Leaseback Agreements Are More Popular Than Ever by Greg McKinney Mineola Texas
With the vast majority of homes across the United States going under contract within the first month it’s creating another new problem we haven’t seen before in this red hot real estate market. With very few homes available to purchase sellers are having difficulty finding another home to purchase after the home they are selling goes under contract. Many are not accepting offers on their homes until they find another home to purchase. Some are writing up the contracts to allow the sellers to lease the homes for several months after the sell to give them time to find a new home. In some cases these sellers are paying extremely high monthly rent just to stay in the home they just sold.
Scheduling the purchase of your new home with the same time you sell your old home has become almost impossible. We are even see the sellers lease the home they just sold for as long as 6 month to give themselves as much time as possible to find a new home. Many sellers are refusing to accept contingency contracts which make it even more difficult for the person selling their home to purchase a new home.
These temporary rental agreements are mainly structured with a daily rate. With the market being so competitive right now the sellers are negotiating very high daily rent costs to convince the new homeowners to allow them to stay in the home for a few months. It’s becoming one more thing real estate agents are having to negotiate during the process. Approximately ¼ of all homes sold across are sold with these leaseback options.
I’m Greg McKinney from Mineola TX and this is something we recently discussed with the buyer of one of our homes. They had been leasing back the home they had sold a few months ago. One thing they mentioned was the buyers of their old home had to obtain a homeowners insurance policy for rental property while the they were living in their old home. These type of leaseback agreements can create problems for both the buyer and the seller need to be aware of. The insurance company needs to be aware the home is being used as a rental. The insurance agent will need to issue a specific type of policy for a rental property and then change that policy once the buyers have actually moved into the home. This could be a very costly mistake if something happens to the home before the new owners move in. Insurance companies are always looking for an excuse not to pay so make sure you have the correct insurance coverage in place prior to signing a leaseback agreement.
Many sellers are opting just to move out and find a home to rent for 6 months to give them time to find a new home. This can be extremely stressful especially if you have a large family with a large amount of items to move. One option is to move the majority of your items into storage and just take what you really need to your new rental. I know one family who did this and discovered after a few months of having a large portion of their items in storage that they really could live without most of those items. So as a result they began looking for smaller homes which in turn will ending up saving them thousands of dollars for years to come. They never intended to become minimalist but this current real estate market has pushed them to rethink the way they actually live. In the long run this turn out to be a positive for this particular family.