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Seller Leaseback & Owner Occupancy Requirements

By HomeBay

Sometimes sellers request to leaseback after the close of escrow. Such a leaseback can be great for sellers because they have the peace of mind of not moving until after the closing funds are deposited into their bank account. Leasebacks can also facilitate a faster closing than would otherwise be possible. This post will explain how to create a seller leaseback and what the owner occupancy requirements are.

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Language to Create a Seller Leaseaback:

If a seller wants to counter to create a leaseback, the language is:
Possession shall be delivered ___ days after Close of Escrow. For this time period, Seller shall pay $___ to Buyer and a deposit of $___. During escrow, Buyer and Seller shall negotiate a written lease to cover this occupancy.

Sometimes sellers request the leaseback be free. In a seller favorable market, buyers may agree to a free leaseback.

Be Careful if the Buyer Needs a Loan:

If the buyer is obtaining a loan, the seller should not request more than a 59-day leaseback. The reason is, a buyer who does not occupy the home within 60 days of closing does not qualify for an owner-occupied loan. Failure to qualify can create havoc for the buyer and undermine their ability to get a loan.

Sometimes buyers and sellers circumvent this issue by agreeing on the leaseback outside of escrow, not referencing it in the offer to purchase real estate or any counteroffer, and not informing the bank that it is occurring. We don't advocate this approach, but it does happen.

Agreeing on a Lease:

A seller leaseback adds one additional wrinkle to the escrow process: the buyer and seller will need to agree on the form of a written lease. Such leases are usually relatively simple.

Have questions regarding a leaseback in a real estate sale? Ask us.


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