Seller Rent Backs – Should there be a security deposit?
Ask Phyllis: a blog series of frequently asked real estate questions.
Dear Phyllis,
I think you previously addressed a situation where the seller rented back. My son is in escrow on a La Crescenta home. Not surprisingly, there were more than ten offers and he had to agree to allow a seller rent back. The seller will pay his mortgage payment as rent. My son is closing in two weeks, and I am concerned that there is not a refundable security deposit. The seller/tenant might damage walls or flooring when moving. Should there be a security deposit? Mama Bear
Dear Mama,
In today’s competitive real estate climate, seller rent backs are becoming much more common. It’s often difficult for sellers to get the timing right between the sale of their current home and their next move. A common solution is for the seller to request a rent back. This allows the seller to remain and rent the property from the buyer after closing. In order to protect both buyer and seller, the California Association of Realtors have provided forms for these instances.
This should have been agreed to and addressed in writing at the time the offer was negotiated. So, I can understand the seller’s reluctance to renegotiate now. In many real estate transactions allowing the seller a few extra days to move without a security deposit is common. There is always the possibility of the seller damaging walls or flooring whenever they move. Be it a few days or several months.
If the seller shows pride of ownership in their home, I don’t foresee any reason they would cause damage during a rent back. And if they did, you could perhaps seek redress in small claims court.
One piece of advice for your son is check with his insurance agent to be certain that the home is properly insured during the rental period. The seller should also convert their policy to a renter’s policy which will insure their personal property.
Related Posts: Pros and cons of seller rent backs
What happens if the seller refuses to move?
Treat this situation as you would any other business relationship. Buyers should never let sellers retain possession of a home without executing a formal occupancy agreement.