What is a Leaseback

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Real Estate

What is a Lease Back

A lease back allows the buyer of a property to temporarily rent the home back from the sellers for a predetermined time after closing. This is fairly common and generally takes place when the the home the seller is purchasing isn't ready or maybe they are moving out of the area and need additional time before moving. 


Pros and Cons of a Lease Back

Some of the pros for a seller doing a lease back is it assures the seller money in the bank to move while giving them a little wiggle room not to rush to the new home. Gives the seller time to clean the home for the new owners and the seller avoids the cost of moving items to a storage. Cons for a seller would be being a renter for a short time until the next residence is ready. The seller is not allowed to renovate the property without getting written approval from the new owner. 



Some of the pros of doing a lease back for the buyer is an increase chance of their offer being accepted if they seller needs more time after closing. Another plus for the new homeowner is if they are not moving immediately after closing, having a the previous owner living in the property reduces the risk of the home being vandalized or broken into. One of the cons for the buyer or new homeowner is the risk the sellers will take something from the home like a chandelier or leave the home dirty or in disarray. Even though the terms are set before closing the new home owner risks the seller staying longer than the time agreed on. 


The Lease Back Agreement

To avoid any potential problems the leaseback is documented early as possible, typically before the home goes under contract. This protects both parties and assures the seller will be able to remain on the property after the close of escrow. This also informs the new homeowner when they can move into the home. 

How the rent is determined by computing the new homeowners Principal, Interest, Taxes and Insurance payment. Then dividing the payment by 30 days for a daily charge to the seller. Many times the seller will have to give a refundable security deposit equal to one month of the buyers mortgage payment.