Rent-backs Reverse Desire to Find Walk-Through Items

Real Estate Agent with Samson Properties VA 0225-059831, MD 646410

Confusion "Rentbacks," technically known as post-closing seller occupancy agreements, have a surprising way of reversing the motivation of sellers to have property condition issues identified in the walk-through just before closing.  Usually sellers hope for to minimize the identification of any issues at the walk-through just before closing to avoid any last minute closing delays or at the table negotiations.

     When a rentback is involved, however it is essential for the listing agent to strongly encourage a formal walkthrough prior to closing resulting in a walk-through list signed by buyers and sellers at closing which documents the condition of the property as accepted by the buyers.  Since the seller will continue to occupy the removal of the seller's personal property is agreed, but it is important to have a document signed by the buyers accepting the property for closing purposes as it is otherwise.

     Of course, if the seller's movers poke a hole in the wall carrying out a piece of furniture the walk-through after the rentback ends will document the difference and part or all of the seller's rentback security deposit will be delivered to the buyers after negotiation at the end of the rentback.

    The problems that usually arise are more of the nature where there are defects that were not noticed or not so obvious at the pre-closing walkthrough.  For example when the portable island was removed it uncovered a burn or tear in the kitchen flooring.  Or when a couch or bed was removed it revealed a stain on the flooring underneath it.  The seller's position will generally be that the damage was there at closing and the buyer accepted it. The buyer's position will be that the seller created the damage during the rentback.

     If the damage is something that clearly took longer to develop than the length of the rentback then the buyer's case is weaker.  Exterior wood root does not manifest in 3 days, for instance.  

     Generally the buyers, sellers and agents are maximally motivated to close right before closing. Specifically pointing out minor defects, or even offering minor concessions to cover them will generally earn good will and cost less than if the defects are negotiated after a rentback.  By the time the rentback is over the money from the closing has been disbursed, the sale transaction has concluded, and both buyers and sellers tend to be feeling more parsimonious.

     The Gold Homes Team always advises our seller clients to insist on a signed pre-closing walkthrough document if a rentback is involved.

     Similar reasoning applies to having a signed pre-occupancy walkthrough document for a pre-occupancy prior to closing.  Of course, the Gold Homes Team generally shies away from pre-occupancies, but that's for another article.

     Fundamentally agents and principals need to treat pre-occupancies and rentbacks like leases, even though they are explicitly not leases for lending and tax purposes.


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The Gold Homes Team, LLC. MBA, MSE, MA, CDPE, Associate Broker VA, MD, FL

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