What is a Rent-Back Agreement?

Photo by realtor.com

Many of our clients who are building a new home decide to put their current home on the market. But what happens when their current home sells and the new home they are building does not close at the same time? It could leave the homeowner homeless for a few months. This is a great scenario for negotiating a “rent-back” agreement on their current home.

As this realtor.com article shares, this double transaction can require some really good luck and good timing. A rent-back agreement gives the sellers extra time to live in the home after closing. But this doesn’t happen for free. The seller would become the new buyer’s temporary tenant and pay rent. The buyer’s offer, by negotiating this rent-back agreement, could be the reason it was accepted since their move-in date allows for flexibility and gives the buyer the added bonus of receiving some rent money for a short time. It’s also smart for the buyer to ask for a refundable deposit, in addition to monthly rent, just in case damage may occur while the previous owner is living there.