"Don't wait to buy real estate, buy real estate and wait" – T. Harv Eker
A Rent-back Agreement Allows Home Sellers to Buy the Most Valuable Commodity of all: Extra Time
CHICAGO, Ilinois — Because every picture tells a story, every story must paint a picture. So picture the following scenario.
The builder of your dream home is almost finished. As for your current home, you've already found a buyer. Lake Michigan seems friendly; smooth sailing appears on the horizon. Ah, but Life — for some reason — feels the need to remind you of why it's what happens while you're busy making other plans.
The phone rings.
Your contractor, unaware of your looming closing date, mumbles on the other end of the line: "Ahem, sorry but we've hit a bit of a delay. You won't be able to move out of your old home for another month or so."
Your heart's racing. Your breathing's heavy. What can you do?
You call up your agent. In the politest voice possible, you suggest a rent-back. After all, such post-settlement occupancy agreements of the sort will buy you some much-needed extra time.
Rent-backs allow sellers to remain in their old homes until an agreed-upon date past closing. In this unique twist, the seller briefly trades places with the buyer, who now owns the home and rents it to the original seller. With so many new houses being sold in Chicago of late, as mentioned in the article on Chicago's Hot Housing Market, sellers are routinely writing rent-backs into contracts.
For those with an eye on Chicago's hot real estate market, such as Lisa and Joe Krogman, they had a feeling their house in Hawthorn Woods in Lake County would sell fast. In fact, it only stayed on the market for a single day, which was "much quicker than I imagined," Lisa Krogman says.
Fortunately for the Krogmans, they had been looking for temporary housing long before closing on March 3. They moved into an Airbnb rental in Mundelein. But for many sellers in this year's rapidly-moving housing market, Airbnb isn't always a viable option.
Sure, real estate consultants have long advised prospective buyers against rent-backs, primarily due to the liability involved, but "when things are happening this fast and you feel like you won't have anywhere to go, people are doing it," says Mario Greco, a Berkshire Hathaway HomeServices Chicago agent.
"When you have a cash offer in hand you never want to turn that down," Andre McDaniel noted, a seller. The agent in turn proposed a rent-back. And from that point forward, it was smooth sailing.
In short, with houses in the Windy City selling faster than tickets to Bulls' games when Jordan played in the old Chicago Stadium, it's no wonder — smart sellers are writing rent-backs into contracts.