real estate

5 tips to sell home before buying another

Q: How do sale-leaseback arrangements work?
How do sale-leaseback arrangements work? © 3Den/Shutterstock.com

You can buy time from your purchaser by renting the home for a while after you sell it.

A sale-leaseback agreement allows the seller to continue living in the home -- usually paying rent to the new owner -- after the close of the sale.

"This is no standard contract," observes Chicago real estate attorney Jonathan Sherry. Typically, the former owner pays rent to the buyer based upon the monthly mortgage payment the buyer is paying on the new home, Sherry says.

By dividing the mortgage payment by the number of days in the month, you calculate the daily rental rate. To live in the house for 20 days after the sale, you would pay 20 times the daily rental rate.

Sherry cautions that there are limits to how long you can rent the house you just sold. "The mortgage document that the buyer has may require that he occupy the home within a certain period, like within 60 days of closing," he says.

Most of the leaseback agreements that Sherry has seen require the former owner to deposit 2 percent of the purchase price into an escrow account. The money is released after the seller moves out, leaving the home in good condition.

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