Looking to sell your house in Wisconsin but also wanting to stay in it?
Event though it’s becoming more and more common for Wisconsin homeowners to sell their house and stay in it, many are unaware they can get cash for their home and continue to live in it post-closing.
Real estate investment companies and landlord investors can buy your house and “rent it back” to you. Leaseback companies allow sellers to sell and stay for 12 or more months as a tenant with a leaseback/rent-back agreement.
Wanna learn more about selling your home in Wisconsin and staying in it after closing?
Read on to get all the details about our Complete Guide to Selling Your Home in Wisconsin and Renting It Back.
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How Can I Stay In My House After Closing?
First of all, you absolutely can stay in your home after selling it.
Buyers understand that owner-occupied properties typically take longer to vacate and often agree to a short post-closing stay. Real estate investment companies and investors even offer the option to stay long term as a tenant.
Before we ge into the How, the biggest question for sellers is whether or not is makes sense to stay in the property after selling it.
Continuing to live in your home after its sold has some caveats.
Buyers often pay less due to post-closing occupancy. You get to stay after closing, but in return give the buyer a break on price. It’s a trade-off.
Some of the most common reasons sellers opt to stay after closing:
- Cash out equity: “sell and stay” to get cash from the sale. You’ve probably grown to love the home and just wants to get money for your house without having to move.
- Relocation: Very often sellers don’t commit to a new home until after the sale. Moving to a new place may not be possible until receiving sale proceeds (to make a down payment on another home or first month’s rent plus security deposit). Sellers want to ensure their current home closes before incurring the financial obligations of a new one.
- Preparing for the move: If you’ve got a house full of stuff, moving can be daunting. Between planning, packing, and organizing, owners can feel pressured to move out quickly. A post-sale lease allow sellers to calmly move out after closing.
- Prepare for retirement: Whether you need the cash to support yourself or just want to properly allocate your nest egg, you can sell first and then plan the next chapter of your life.
Option #1: Short Post-Closing Stay
Need to stay in your property for a brief period after closing? Ask for post-closing permission.
Typically, post-closing stays last only a few weeks to a couple of months.
Many times buyers are agreeable with a post-occupancy term – often free of charge. Having sellers rush to move can incur accidental damage to the property. Happy sellers are more likely to take care of the asset even after closing.
On the other hand, buyers’ offers with a post-occupancy term might make it more enticing to sellers. An offer allowing a one month stay after closing is more likely to be accepted than one requiring sellers to move out immediately.
Staying in your property for a short period of time after closing can make sense if you’re looking to relocate or move out in the near future.
Option #2: Leaseback/Rentback And Become A Tenant
Sell your house for a lump sum of cash and stay in it as a tenant. That simple.
Sellers are usually unaware of this option. It’s a great way to cash out some equity without having to restart your life in another city or neighborhood.
Esquire defines a leaseback as below:
A leaseback agreement is an arrangement whereby the owner of a property sells it to a buyer, but remains in possession for a specified period of time while paying rent to the buyer, effectively making the seller a tenant and making the buyer the landlord.
Here are the key steps to take when performing a leaseback:
- Buyer and seller agree on sale price and closing date
- Buyer and seller agree on lease terms, including monthly rent and length.
- Buyer and owner execute the purchase contract and lease agreement
- Upon closing, owner receives the lump sum cash payment and transfers ownership to the new owner
- The previous owner makes a security deposit and is now a tenant in accordance with the terms of the new agreed upon lease.
It’s important to read lease “terms” carefully. A great leaseback experience can be defined by the terms we have explain in detail below:
- Termination Date and Renewal Options. Most lease agreements terminate after 12-months and do not auto-renew. However, each lease is unique.
- Security Deposit. Payment to the landlord to ensure that rent will be paid and other tenant responsibilities complied with.
- Rent Payment Grace Period. Window of time, typically 3 to 5 days, that tenants have to pay rent before incurring a late fee.
- Fixtures Provided. Most apartments come with kitchen appliances. Make sure to ask the landlord if these will not be provided.
- Remodeling Restrictions. Like to paint? Install a TV on the wall? Check the rules before making modifications.
- Homeowners Association Rules. Townhouses and condos typically belong to a “Homeowners Association” that specifies rules and regulations for all occupants.
- Number of Occupants Allowed. Got a big family? Planning for children? The written lease could limit your options.
- Guest Policy. Like to entertain overnight guests? Some landlords restrict the hours and number of guests.
- Subletting Policy. Subletting occurs when a tenant rents out the property they are leasing from the landlord.
- Pet Policy. Landlords and buildings often restrict pets by size, weight, and type.
- Renters Insurance. Protection for belongings and coverage for additional living expenses, should the rental become uninhabitable.
Option #3: Home Reversion
Also known as a home reversion plan, under this scheme you sell all or part of your home for a cash lump sum, regular income or both.
This is strategy is usually employed by people aged 60 and over as a tax free way to cash out home equity.
Typically, you sell between 50% of your home via the lump sum. When your home is sold in the future, the company providing the home reversion receives a share of the proceeds and the rest goes towards your inheritance.
The big disadvantage in this plan is heirs will have a reduced share, you’re gonna have to sell below market value and is still obligated to pay for regular costs of ownership (whereas as a tenant, all costs would be the landlord’s responsibility).
Who Can Buy My House And Rent It Back To Me?
The MLS is still the most popular way to sell a house in today’s market. Typically, you hire a real estate agent that puts your house on the market, you accept an offer from a buyer and after closing you move out and the new buyers move in.
If your goal is to sell your house and stay in it, you need to explore other options. MLS buyers are usually not willing to let you stay in the property.
Plus, negotiating a lease and a home sale via a real estate agent is rarely (if ever) succesful.
Finding the right buyer that is experienced in “leaseback” agreements is the best way to ensure a smooth transaction.
Some real estate investors can buy your house and rent it back to you. A “sell and rent back” company is typically an experienced landlord.
Where do you find a real estate investment company to buy your house and rent it back to you? Your best bet is searching online. Call around and see if they’re willing to do it, and how the process works.
How Much Rent Will I Pay?
There are two methods to determine what will pay for rent.
If you’re staying in the property for a short period after closing, the buyer will calculate holding costs for such period. If, however, you’ll be staying as a tenant, the buyer will charge rent based on the current market.
Determining Holding Costs
Holding costs is simply the sum of all costs incurred to own a property.
Holding costs include utilities, maintenance, taxes, insurance, financial payments, HOA fees, landscaping, and management fees.
Buyers will charge rent that is equal to, or is slightly above, holding costs for short-term, post-closing stays.
Usually, buyers will not be looking to profit from this period and instead will offer short term post-sale stays as a courtesy to the prior owner, or in many cases, as a necessity to finalize the sale.
Determining Market Rents
Real estate investment companies and landlord buyers will charge market rents for long-term post-closing stays (usually, leasebacks).
As investors, they seek to maximize the return on their investment. Charging market rents allows them to cover their costs and have some profit to justify their new cash investment.
There are four ways to learn the market ren in your areas:
- Search Online. Free websites show you the rents charged in the market. This includes Rentometer, RentBits, Padmapper, Zillow, Craig’s List, and Ziply. Simply type in your address or zip code and get instant estimates and review rental listings!
- Drive The Neighborhood. Some landlords don’t post their listings online. Drive through your neighborhood and look for “For Rent” signs. Call the phone number and ask the rent being charged.
- Consult with Local Landlords & Property Managers. Landlords and property managers charge the rent. They possess the “first-hand” knowledge of the current trends in market rents.
- Newspaper & Written Publications. Although print is considered “old school” and out of favor, it is an additional source of rental information.
Market rents can vary based on the following: number of bedrooms and bathrooms, on-street or off-street parking, utilities included, pet allowances and pet fees. Transportation access and proximity to local areas of interest can also play a huge part.
It’s important for Wisconsin homeowners that are looking to sell their property to develop a basic understanding of real estate law.
When negotiating the purchase and sale, as well as, the leaseback of a home, many terms can make a huge difference in an offer or transaction. Terms like escrow, closing date, contingencies, inspection period, deposit, plus monthly rent, security deposit, grace period, subletting policy and duration (monthly or yearly).
Here are some official documents used in the State of Wisconsin:
Wisconsin Real Estate Purchase & Sale Agreement: Standard, WB-11 Residential Purchase & Sale Contract in Wisconsin.