Are you trying to access the equity in your home and have been turned down by the bank? Have you fallen behind on your mortgage payments? Is your household debt accumulating? Would you like to be able to eliminate your monthly mortgage payments for up to two years? A rent back agreement might be the solution you’re looking for.
What exactly is a rent back agreement?
It is a legally binding agreement that allows a seller to stay in the family home after it is sold. The former homeowner becomes the tenant of the buyer, who becomes the landlord. The seller/tenant pays rent until moving out.
This can be a great option for sellers who aren’t ready to move. They avoid having to put all their belongings in storage and relocate to a hotel or a room in someone else’s home. Kids and pets can stay put in surroundings familiar to them until the whole family is ready to move into the new house.
The seller must keep in mind though that the house no longer belongs to them. Nothing should be done to the house while they are renting that decreases its value. The seller must abide by the terms of the rent back agreement.
What line items should you look for in a rent back agreement?
Rent. Both you and the buyer have to agree on how much rent you will pay. It is common for rent to reflect the rental market in the community where you live. The agreement must spell out how the rent will be paid (weekly, monthly, upfront, or at the end of the lease period).
Term Length. Very few rent back agreements are open-ended when it comes to how long you can stay in the house. You have to be sure the agreed-upon date for you to leave is compatible with your move to the new house.
Insurance. Since you no longer own the house, does it make sense for you to maintain the homeowner’s insurance? If the buyer takes over the policy, you will need to take out renter’s insurance to protect your possessions in case of fire, flood, or theft.
Utilities. Are the utilities included in your rent, or are you still responsible for them? Instead of reimbursing the buyer, it is more common for the seller/renter to continue paying all the utility bills.
Security Deposit. Is a security deposit required? Since you don’t own the home anymore, the buyer will be responsible for anything you damage while you are renting. Most buyers require a security deposit as a form of property protection.
Entrance. Will the buyer be allowed to enter the premises while you are renting the home? If the buyer reserves the right to periodically inspect the home, how much notice must be given to the renter? In case of emergency, does the buyer have the right to enter the property or contact law enforcement and let them into the house? If maintenance is required does the buyer have the right to enter the property with notice?
Maintenance Responsibilities. It is customary for there to be a provision in the agreement stating that the renter is responsible for maintaining the property and leaving it in the same condition it was in at closing, minus normal wear and tear. The renter must notify the buyer of any defects or dangerous conditions.
Pets. If you have dogs, cats, goldfish, gerbils, or any other family pet, you will want to make sure there is a provision making it acceptable for them to continue living in the home with you. The buyer may require a pet deposit for property protection.
Subletting and Assignments. There may be a provision protecting the buyer in the case that you move out before the rental agreement expires and agree to sublet the property to a third party. You will probably find that this is strictly prohibited. The buyer is not going to let anyone live in the house but you. If you decide to move out early, you must let the buyer know and terminate the agreement.
Disturbances and Law Violations. The buyer has the right to expect you to refrain from any activity that is illegal or causes a neighborhood disturbance.
Lead-Based Paint. If the house you sold was built prior to 1978, there should be lead-based paint disclosure language in the agreement.
Attorney Fees. In the event, you get into a disagreement with the buyer that can’t be resolved to your mutual satisfaction, who pays the attorney fees and court costs?
Skydan Equity Partners Goes Above and Beyond the Rent Back Solution
We can offer you more than a traditional sale and leaseback option. It is customary for the buyer to collect rent on a weekly or monthly basis with a typical rent back agreement. The Skydan program defers the rent for up to two years. That means you don’t make any payments until the lease agreement ends. And you never pay any interest.
This will give you the extra money you need to pay your construction loan or new mortgage and help make your move to the new house, when it’s ready, seamless.
You get fast cash for the equity investment you have in your old home.
We make it easy for you to qualify for our program. You don’t have to worry about your credit score, debt-to-income ratio, or job status. All you have to do is sell your house and rent it back. We make the process hassle-free.
We’ve been helping homeowners in the Chicago area solve their real estate problems since 2004. We can help you with yours. If you need to sell but aren’t ready to move, give us a call. We also assist those thinking about home refinancing in Chicago.
Serving the following Illinois communities:
- DuPage County
- Lake County
- Kane County
- Kendall County
- Will County
- Cook County