Renting Home Before Closing

Added March 3, 2007 by Ilyce R. Glink

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Summary: Relocating to a new city can be difficult. To save time and money, you might consider moving only once - by renting the home you'd like to buy before the closing. However, a seller may not want to rent the home. But given the current buyer's market, renting before closing could be a possibility. To have the opportunity, you must work with the seller to offer them several assurances that you will go through with the closing.

Q: We're moving across the country so that I can take a new job. Do you have any advice on buying a house, but moving into it immediately as a rental until we can close?

We're hoping to be able to do this so that we don't have to move twice.

A: While this sounds like the perfect solution for you and your family, some sellers aren't comfortable handing over control to a buyer who hasn't put down the cash and closed on the property.

But first things first. You've got to find a property that you like enough to buy in your new neighborhood of choice. Once you've found it, you need to make an offer.

As part of the offer-making process, you can ask the listing agent whether the seller would feel comfortable allowing you to rent the property before the closing. One problem is that the seller may not be ready to move quickly into his or her next home particularly if they don't know whether you will buy the home or not, or whether you will even be able to get financing for the purchase of the home. That said, there are a record number of vacant homes for sale and the need to move the seller out wouldn't even factor into the equation.

Given that much of the country is suffering from a buyer's market; too many homes on the market and not enough eligible buyers to purchase them; you may find sellers who are desperate enough to allow you to work something out.

There are several ways to make a seller feel more comfortable with what you're trying to do. You can offer more earnest money up front to give the sellers more comfort that you have cash to buy the home. You can also offer to pay the seller's monthly expenses on the home until you actually close on the purchase.

In some parts of the country, rental costs are less than what it actually takes to keep up a home: real estate taxes, insurance, utilities and other maintenance expenses on the home..

You may find a seller more receptive to your offer if they know you have the money for the down payment on the home and you are paying at least what the seller is paying to own the home.

Finally, if you come in with a preapproval letter from a lender, you will have even more leverage. The letter should not be a prequalification letter, but rather a letter stating that the lender has approved you for a loan and is only waiting on the appraisal and some other minor items to close on the purchase.

A good real estate agent will be helpful in this situation. Be sure to explain your needs and parameters upfront so he or she knows how to help you. A real estate attorney can assist you in making sure you, and the seller, are protected.

Mar. 3, 2007

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