Common Problem

Consider this scenario — You’re looking forward to moving into your new home soon, having sold your old one recently. Suppose it’s the 25^th of February, and the new home you’re moving into will close on the 28^th of March, but the old home you recently sold will close 26 days earlier on the 2^nd of March.  Where will you live for the 26 days between March 2^nd and March 28^th? This is a common problem.

Your Options

One alternative is moving into a hotel or a short-term rental. However, that would require you to move your household items twice. You’re probably going to move them first to a storage facility, then to the new home. Moving your furniture and all your possessions twice would be a big logistical headache, not to mention the extra cost.

The second option, which would be easier, is a sale with a leaseback agreement. For most home sellers who are also buying a new home, the thing they worry about most is selling their home before they buy the new home. If their old home is not sold first, then they may not have the money to buy the new home, or they run the risk of having to pay two mortgage payments every month, which could be financially disastrous. The sale with leaseback resolves this dilemma.

Selling your home and getting ready to move is hard enough, but timing the sale of the old home to the exact day you buy the new home is a magic trick many families find difficult, if not impossible.

Finding a buyer too soon could mean scrambling to get a roof over your family’s heads. Selling too late may hamper your ability to finance your next home or stick you with paying two mortgage payments every month. However, there’s a viable workaround: a short-term leaseback.

There are other reasons people do a sale with leaseback agreements. For example, let’s say I want to sell my house because I need the cash, but I still want to remain living in the house. In a residential or home sale with a leaseback agreement, someone will buy my house, pay for it, but unlike an ordinary home sale, I’ll lease back the house and become a tenant. I just got the cash I need without having to move out of the house.

  Avoid Double Mortgage Payments

Before you sell your home and get the cash, your financial capability may not allow you to move out. It’s because moving into a new home often requires a down payment, closing costs, and a host of other fees. It’s financially prudent to make sure your current home is sold before shouldering the financial obligations for a second home. A sale with a short-term leaseback can prevent double housing costs.

Move at a Leisurely Pace

Moving is never easy, but if you have a house full of furniture and personal possessions, moving can be an uphill task. You may need many days of planning, organizing, and packing, which are often overwhelming especially when trying to simultaneously close on the sale and purchase of a home. It is easier and less traumatic to move out at a leisurely pace after you have closed on both homes.

Take Alex Brown, a banker who lives in Texas in a 2,900-square-foot, five-bedroom house. Brown and his wife purchased their current home in 2014, and in early 2020, they began constructing a new and better home in the same neighborhood.

Mr. Brown had initially scheduled to put his current house for sale in mid-2020, which would be some weeks before moving into their new home. Unfortunately, in April 2020, the COVID-related layoffs that ensued affected his wife, a hotelier, and the family had to make do with Mr. Brown’s salary only. “While I saw the need to sell my house fast so I could fund the building of our new home, the idea of relocating twice didn’t sit well with me, especially during a pandemic,” said Brown.

A leaseback provides you the financial comfort you need to buy a new home while allowing you the wiggle room not to rush the process.

You avoid the extra cost and stress of moving twice and having to live in a temporary rental or hotel.

It affords you ample time to find the perfect house or complete the construction of a new house.

The Property Fits:  Occupying the home long term as a renter is an excellent way to get the cash you need without having to move out of the house you love and that just fits your needs.

The Payments are Reasonable:  The monthly payments to rent the house are usually about the same as the mortgage payments would be, without any of the associated responsibility for large maintenance and repair costs.

Flexibility: When you are a tenant, you have the flexibility to move out at the end of any lease term. So if you decide you want to move to Hawaii, you just terminate the lease, pack your bags and go.

Stay near Family and Friends: You probably moved to the house you live in to be near family and friends, and selling to a company that buys houses and provides a long-term leaseback will allow you to stay near the people you love.

  It Frees Up Cash

A sale with a leaseback converts your home into liquid cash without having to lose possession of the property. Whether you need the cash to start a business, retirement, medical expenses, or fund college for a loved one, a sale with a leaseback can be an excellent option.

Cash Out Before a Market Downturn

If reliable evidence suggests that properties will decline in value in your town soon, it may be wise to sell your home and take your equity before the market downturn. Rent for a few years, and then buy a home when the time is right.

  You Get All of Your Cash

A sale-leaseback transaction allows you to get 100% of your home’s value versus refinancing when you will typically only get 80%. You also avoid the high cost associated with obtaining a mortgage, including points, loan, and appraisal fees.

 Someone Else Pays for Repairs and Improvements

If your home needs extensive repairs and improvements, you can sell the home to a home cash buyer who will make the repairs at their expense. You not only get to stay in your home, but you also get to enjoy living in a home repaired and improved by someone else.

 Quick Home Buyer

Companies that buy houses specialize in closing quickly. When you sell to a home cash buyer, you typically will close in 10 days or less. Most companies that buy houses also offer flexible terms and leaseback options, like OutFactors. So not only do you sell house for cash, you get to decide when you move out.

 Easy Access to Cash

If you have a low credit score or other financial issues, it might limit your ability to refinance or borrow money. However, companies that buy houses do not check your credit or even ask for an application. As a home cash buyer, they only want to verify that you are the true owner, what the house is worth, and agree upon a fair monthly leaseback rental rate.

If you need cash but have bad credit, are unemployed, or have other issues, a sale with leaseback can be your best option. When you sell your home to a home cash buyer, you also avoid the cost of borrowing with high-interest rates and exorbitant transaction fees.