Here’s how you can protect your buyers in rent-back agreements.
Rent-backs are very common in a seller’s market like today, but are we protecting our buyers with these agreements?
You’re in negotiations, and the seller counters you back. They want to remain in the property rent-free for 30 days with the option to extend another 30 days at the buyer’s PITI. If they like your price and this is their only request, it’s easy to accept, especially when there’s so little inventory. However, what are you doing to ensure the seller actually moves out?
You can negotiate extensions after the deal, but sometimes you will come across a seller who won’t listen. That’s what happened to one of my buyer clients recently. We were to get possession on December 4 at 9 a.m. They ask for extensions up until the next morning.
I saw the writing on the wall while we went through this escrow process. When we asked for a repair, the seller asked for seven days in the house, rent-free. We countered back and asked them to leave a portion of their proceeds, $25,000, in escrow. That money would be refunded if they moved out in seven days and didn’t leave behind any trash or personal property.
“You have to protect your buyer clients in rent-back agreements.”
Check out what they decided to leave my clients at 3:16 in the video. My clients and I were upset, but it was a good thing we had that money in escrow. We’ll have all of that trash removed, and we will bill escrow for the cost.
When you represent the buyer and negotiate a rent-back, hold back a big portion of the seller’s proceeds to ensure they move out. The last thing you want is to file for an unlawful detainer during a pandemic. If the sellers lawyer up, it could take years to get them out of the property.
I hope you found this valuable. If there’s a topic that you’d like me to cover, please comment below or shoot me a dm. If you’d like to attend any of my trainings or have a growth conversation about your business, just call, email, or text me. I’d love to hear from you.
