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Homes are selling quickly and that has caused a problem for many home sellers. With housing inventories at record lows and buyer competition strong, home sellers are finding it difficult to purchase a new home to move in to before they must leave their existing home. Some sellers are even declining offers on their current home because they can’t find a place to move to, or they’re exploring other options like short-term housing or asking for leaseback options.
Nearly 60% of homes are going under contract within just two weeks, according to housing data from Redfin. Forty-six percent are sold in seven days or less.
“One of the toughest aspects of selling a home in a hot market is what’s next after the home sells,” Matt Van Winkle, owner of RE/MAX Northwest in Seattle, told Money.com. “Timing a purchase and sale is incredibly difficult in most markets but especially when most sellers won’t accept an offer contingent on the sale of the buyer’s home.”
Many home sellers in this situation are asking for a leaseback or rent-back agreement after closing to allow them to stay longer to find a new home. This allows the seller to lease the home from the buyer for a set amount of time and pay the new buyer a daily, weekly, or monthly rate. Some buyers are waiving those extra fees to sellers in leaseback agreements to win a bidding war when they first negotiate an offer.
It’s increasingly becoming a trend, Gordy Marks with RE/MAX Northwest in Seattle, told Money.com. “I’d say a third of the current contracts being written have a rent-back of some length—usually free to the seller,” Mark said. “If the buyer doesn’t want to give the seller a rent-back, they just won’t get their offer accepted.”
But these leaseback agreements can raise potential home warranty and insurance issues that both the seller-tenant and new buyer need to be aware of and ensure they’re both covered for whoever is living in the property.
Other options that sellers are exploring are moving in with friends or family or even renting a short-term furnished unit, like with monthlong setups through Airbnb, VRBO, or other similar property. They also may find more options from a traditional rental property with short-term or month-to-month leases. Home sellers can place their furniture in storage with a moving company—usually averaging about $60 to $225 per month—and then are living out of a suitcase until they find a new home.