Post-settlement occupancy/rent-back agreement: a leverage for sellers and buyers

A March 2022 Redfin study revealed that on average, Washington, DC homes sold after being on the market for 29 days. Fantastic news, right? What do you do if you want to sell, but you don’t want to move out by the closing date? You consider a post-settlement occupancy agreement, which benefits sellers and buyers.

Is there a different between Post-Settlement Occupancy Agreements and Rent-Back Agreements?

No. The terms are interchangeable, but the function is the same: A seller and buyer agree to terms that allow the seller to remain in the home for a specified amount of time with both parties abiding by the agreement.

What are the terms of a post-settlement occupancy agreement?

The lender must be notified and grants permission for the seller to remain in the home for a maximum of 60 days past the closing date.

Typically, the seller pays the buyer a per diem to cover the buyer’s PITI (Principal, Interest, Taxes and Insurance), and condo dues or home owners association dues, if applicable.

The seller would also pay a security deposit to prevent damage to the property. The security deposit would be held by the title company and not given directly to the buyer, and it would be reimbursed to the seller as long as there is not damage to the property during the post-settlement occupancy timeframe.

This is not the same as a landlord-tenant relationship. The seller is allowed to remain in the home, but does not have additional rights beyond occupancy that a tenant has in a landlord-tenant agreement.

Sounds great, but what happens if there is damage to the home?

Post-settlement occupancy has its perks and pitfalls. You should consult with an attorney who would be able to guide about options you have if the property is damaged during the post-settlement occupancy period.

What are the benefits for a buyer?

In a competitive housing market, you want your offer to get noticed. Agreeing to a post-settlement occupancy agreement will make your offer more attractive to a seller and it allows the seller to not feel pressured or rushed to move out quickly. Also, the buyer will receive rent from the seller. Think of it as a recouping of funds for closing costs and attorney fees.

When done properly, a post-settlement occupancy agreement can create a win-win situation for all parties involved.