Renting Back After Close of Escrow
Question: I am selling my home but am going to remain in the home for a month after the sale closes per my agreement with the buyer. What should I know about my responsibilities during that month?
Answer: This is a common occurrence with sellers and buyers to accommodate the seller to be able to find another home or just to be able to stay until a transfer is completed or to get the kids through school. There are lots of reasons to do the "rent back" for the seller. The buyer usually has some concerns about the property during this rent back period, such as "What if something is broken or stops working or is damaged?" Although the buyer will have insurance on the property at the time of the closing of the escrow, it might be a good idea for the seller to maintain their own home owner's insurance during that month for their own protection and the peace of mind of the buyer. The buyer will do a walkthrough of the property prior to the close of escrow as a routine function of the sale. The purpose of the walkthrough is to determine if the requested repairs were made and the property is in substantially the same condition as it was originally at the time the buyer made the offer and had it accepted. At the time of the walkthrough I would suggest that a list of items be developed that recognize the current condition of the property that can be compared with the end of the rent back period so that if anything changed it will be the responsibility of the "renter" (seller) to fix or repair. There is a form called Move In/Move Out that can be filled in by both parties to insure there is written documentation as to the condition of the property at the start and at the finish of the rental period. This form is used with all leases by the landlord and the tenant for the same reason. For instance, if one burner on the stove did not work at the beginning it would be noted so that the renter would not be responsible to fix it at the end of the term. I believe that people can be overly concerned about this period but still it makes sense to protect both parties with a clear understanding of present condition and final condition to avoid any conflict. Most sellers love their house and are going to maintain it well during this period, in fact, often take better care of it because they want the buyer to be pleased with their home. You should discuss all these details with your real estate agent to gain the level of comfort you are seeking.
Question: At the end of the sale of my home I am going to “rent-back” for a month. Do I need to get insurance or will the new buyer’s insurance cover me while I am living there?
Answer: This is a common part of many real estate transactions where the seller needs to remain in the home for a while after the transaction closes. This is part of the real estate contract agreed upon by both parties. That agreement covers the conditions of the rent-back and the amount of money to be paid for the period that the seller is renting back the property. Several things take place to protect the buyer and the seller. Both parties should fill out a Move-in, Move-Out form that describes the condition of the home, going room by room, so that those things that exist at the time of sale are noted and do not become an area of dispute when the seller moves out at the end of the rental period. For instance, if there is a big stain in the carpet that existed at the time of the sale and both parties are aware of that fact, then it would be noted on the form and not be an issue at the time the seller moves out. You get the idea. It protects both parties. The agreement should indicate who will take care of the yard and the pool (if you have a pool), who pays the utilities including trash. Again, all this just insures a favorable rent back period. Regarding insurance, which was your question, the buyer will have to have insurance on the property that covers the home. That does not mean that you do not need to have insurance however. As a renter, you would need to have Renter’s Insurance that would cover your possessions in the home. The buyer’s insurance would not cover your possessions if the home burned down as they are not the possessions of the homeowner. The buyer’s insurance would cover the structure. Rental insurance is not very expensive and is much less than full home insurance. Some sellers just maintain their regular home insurance for the period of the rental period but that is more expensive then changing over to Rental Insurance. The best advice I can give you is to talk to your insurance company or representative to understand the differences and the cost associated with those choices. To those of you who are selling your home and have not found the next home yet, this rent-back idea can be an excellent way to make the transition to your next home or location. Of course it has to make sense to the buyer as well. Sometimes the buyer wants to be in the area at a certain time but they found just the home they want a couple of months sooner than they need and it makes a perfect scenario to have the seller rent back. Worth consideration in some circumstances. Check with your Realtor for your particular situation.