advice needed: sellers who want to stay past closing

Buying & Selling Real Estate
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advice needed: sellers who want to stay past closing

Elizabeth Nenque
Bellevue, WA · Member since 2016 · 4 posts · 1 vote
My husband and I have been house hunting and are about to submit an offer on a house in Bothell.
The sellers would like to stay past closing and rent until they find a house. Our agent says this is common. BUT we received advice from another RE agent that we shouldn't allow this, because of the liability.
Our agent had suggested that the sellers need the proceeds to begin their house hunting (they want a bigger house), but a closing contingency makes them less competitive in this market. 
Tomorrow at 1 pm, (Friday Dec 30) we will meet with our agents for a strategy meeting. They say that sellers request to stay past closing is common. But that doesn't make me feel assured.
Additionally, they need to repair the roof before we close. A previous set of buyers backed out of closing when the sellers could not repair the roof on their own.  They were willing to use the proceeds of the sake to repair the roof. 
However, their agent says that now they have a roofer that will do the work and will wait to get paid on closing with the funds from the sale. So this may not be a concern.
What advice would you offer us? What should we bring up with our agent in our strategy meeting? Should we offer lesson the sale price AND charge for rent?  what would you cosnider in the contract?
Other considerations: This is a sellers market. Once the holidays are officially over more buyers may come into the market.  The area and home are desiresble, but the sellers request, I think have kept the house on the market limber than normal.  The house had been on the market for almost 1 month.
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Carley M.
Investor · Buffalo, NY · Member since 2016 · 100 posts · 71 votes
9y

I've done a sale with a rent-back before.

You should handle the roof situation completely separately. Make sure it is fixed and inspected prior to close.

When you set up the rent-back (if it doesn't inconvenience your family situation), make sure that the sellers obtain renters insurance, require that they list you as an additional insured, and put in a time limit for the rent back.  If they've been waiting to find a place, they can start looking as soon as you sign the contract and they can make their purchase offer without a contingency since the property will be sold to you before they close. Give them 30 days post closing and then charge them a significant per-day rate for each day past the 30 that they stay in the property.  Otherwise, you could be waiting to move in for 6 months or a year. I started looking in January, found a place in April, signed a contract in May, but didn't close until November. While that is certainly not a typical timeline (this is my 8th home purchase experience), you need to protect yourself from the worse case scenario.  Also, price the rent-back to cover all the costs of them in the home, not just the mortgage payment. I also asked for a security deposit to be held in escrow to make sure that when they moved out, there wasn't damage to the property. That might help the sellers decide that it would be a cheaper option for them to move into temporary housing while they search for a new place.

A rent-back is not ideal and if you can avoid it, you should. That said, I jumped through a lot of hoops to get my most recent property because I knew it was the right financial decision and would be worth it in the long run.

Good luck to you! 

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  • Carley M.
    Investor · Buffalo, NY · Member since 2016 · 100 posts · 71 votes
    9y

    I've done a sale with a rent-back before.

    You should handle the roof situation completely separately. Make sure it is fixed and inspected prior to close.

    When you set up the rent-back (if it doesn't inconvenience your family situation), make sure that the sellers obtain renters insurance, require that they list you as an additional insured, and put in a time limit for the rent back.  If they've been waiting to find a place, they can start looking as soon as you sign the contract and they can make their purchase offer without a contingency since the property will be sold to you before they close. Give them 30 days post closing and then charge them a significant per-day rate for each day past the 30 that they stay in the property.  Otherwise, you could be waiting to move in for 6 months or a year. I started looking in January, found a place in April, signed a contract in May, but didn't close until November. While that is certainly not a typical timeline (this is my 8th home purchase experience), you need to protect yourself from the worse case scenario.  Also, price the rent-back to cover all the costs of them in the home, not just the mortgage payment. I also asked for a security deposit to be held in escrow to make sure that when they moved out, there wasn't damage to the property. That might help the sellers decide that it would be a cheaper option for them to move into temporary housing while they search for a new place.

    A rent-back is not ideal and if you can avoid it, you should. That said, I jumped through a lot of hoops to get my most recent property because I knew it was the right financial decision and would be worth it in the long run.

    Good luck to you! 

    3Reply
  • Elizabeth Nenque
    OP
    Bellevue, WA · Member since 2016 · 4 posts · 1 vote
    9y

    Thanks Carly for the great advic.

    We put an offer in, but it wasn't accepted. It's just as well. We felt we were negotiating with our Real Estate Agent the whole time. We wanted a lease that protected us. We asked for a security deposit $1500, full PITI plus $10 ($100 per day) for rent for 20 days--which is market rate--and then increase the rent for holdover to $150 per day (I wanted to do $200, but heard that was a pretty high increase). Aside from how painful it was to get our real estate agent to prepare a satisfactory lease that protected us (she said it was compicated), she told us that according to the listing agent the sellers felt the rent was too high because it was more that their current mortgage. Once we heard that, my husband and I became really concerned at that point about their intentions. We reasoned that obviously they would not be paying their mortgage they would be paying ours.

    As far as the roof is concerned our agent kept pushing us to get a credit at closing and then repair it ourselves after. We did not go with her advice.

    In the end, we learned several things--as a friend told us--most Real Estate agents are more concerned with closing the deal. I'll admit that our agents understood what it would take to close this deal, but we felt that our interests were overlooked and that we had to be extra diligent in protecting ourselves. Ultimately, we fired them.

    Finally, even though the sellers took the other offer, the house went back on the market within 10 days. The asking price is now $10K less. Even if we weren't under contract with for another home, we wouldn't go back to that house. Too complicated.

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  • Elmer FosterPro Member
    Real Estate Agent · Pembroke Pines, FL · Member since 2013 · 22 posts · 10 votes
    9y

    I am a Realtor in South Florida and you are right.  One of the biggest complaints about us from customers is that we fell to listen to the client.  For most of our clients, the purchase of a home is the most significant financial investment they will engage in during thier lifetime and we have to remember that it is not about us but about the clients.  I am sorry you had such a bad experience and I hope that Realtor learned a valuable lesson. 

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  • Account Closed
    Medford, OR · Member since 2016 · 114 posts · 70 votes
    9y

    Elizabeth,

    @Carley M.Has good points. The one thing to realize is if you do this you now have a renter. If they decide not to pay you will need to go through the standard eviction process and this can tie your property up for awhile. If you do go through with the tenant make sure your language in the rental agreement says Et Al. This will assure your eviction covers everyone. We once evicted a tenant, come to find out she had moved and let her sister move in. We had to go through the process again evicting the sister because our agreement didn't say ET Al.

    1Reply
  • Aaron Pfeffer
    Lender · Los Angeles, CA · Member since 2015 · 127 posts · 82 votes
    9y

    @Carley M. That was one of the most concise and helpful posts I've seen on BP.  Couldn't agree more with all of it!

    1Reply
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