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How to safely rent back: Use a
possession agreement
Most of the time possession of the house is delivered
at closing. This means the keys are turned over at closing and all of your stuff
is out of the house. When possession is not delivered at closing, the Buyer and
Seller sign a possession agreement. It’s like a mini-lease. The following are
common terms in a possession agreement:
-
The
seller pays rent, usually based on the Buyers mortgage payment. The seller
must say in the possession agreement what happens if the seller leaves
before the end of rental period, does the seller still pay or not? This is
one of the biggest sources of conflict with rent-backs.
-
The
seller is responsible if anything breaks. It’s the Buyer’s house, but
the Seller has to fix it.
-
The
Seller has to keep his insurance in effect (renter’s insurance).
-
The
seller’s attorney or realtor holds 2% of the purchase price as a
“security deposit” until the seller moves out. This is to guarantee
possession and the condition of the property. The Seller can’t use this
money to do his Purchase closing.
-
If
the Seller doesn’t leave when he says the Seller pays a big penalty, about
$250 per day.
-
The
Buyer has the right to a second inspection after closing to check the
condition of the property and must get back to the Seller immediately with
any problems.
If the parties sign a decent possession agreement
(that is agreed on at the time of the contract) there are very few possession
problems. In my experience, it all works out fine 98% of the time. If you fail
to negotiate and document possession with an agreement, get ready for trouble.
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