As usual, Charles Butterfield adds good ideas and options for buyers to consider. One caveat on a rent back scenario though: If you are using an owner occupied loan, you are probably signing a pledge to be living in the house within 60 days of closing. If so, and you don't move in, and your contract gives you the option to not move in within that period of time by giving the current owners the possibility of staying past 60 days after closing, your life can become extremely unpleasant. First, the loan may be cancelled and called, leaving you in all sorts of hurt. Second, you've possibly broken a federal lending law, which means a possible conversation with an agent from the FBI you'll wish you never met.
If you are not using an "owner occupied required" loan and paying a slightly higher interest rate as a result and that works for you, then Mr. Butterfield's suggestion may be your best option. You, the seller, and the bank would all be happy. You would be able to work out rent back to everyone's satisfaction. As others have said though, be wary of WHY the seller wants the rent back. Make sure your agent gets ALL the facts as to why the seller needs the extra time. Evicting the seller because he won't move out as promised is never a happy time.
Mr. Butterfield gets a thumbs up from me for articulating a possible solution to your question.
1) If you remove your loan contingency you risk your earnest money.
2) Your loan interest rates usually are only locked for a certain period.
3) Interest rates change and your ability to qualify can change if rates go up or your income/debt changes.
4) Lenders may not wait that long to close.
Your Real Estate Agent and Mortgage Broker should be discussing the risk to you and giving you options based on what is going on with this purchase.
There are ways to deal with this and your agent should be advising you because you have an agency agreement with them.
All the best to you.
Mitchell Pearce gave you an excellent answer. I agree with Mitchell Pearce that you should not remove your loan contingency. If you will not be closing until April, many things may happen between now and then that may make your loan far more expensive and by that time it is entirely possible that you may not be able to get the financing that you could get today.
I recommend that you consider closing escrow now with a rent back to the seller at your cost to own the home, that is your principal, interest, taxes and insurance (PITI)
That will permit the sellers to stay in the house as long as they pay your costs, and you lock in your loan and interest rates now, and eliminate the interest rate risk and other lending risks that you are exposed to by extending your close of escrow to April.
Charles Butterfield MBA
Real Estate Broker/REALTOR
Cell Phone: (408)509-6218
Email Address: firstname.lastname@example.org
In this lending climate, it is never good to remove the loan contingency till the deal closes. Don't take a lock for less than the time necessary to close the deal. You cannot predict when things will settle down in Europe, if a miracle happens in Congress and they get their fiscal act together (Yes that is a long shot, but if it happens rates stay low, and if it does not rates will go up dramatically at some point. You don't want to be unlocked at that point.)
When rates move against you, they move a quarter pint in a day. I've seen them move half a percentage in less than three days. Do you really want to be playing in that game?
Also keep in mind in a normal situation, there is a 5 day period before you close escrow, AFTER the sellers move, to inspect the property to make sure it's in the same condition as the day your offer was accepted. You need to have a plan if you rent back and find damages after you close escrow.
You didn't mention what type of sale this is; regular sale or short sale? I'm assuming it's a regular sale. However, in case it's a short sale I would strongly caution against doing any rent backs. Your agent should be able to tell you why.
As others have suggested, you should talk to your agent and lender to have a clear understanding of the seller's issues and your options.
Good luck and congratulations on getting into contract on a home.
Coldwell Banker Residential Brokerage
It appears that the sellers were able to change the contract to their benefit and no one was thinking about yours. When escrow was extended that long the first thing I would have thought of was your rate and having to lock it that long.
If you are forced to remove loan contingency I would walk away. That long if an escrow is a huge risk. I never would have let you agree to change that without something secured for you.
There is so many details that you left out that it is hard to suggest a single solution. Why is the owner selling the house now and needs to stay till May? Do they need the money from you to move out of the house? Why are you doing the loan now and not 60 days prior to closing? It is very unusual that you are planning the escrow to take half a year.
One of the options is to close around March 1st and then rent it back to the current owner till end of May. You can also write an addendum to the original purchase agreement saying that you will get a loan on such and such date with interest rate not higher than such and such and the contingency to be removed at late date.
Get your agent to negotiate!