount paid for a 45-day rental would be $3,015. 
• Monthly rent: In this instance, you’d pay $2,000 for the first full month of renting, and the buyer prorates the rest at $67 per day. You’d pay $3,005 instead. 

These costs don’t include anything you might pay for a security deposit. A buyer might ask for one full month of rent in security, which adds another $2,000 to the total. If you’re paying utilities, factor in those costs too. 

If you only need a few extra days to move out, you might be able to stay for free. Your agent may be able to negotiate that with the buyer’s agent. 

Who is a seller rent-back agreement best for? 

A rent-back agreement can be mutually beneficial. It could make sense for a seller to rent back a home after closing in several situations. You might consider this arrangement if you:

• Are building a home. Home construction doesn’t always move ahead on schedule. If you’re building a home and encountering a delay, you might prefer a rent-back agreement to finding a short-term rental elsewhere.
• Have not completed a new home purchase. You might be in the process of closing on a new home, but the dates haven’t lined up. In that case, you may need more time to complete the transaction before moving. 
• Are waiting for your rental to become vacant. If you plan to rent after the sale or move into a rental property you own, you may need to allow time for the current tenants to move out. A leaseback can help you bridge the housing gap. 
• Have kids. If you have school-aged children, entering into a leaseback agreement could make sense to allow them time to finish the school year. 

Cost and convenience can influence your decision. If renting back after closing is cheaper and less hassle than moving twice, you may want to stay put temporarily if the buyer agrees. 

Pros and cons of renting back your home after closing 

Rent-back agreements can have advantages and disadvantages for buyers and sellers. For now, we’ll focus on what you need to know as a seller if you plan to return your home. 

Pros

• You can minimize the number of times you need to move and save money on moving costs.

• If you haven’t yet closed on your next home, you’ll have more time to complete a build or purchase.

• Renting from the buyer may be easier than trying to find a short-term rental elsewhere.

Cons

• Renting back your home may be just as expensive as renting elsewhere, if not more so.

• If you’re required to make a security deposit, you could lose it if the home needs repairs for damages you caused during the rent-back period.

• Failing to move out on the required date could trigger late fees or legal action.

Our expert weighs in on tax implications

Michael Menninger

CFP®

I suspect that the buyer would need to report the rental income on their taxes, not to mention the “hassle factor” of the additional effort and cost of tax preparation. As an alternative, I suspect the buyer could decrease the purchase price by the corresponding rent amount. Doing so would lower the buyer’s cost basis and decrease the potential capital gain to the seller. That would need to be in the sales agreement, and you should always confirm the legality of this idea in your local jurisdiction.

What happens when a rent-back agreement ends? 

At the end of a rent-back agreement, you’ll move out of the home so the buyer can move in. The buyer may want to inspect the home before agreeing to return some or all of your security deposit. 

If you don’t move out on the agreed-upon date, the buyer may charge you late fees or penalty fees if your agreement allows. They could also take a more serious step and begin eviction proceedings against you. 

If you think you’ll need more time to move, talk to the buyer, or have your agent contact their agent to discuss the possibility of an extension. 

Where to go to rent back your home after closing 

Should you decide renting back your home after closing is the right move, several companies can assist with:

• Negotiating leaseback agreements
• Handling any repairs or maintenance required for the home
• Helping you get an extension if you need one
• Answering questions about the leaseback process

Explore the best home sale-leaseback companies to find the right one for you.

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