In a sellers’ market like we’re seeing in the Front Range, home buyers will need to consider everything to help sellers accept their offers. One of those things is a sale leaseback. What are they?
A sale leaseback allows a buyer to rent the property back to the sellers, letting them stay in the home for a predetermined amount of time after the closing. This situation is fairly common if the sellers haven’t bought a new home before their house sells, and need a place to live.
Most lenders, depending on the program you qualify for, will allow up to 60 days for sale leaseback. The caveat is that these things change all the time, so definitely check with your lender to see what is allowable.
Naturally, you may ask, what should I charge the sellers for rent after we’ve completed the closing?
One way is to charge the sellers what it costs you to pay your mortgage (and any home owners’ association fees):
“If your total monthly mortgage payment is $2,000 and your homeowners dues come to $100 per month, your daily rate is $70. If the sellers are staying in your home for two weeks, then you would charge them $980.”
Another option is to use market rents:
Some sellers might balk at paying a rent that’s based on your costs… especially if they’ve lived there a long time and have a low or no mortgage payment. If that’s the case, buyers also have the option of using current market rent to calculate the leaseback, which may work out in the seller’s favor.
Or you may not charge anything at all so as to make your offer stand out:
“If there are multiple offers for the home, a buyer can offer to let a seller stay in the home for free for a short amount of time… It is just one additional negotiating point between the buyer and seller.”
Questions about rates today, or about your specific situation regarding mortgage approval? Contact me today!