What is a Sale with a Leaseback?
March 18, 2021 Mark MacFarlane

What is a Sale with a Leaseback?

Posted in Cash Buyers (for Homes), Home Buying, Home Selling

What is a Sale with a Leaseback?

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 25th of February, and the new home you’re moving into will close on the 28th of March, but the old home you recently sold will close 26 days earlier on the 2nd of March.  Where will you live for the 26 days between March 2nd and March 28th? 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.

When you do a sale with a leaseback transaction, you sell your existing home first but move later. In the above scenario, you would close on the sale of your home on March 2, the buyer of your home agrees not to move in immediately but allows you, the seller, to lease the home from the buyer for 26 days. This allows you to close, get your cash from the sale, but move out when your new home is ready to be moved into.

As part of the sale-leaseback agreement, you will pay rent to the new owners for the 26 days, but it is almost always less expensive than staying at a hotel and moving your furniture and possessions twice. Most people would agree that avoiding the hassle of moving twice and not having to live in a hotel for 3 weeks is almost priceless.

What is a Sale with a Leaseback?

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.

How does the idea sound to you? A leaseback is an opportunity to get the cash you need without having to uproot your family. In most cases, it also relieves you of the responsibility of paying property taxes, insurance, and the cost of major repairs.

A sale-leaseback can be either short-term or long-term. A short-term lease can stretch from a month to a year. All leaseback agreements that are longer than a year are generally considered long-term leasebacks.

A Sale with a Short-Term Leaseback

A short-term sale with a leaseback agreement often lasts for less than three months, but most are just for a couple of days.

They afford you additional time to vacate the home before the new owner moves in, and they work to serve both the buyer and seller’s convenience. If, for example, I sell my house quickly, I can reach an agreement with the buyer such that I can continue to stay in the home shortly to allow my children to finish the school year.

Here are some other benefits of a sale with a short-term leaseback:

  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.

A Real-Life Example of a Short-Term Leaseback Arrangement

Sell House fast to problem solvers

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.

Mr. Brown and his wife debated for days whether to sell early. On one hand, they needed the cash. On the other, they would have to pay to move twice and move in the middle of a pandemic. They were in a bit of a dilemma.

Then one day, a friend told Brown about companies that buy houses for cash and how Brown should call a few of them to see if they would buy his house. The Browns did some online research and called OutFactors, a local Texas home cash buyer for an offer. During the conversation, the people at OutFactors explained their Sell and Stay Program. With this program, OutFactors will buy homes for cash and provide the seller with a leaseback, allowing the Browns to remain living in the home until their new house was completed. The Browns accepted the Sell and Stay Offer and ten days later, OutFactors bought the home and the Browns became short-term tenants.

For Brown, the fast home sale coupled with a short-term leaseback was ideal, eliminating the hassle of looking for a temporary rental or moving into a hotel. “It was the leaseback that took me and my wife over the edge to sell my house fast,” he said.

The Pros of a Sale with a Short-Term Leaseback

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.

Pros of a Sale with a Long-Term Leaseback

A home sale with a long-term leaseback works in the same way as a short-term leaseback but offers greater flexibility to the seller to choose when they want to move out. This is especially effective for retirees or people with serious medical conditions who need the cash but want to stay living in the home they love. Many consider it to be the better and more flexible alternative to a reverse mortgage.

The seller will execute a long-term lease at the same time they sell the home. The lease terms are usually on an annual basis with an option to renew for a total of 15 years or more. If allowed by state law, many of the more reputable companies that buy houses, like OutFactors, will allow the seller the option to repurchase the home.

So, why would a sale with a long-term leaseback be right for you?

image of family that sold house for cash

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.

Why You Want to Sell Your Home with a Leaseback

  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.

sold sign showing cash for keys

  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.

A Few Final Words

Companies that buy houses provide homeowners a great method of getting the cash they need while allowing them to remain living in the home, either on a short or long-term basis. Unlike borrowing from a bank, the process is super easy with no credit checks, employment verification, or other stringent requirements. When selling to a home cash buyer, there are no fees, loan costs, and getting a cash for house offer is fast and free.

Although a buy my house sale with a leaseback has many benefits, it is not for everyone. We recommend that you contact several companies that buy houses with a leaseback program to get information about the company, their terms of leaseback program, and request a buy my house with a leaseback offer. Keep in mind that companies that buy houses are not all the same, look for one that has been in business for 10 years or more and that is BBB Accredited with an A+ rating, like OutFactors.

The Sale with Leaseback Program Offered by OutFactors

At OutFactors, we offer many “Buy My House” programs, including a buy my house with a leaseback program. Our buy my house with a leaseback program is unique because it can be tailored to meet the needs of the seller. We offer a short or long-term leaseback and when permitted by law, we even offer the seller an option to buy my house back from OutFactors.

We invite you to visit OutFactors.com for additional information, and if you are ready to get your fast and free buy my house offer with a leaseback offer, click here. Getting an offer from OutFactors only takes about 2 minutes, is absolutely free with no obligation, and personal information is NOT required. Yes, that is correct. No registration, no email address, no telephone number – not even your name. So get a great cash offer today!

Gold and red seal free No risk Cash OfferWe hope this article is informative and provides you with another option for selling your home that you may not have been aware of previously.

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Dallas, Texas 75208
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What is a Sale with a Leaseback? | Buy My House | OutFactors — Dallas Fort Worth, Texas