Negotiating the purchase of a home can be stressful, and buyers who take on the responsibility often don’t recognize the arsenal of tactics at their disposal to achieve a win-win for everyone.
As hard as this may be to believe, the highest offer doesn’t always win the deal.
Often, sellers have concerns that may push into the background the difference of a few thousand dollars between offers.
Their most common stress is finding their next home and settling before the deadline to vacate their current property.
With mortgage rates rising, sellers are shying away from buying their next property ahead of time.
Those who do take the plunge and hope they’ll sell their current home in good time often require a bridging loan, a temporary second mortgage. They’re expensive, and should be avoided if possible.
So, how can you make the situation work for you if you find a seller in this position?
The answer is a rent-back agreement. Here are some top tips:
Make it legal
A rent-back agreement should be formalized in a legal contract, not based on a verbal agreement or handshake. It should be tied directly to proceeding with the purchase of the property by the buyer.
Key details
The agreement should detail the period and dates between which the seller will be permitted to stay in the property and the rent they should pay. Depending on the length of the rental period, you may ask for weekly, fortnightly or monthly payments.
Fair rent
Ask your agent to assess the rental market and propose a rent. The fee should be market-appropriate if you want to buy the property in a competitive situation.
Deposit
It’s common for the buyer to ask the seller for a refundable deposit, just as a landlord might ask a tenant. By mutual agreement, the deposit can be held by a lawyer involved in the transaction. Serious money can be involved, perhaps up to $10,000 depending on the property.
Landlord responsibilities
A rent-back deal isn’t quite the sweetheart agreement it may appear to be. You’ll be a landlord and obliged to address and pay for any problems on the property during the seller’s tenancy.
Make a judgment
Before entering such an agreement, ask yourself how much you want the property and whether you believe the seller will be a good tenant. Chances are everything will be fine, but you need to make a call and not be swept up by your desire to strike a deal. If it doesn’t feel right, don’t do it. Other homes will come along that you’ll love.