Seller Lease-Backs: What Are They, and How Do They Work?

When you sell your home, the buyer usually thinks that they will live there from that day on. But sometimes the seller stays in the house for a little while after the sale. This is called a lease-back agreement.

If you're a buyer reading this, you might be thinking that you don't want to buy a house only to become a landlord. But don't worry! Seller lease-backs are very common in North Texas. In this blog, we'll explain what lease-backs are and how they work. We'll also talk about the risks and benefits for both buyers and sellers.

What Is a Seller Lease-Back?

A seller lease-back is an agreement between the buyer and a seller wherein the buyer agrees to allow the seller to continue possession of the home after closing. The seller will receive money from the sale and will stay in their house until the lease is done.

How Does It Work?

A lease-back is a situation where both the person selling the house and the person buying the house agree to have a lease. The lease-back is created using the Seller’s Temporary Residential Lease Addendum. This means that the person who buys the house can live in it for up to 90 days, although usually it is only for 60 days if the person buying the house wants to live there all the time. Whether or not the seller pays rent to the buyer (the new homeowner) is determined by the negotiated lease terms. Of course, there are penalties if the seller overstays the lease or damages the property. When the seller moves out, the buyer can take possession of the home and move in.

Benefits for Sellers

The main benefit of entering into a seller lease-back agreement is that it allows a homeowner to stay in their home longer without having to purchase another property or search for rental housing. It might be useful for having extra time for the home search - and to have the certainty of cash-in-hand from the sale of their home - or simply to have a few extra days to move out after closing. Ultimately, a lease-back just allows the seller more time in their house before moving out.

Benefits for Buyers

It may seem like there are zero benefits for buyers of having the sellers keep possession of the home, but there are some advantages for buyers, too. First, if you're not able to move into the house immediately, it's always best for homes to be occupied, especially by a seller who has pride in ownership. Also, lease-backs allow buyers to offer something of big value to a seller (but at almost no cost to them) in their offer package. Giving this extra flexibility to a seller may enable buyers to pay a little less for the house.

Risks of a Seller Lease-Back

When buyers enter into seller lease-backs, they should know that there is always some risk involved when taking on tenants. Buyers need to know that even after selling their home, sellers still have some rights. For example, sellers can move out early without breaking any agreements like in a typical rental arrangement. Most buyers are worried about risks but the Texas addendum for temporary leases put the onus of damages or repairs on the Seller. (Unlike regular tenants, buyers know they can afford to repair it because they just gave them a pile of money to buy the house!).

Overall, seller lease-backs can be a win-win for sellers and buyers in Texas. But it is important to know the good and bad parts of this type of agreement before making a decision. If you are considering buying or selling a home in Texas, we'd love to be your guide on that journey. Our expert agents have a wealth of experience negotiating real estate contracts. We look forward to helping you achieve your real estate goals!