THE SELLER LEASEBACK

What was once a rather uncommon feature has become almost a permanent fixture. What is it? A seller leaseback is when a residential transaction closes and the seller stays in the home for a period of time. They “leaseback” the home from the buyer. Sometimes it’s a couple of days, sometimes it’s a couple of months. The seller becomes a tenant in their own home while the buyer becomes the landlord. In Texas, we use a rather short, one page (back and front) addendum that outlines the leaseback terms. Cost. Length of time. Who pays for the utilities. Pets. Etc … It’s very basic, especially compared to the 16 page residential lease we typically use in Texas. In today’s market, buyers are including them - typically for free - as another way to improve their offer. But be careful, if it’s a financed deal, the lender will typically not allow anything beyond 60 days. If it’s a cash deal, you can leaseback for as long as both parties want.

Why the sudden spike in popularity? Because sellers need all the time they can get to find their next home! As you know, finding and closing on a home in this market is not easy, so having a couple extra months to conduct your search, or plan out your next move, is critical. If not for leasebacks, most sellers would need to either move twice (rent for a short period of time while they are looking) or they may simply opt to not sell their home at all. Both rather undesirable options.

Historically, leasebacks were more uncommon. Once you sold your home, you usually had to vacate the property by the closing date. If you did get a buyer to agree to a leaseback, you had to pay for it. Usually equal to the buyer’s carrying cost for the new home.