Home Selling in Cape May>Question Details

Lorraine,  in Cape May County, NJ

What are the potential negative consequences of allowing a seller to rent back the home after settlement ?

Asked by Lorraine, Cape May County, NJ Sat May 14, 2011

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The risk is primarily that they won't pay and won't leave forcing you to evict them at great expense of time and money. During this process the "renters" may damage the property adding to your woes.
Now, if the seller only needs a couple of days to clear out their belongings to move to the new home they are purchasing, the risk goes down. Other ways to lower your risk is to treat them like any other tenant; obtain a credit report, collect first, last & damage deposit, do a move in inspection do determine the condition they are to return the home to you in and put everything in writing.
If this is for more than a 3 days, you need to consult the landlord tenant law to understand your rights and obligations. I’ve attached a link with this for you. Best of luck.
0 votes Thank Flag Link Sat May 14, 2011
I would just be sure they are credit worthy. Give them a lease and you might also want them to have tenants insurance for their personal belongings. These things will not be covered when they drop their homeowners insurance.
If you have not been a landlord before, make sure you get a copy of Truth in Renting so that you know the landlord/tenant laws in NJ.
Web Reference: http://www.dianeglander.com
1 vote Thank Flag Link Wed May 25, 2011
When your seller is looking to rent back the property short term to allow the deal to go to completion it may be a very viable option that accommodates both the buyer and the seller. Assuming that you don't need to occupy the property immediately, you have the advantage of actually buying the property and recouping some cash in the form of rent. Please make sure to consult a lawyer to draw up a short term lease that specifies when they must relinquish the property back to you.
0 votes Thank Flag Link Tue Oct 4, 2011
I agree with those that suggested to consult an attorney to draw any lease for this option. There are many possible negatives but on the flip side I have been involved with several closings that allowed the seller to lease back for different reasons and it worked out well for everyone.
0 votes Thank Flag Link Sat May 21, 2011
Loarraine the biggest negatives are getting them out, keeping them form damaging the house or removing anything when they leave. The best and safest way is to have a final walkthrough, close and take immediate possession. There are cases where the seller need sto stay after closing, my advice to my clients is delay closing. You also have to see if you are getting a mortgage, the mortgage co or bank usually has a mandate house is empty at closing and you move in just after up to within 30 days of closing
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Wed May 18, 2011
Other than not paying, they may not move out when you want or at all, may damage the property or may cause injury to themselves or others for which you may be liable. Follow the advice of the others as to how to minimize your risk if you go this route.
0 votes Thank Flag Link Wed May 18, 2011
Agree with Debbie - as I so often do - consult with an attorney on a Use and Occupancy. Generally though closure is a good thing and a Use and Occupancy delays final closure, and results in a less than perfect walk through prior to close (simply because the seller's have not vacated the property).

In my experience, attorneys would rather not see them, but if it is needed, then your surely want an agreement in place to cover the period that the seller remains - and that is a Use and Occupancy agreement that a real estate attorney will draft.

Jeanne Feenick
Unwavering Commitment to Service
Web Reference: http://www.feenick.com
0 votes Thank Flag Link Wed May 18, 2011
Lorraine - if you are asking about a "use and occupancy" following a (normal- not a short sale) closing, where the seller remains for a fixed period of time, as a tenant..........I suggest you speak with a real estate attorney.

We use attorneys for all our closings up here in northern NJ......I know you might not be using an attorney down there in southern NJ.
The attorney would hold money in escrow (from the closing) to cover the rental amount - which may be calculated on a per diem basis, depending on the length of time.........also an amount to cover a security deposit.....and an agreement in regard to any repairs that might be needed.

The new owner of the home might have the potential downside, moreso than the seller..........the tenant might decide not to vacate on the agreed upon date.....things might break........but with the agreement written by an attorney, everyone should be protected.
0 votes Thank Flag Link Sat May 14, 2011
Hello Lorraine,

If you're referring to a short sale purchase, then there's no question, it's not permitted. The previous owner who short sold the home is not allowed to stay and rent by law.
0 votes Thank Flag Link Sat May 14, 2011
I have heard that if a property is a distressed property it is a better idea to buy the home vacant to avoid potential title issues in the future. You may want to speak with an attorney about your question to get specifics.
0 votes Thank Flag Link Sat May 14, 2011
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