A “rentback” in real estate is when the sellers stay in the property for an agreed-upon period of time after the close of escrow. The reason sellers typically need rentbacks is because they need the proceeds from their sale in order to purchase their next home.
I am not a big fan of rentbacks, because most buyers want to gain possession of their new home after they close, for a variety of reasons. But if you’re considering requesting or granting a rentback, here are a few important things to know before you agree to one:
1. Execute and sign a “Seller in Possession” addendum. This is also called a rentback agreement, and it specifies all the details of the rentback. These include the length of time the seller can remain at the property after the closing date, whether the seller will pay the buyer a fee to stay in the property and who will pay utility costs during the rentback period.
2. Consult an attorney before you agree to let the seller remain in the property. A rentback technically is a form of tenancy, and things can get complicated if the rentback is more than 30 days. Most sellers don’t have intentions to keep hanging out indefinitely, but it’s a wise idea to avoid those scenarios. I recommend limiting the rentback to 29 days. Continue Reading