Seller Leaseback, a really good once-Over right here. We’re going to talk about real quick, that is Shana Acquisto. She is a luxury real estate broker. She’ll talk all about the lease back here for us. Who’s responsible for repairs? What happens if there’s damaged? What are the remedies that the buyer has? There’s like a lot of things to kind of unpack here, Shana. So let’s go ahead and walk through that right now.
So we’re seeing in this market that we’re doing anything and everything to allow our to give our buyers an advantage on offers getting accepted. So one of them is the seller’s leaseback, offering the seller time to stay in the property. And there’s a few things you need to understand. One, this is a document that it’s after closing, but it’s something negotiated in the contract.
And you need to discuss this with your client. OK, everyone needs to understand how this works, because if something kind of goes sideways during the lease back, they’re going to call you. Yes, they will at any time of the day. So what I want to point out is a few things in here, one being what happens if you have a repair needed during the lease back? This is very important to have this conversation with your client. So in the lease back, number 14 talks about repairs and it is underlined any time something is underlined.
Crazy how much it’s vandalized. Yes. So any time car can you pull this cellar’s temporary. This is Perfect.
So, you know, let’s go on, go ahead and go on down to number 14, if you don’t mind. And this talks about repairs and maintenance, so it is underlined and like I was saying, any time something is underlined in the contract, I believe it’s pretty important.
So we want to make sure that we’re paying close attention to this. And what it reads is you the tenant who is the person that’s been in the home the whole time, never moved out, is ultimately responsible for anything, anything and everything. OK, so if you have a major disaster, then obviously if it falls under something that could be filed under homeowner’s insurance, that’s obviously going to be the new owner at that point. OK, but everything else falls under the current tenant who is the previous seller.
OK, so I want to make sure that you guys are discussing this with your clients. So there are some questions on the home warranty while the buyer got a home warranty. Why can’t they use that? Well, that’s not something they have to do. So you need to make sure you’re having these conversations in advance, OK? And maybe sometimes people aren’t getting a home warranty. So a couple of things to think of.
If your seller has a home warranty in place, then they should keep it through this lease back. And you need to just verify with your provider if you can utilize that during your lease back. So I think it’s going to depend on the provider, but let them know, one, you’re responsible for anything and everything. You might want to call your home warranty company and just see if it might cover any minor things as it did when you own the home. OK, so you don’t have any issues.
You can also have that conversation or work it into your lease that if a repair could fall under a home warranty, that the landlord would utilize their home warranty. So it’s a it’s a really good topic to discuss further. So if you guys have questions on that, we need to discuss it. But the point is, this has to be discussed with your client because this could get really hairy if something happens. And they’re like, well, I don’t own the home anymore. I’m not taking care of it. You never told me that I had to take care of it. You need to make sure that you do. So you don’t get blamed for that, you know.
So my note here is like, hey, let’s think about this for a minute. We just sold the property, huh? Right. And now we have this lease back and we think like, oh, we’ll just throw this lease back in place because it’s going to do this, that or the other. And it’s convenient, whatever. But you actually have to go through what you do. You have to explain it. People need to know what’s going on, because if you can imagine if you’re doing a lease back for 30 days, six days, whatever that timeframe is, that there is going to be things that happen. Yes. And then they’re going to call you.
And if you explain it, then they’ll understand it right now. So the key is to read it, to make sure you understand it and make sure everybody’s on the same page because it’s almost like a purchase or a sale. Right. Like the transaction and a lease and their separate right. There are two separate things that fall together. So don’t act like it’s only a purchase or a sale transaction. There’s also this whole other thing which creates a bunch going on with it,
A bonus at the end. And you may have this conversation with them in the beginning. They’re going to forget it at the end. So my suggestion is before closing, I have a, you know, a conversation with your client and just say now let’s talk again about the seller leaseback. These are the things you need to you need to be aware of during that lease back. And, you know, these guys never moved out of the house. So things are a little different, right? They’ve owned this home for a period of time. You know, they’re familiar with it. They know what’s going on with it.
So I understand why this lease back is written as it is. The other thing is, if you were giving somebody longer than 90 days after closing to stay in this home, it does not go on this seller leaseback. It is a a lease, a flat out lease. So if you’re giving somebody six months or however long longer than 90 days, it does not go on this. This is only good for ninety.
It’s a temporary. Yeah, that’s what it says it right at the time. So temporaries considered 90 days or less or less than 90 days.
And, you know, let’s talk about deposits. When they move out the condition of the home, is it a wreck? Well, it says a number nine condition of property. They are supposed to convey that property just as it was before. So if it’s not, then you should hold a deposit just for any incidentals. I would say that happened during that move out. If you don’t accept a deposit, you don’t have any recourse really, unless you take them to court.
And and what about special provisions? Is that where you become an attorney and start writing all types of stuff in there?
Yes, but there are some things that you can put in special provisions. We do have to be careful. And if it is something that falls into more of a legal. You know, some legal text there when we need to get an attorney to draw that up. So that’s a whole other thing.
But yeah, I was trying to make a joke there because special operations people really don’t want you utilizing them to become an attorney to start putting legal stuff in there. So use the contractors it’s meant to be.
So just be careful if you know the deposit. I don’t know the amount that you should put in there. It really should depend on if you go into that property and they have tons of furniture and kids and dogs and all of that, you may want a higher deposit because you have a higher risk of things happening. Right. So you just have to use your judgment there. OK, but just be aware of it, have a conversation, identify these things with your client so they’re aware because they will call you if something goes wrong.
All right. So Stacey brings up a really good point. Thank you very much, Stacey Katrín, client coordinator living in currently currently in Roanoke, Texas. She says that 60 days is the item that you can normally have if a lot, if there’s a loan on it. Some of the lenders don’t want it to go over that. So please be aware of that potentially creating an issue. That’s a really, really good point to bring up.
So the buyer’s lender needs to understand about that. Right. So that’s a really good point. The other thing piggybacking off that is insurance. So if you are a seller when you close on the home, you will then turn into a tenant and you will change your insurance to renter’s insurance. OK, but if you have a buyer and a seller is doing leaseback, they need to contact their insurance provider and let them know that there is a seller’s temporary lease back, because if something happens and they haven’t told them that, it’s possible that the claim would be denied. So it’s really important to talk about that with your lender. And your homeowner’s insurance provider all really.
So those are super important items, feels to me like we should have this form here sold, initialed at closing. Again, again, like reinitialize right. And I also kind of feel that we should have a separate addendum that we have in here just about covering insurance and covering who’s responsible for what and just making sure that they understand that.
Inspection, you know, get your home inspection. Maybe we should have just a little addendum that says reminders for seller leaseback, you need to contact the insurance provider, you need to contact your lender and all of that. So I’ll get with Meghan and we’ll. Work on that.