If you are like many of my clients, you may want to sell your home, but the uncertainty of knowing where you will go once your home is sold is daunting. You may wonder if you can find a replacement property once your home is in escrow. I get it. This is a common concern. Very common. I never want to sell a home for someone without the assurance that they have a new home to go to.
So, what are your options? Well, if you can afford to buy your next home without selling your first home, good for you! You can buy first, move, and then list your old home for sale. Problem-solved. Unfortunately, most people don’t have that luxury. Sometimes, we list a property subject to a Seller finding, purchasing, and closing on a replacement property. This is a great strategy, and I have used it successfully over the years. Of course, it means a Buyer must be willing to wait while you find your replacement home. It’s definitely doable, but not always agreeable to a Buyer because in a “subject to” contract, the Seller can cancel if they don’t find a suitable replacement.
Late Occupancy Strategy
Enter option #3 — The Late Occupancy strategy. Granted, it’s not a perfect solution, but it has merit. Here’s how it works — you list your home for sale and you negotiate a late occupancy with the Buyer. The house closes, but you rent it back for a period of time, typically at a price equal to the Buyer’s mortgage, taxes, and insurance payment. Time frames can vary, but I see anywhere from one to two weeks, to 30 to 90 days. Everything is negotiable, though of course, you’ll need to make sure that any arrangement is agreeable with the buyer’s lender. In general, 60 days is acceptable with most lenders. Buyers often will agree to a Late Occupancy because they know they can secure the property. Yes, they may have to wait for you to find a suitable property to purchase or rent, but the property becomes theirs.
The beauty of a Late Occupancy is that it allows you to stay in your home after closing. You now have money in the bank. Liquid money that allows you to negotiate from a position of strength on your next property. You also have time. Time to look at replacement properties without the stress of trying to sell your home. You can begin to look, negotiate, and hopefully, settle on a new property during the rent back period. There can be hiccups, but I have done this successfully multiple times, and with the right strategy, good communication, and skill, it can be an effective way to sell and buy with enough margin to save you a lot of stress. It provides assurance that your next decision will not be born of urgency.
Buy Yourself Time
One thing I often tell my clients is this: “Do not make a long-term decision based on a short-term circumstance.” In other words, your next purchase may be your last purchase. Buying a property is generally a pretty long-term proposition. So, don’t settle on a home that isn’t just right because you are squeezed for time. Buy yourself time — enough time to look for the next property.
A Late Occupancy may not be right for every seller, but it can be a successful strategy, especially for those who are unsure about where they are going and for those who want to avoid multiple moves. Don’t miss out on a good Seller’s market just because you are unsure of your next step. There are ways to create a win-win situation for you if you are ready to sell. Renting back your own home is just one of them!