What Is a Rent-Back Agreement & How Does It Work?

Has a bank ever blocked you from accessing your home’s equity? If you’ve had financial struggles like falling behind on mortgage payments, inability to pay medical bills, or drowning in credit card debt, you’ve probably tried to seek a financial life preserver from the bank. But if they say no, you might not know where to turn. Rent-back agreements are a newer alternative to traditional lenders that can give you a quick injection of cash, defer monthly payments for up to 2 years, and help you improve your financial health for the long-term.

What is a Rent Back Agreement?

A rent-back agreement is a legally binding agreement that allows a home seller to stay in the family home after it is sold. The former homeowner becomes the buyer’s tenant, and the buyer becomes the landlord. The seller/tenant pays rent until they are ready to move out, a period that is outlined within the agreement.

This can be a great option for sellers who aren’t ready to move. They avoid common headaches that come with moving, including:

  • putting belongings in storage
  • relocating to a hotel
  • couch surfing at a friend’s or staying with a family member.
  • relocating to a new school district at an inopportune time
  • hiring and organizing movers
  • putting down a large deposit on a new home

Rent-back agreements allow families to stay put in their community until they are ready — financially and emotionally — to move.

In traditional rent-back agreements, the seller must keep in mind that the house no longer belongs to them. Usually, nothing should be done to the house while they are renting that decreases its value, so no more renovations or other major aesthetic-altering changes. However, with SKYDAN’s rent-back agreement, the seller can make any renovation they please. This extra level of comfort lets the seller feel more at home. After all, SKYDAN’s program aims to help the seller’s finances, not make them feel as if they live in someone else’s house.

What Should You Look For in a Rent Back Agreement?

If you think a rent-back agreement would be right for you, here’s what you should expect to find within the contract:

Rent. Both you and the buyer have to agree on how much rent you will pay. It will most likely 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 plans to relocate.

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 utility bills.

Security Deposit. Is a security deposit required? SKYDAN’s program does not require any form of security deposit. But in traditional rent-back agreements, it’s possible that you’ll need to  pay a security deposit, since the buyer will be responsible for anything you damage while you are renting.

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 to 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 probably not going to let anyone but you live in the house. 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, there should be language in the agreement stating who pays attorney fees and court costs.

When Banks Say No, We Say Yes: Above and Beyond Rent-Back Agreements

We offer you more than a traditional sale and rent-back option. It is customary for the buyer to collect rent on a weekly or monthly basis in a typical rent-back agreement. SKYDAN’s innovative program defers the rent for up to two years, meaning 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 off outstanding debts or a new mortgage and help make your move to the new house seamless when it’s ready.

We make it easy for you to qualify for our program. There are no credit checks, debt-to-income ratio checks, or job status checks. 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 financial problems since 2004 and we can help you, too. If you need to sell to free up some extra cash, but aren’t ready to move, give us a call. We also assist those thinking about home refinancing in Chicago.

We serve the following Illinois communities:

  • DuPage County
  • Lake County
  • Kane County
  • Kendall County
  • Will County
  • Cook County