REIN Seller Possession Agreements

Here I'm sharing the document used primarily in Hampton Roads for seller possession agreements in locations where REIN MLS is the primary MLS.

What is it?

A seller possession agreement for a seller, informally known as a “rent back” for the seller, is where buyer & seller close on a property, and for a certain time period, i.e. a week, a month, or a few months, the seller doesn’t vacate the premises. It’s most often done when the seller plans to purchase a home and the funds required for that purchase would need the proceeds of their sale.

How Long?

It’s common for it to be between a few days & up to 60 days if the seller plans to get (or is already) under contract on their own purchase while another buyer gets under contract on the home that they are selling. Often owner occupants using a mortgage will need to move in within 60 days to satisfy their loan requirements, even on a renovation loan. Those purchasing in cash or those who won't be buying it owner occupied can exceed 60 days.

It’s common for a month or 2 in cases where a seller wants you to purchase their home, and then after you close, they get under contract on another property to purchase.

By doing it the latter way, they avoid needing a home sale contingency clause in their contract.

What if the Seller Wants to Leave Early?

The default template for what happens in this scenario varies by contract.

A. With REIN agreements, there's an ambiguous style in section 4 B regarding whether or not part of the fees will be prorated back to the seller if they leave early, where the seller is at the mercy of the buyer's good will at the time without an up front agreement.

B. With VAR agreements, there's an explicit up front agreement in section 3 regarding whether or not part of the fees will be prorated back to the seller if they leave early.

Basic Provision Sections

A seller possession agreement includes but is not limited to elements like the following:

	REIN Section	VAR Section
Occupancy Date/Time	3	1
a security deposit from the seller	4A	7
an amount that the seller(s) pay the buyer in rent,	4B	2
a higher amount that the seller pays if they keep renting past the time they are supposed to	4C	4
Whether or Not Fee Will Be Prorated for Seller Leaving Early	4B	3
Insurance/Liability Details	6	5
Utility Provisions	8	6
Move Out Condition	7	6

The terms of this agreement, if present in an offer, are part of the negotiating process that can help determine whether or not the seller accepts your offer above other offers, so while not typical, in some cases (especially in a multiple offer scenario), the buyer offers a home to the seller for a time rent free.

How is the Buyer Protected?

The buyer may be protected in a few ways with a seller possession agreement. The REIN seller possession agreements has built-in terms to add like:

1. A security deposit from the seller to be held by the buyer (Section 4A)

2. A penalty rate (Section 4C) in the event that the seller doesn't move out of the house on the date that they are supposed to. In addition, the buyer still has recourse to pursue the seller for further damages beyond the penalty rate with an attorney if desired (section 3 of the REIN possession agreement), with the penalty rate not releasing the seller from all liability in the event that they don't move out by that date.

3. Insurance provisions (Section 6)

4. Move out condition provisions (Section 7)

5. Utilities/maintenance repair provisions (Section 8)

Are There Any Incentives for the Buyer?

The main incentive of a seller possession agreement is the ability to make a stronger offer. In a competing offer scenario, sometimes the highest price offer doesn't win. Sometimes the other terms, such as a seller looking for a rent back, can be the single deciding offer between 2 or more competing offers.

Another potential incentive for the buyer is the ability to charge rent to the seller, especially if the buyer is in a location where their rent is free or lower than a new mortgage would be. That said, it's not uncommon when I am representing a buyer to encourage them to not charge any rent to the seller as long as they vacate by the date that they are supposed to. Conversely, I do typically recommend that buyers request a deposit from the seller even in competitive offer situations as a protection.

There are certain scenarios where a seller possession agreement provides further advantages:

Another potential advantage of a seller possession agreement is if a buyer's lease doesn't expire until after the closing date would be. Rather than breaking a lease agreement early, moving out soon before it expires, or weakening an offer (typically) with a long time before closing, it sometimes creates an easier transitioning point into their next home.

Another potential advantage of a seller possession agreement is if a buyer is in a lease and wants to be in a more secure position with a home prior to providing their landlord notice that they are vacating. 30-day notice required isn't uncommon with lease terms, and if a buyer provides less notice than that, there are sometimes penalties that are incurred. By purchasing a home with a seller possession agreement, or by purchasing a home with an extended closing date (which typically weakens an offer from a seller's perspective), a buyer can be in a better place to provide that 30 days notice often after the home inspection contingency goes by with the buyer being satisfied with the home, the wood destroying insect & wood destroying organism inspections occur (which I've seen kill at least 1 deal where the seller didn't even sell because of the extent of damage & took his home off the market instead), and the appraisal is passed.

Another potential advantage of a seller possession agreement is if a buyer is also selling. It's nice to be relatively "clear to close" prior to putting your home on the market because it means that you may not have to pay 2 mortgages for long or at all. In many cases, sellers don't want to wait too long to close. A seller possession agreement provides an extended time period where a seller can make that easier transition.

Page 1 of REIN Form

Page 2 of REIN Form

VAR Form

While I"m happy to share the latest version with my clients & customers, VAR has some strict rules regarding republication without prior consent from VAR. In light of that, here's a 2020 version directly from VAR's publication.

Move Out Inspection Report

All images courtesy Real Estate Information Network & Authentisign/TransactionDesk

Related:

• REIN Buyer Possession Agreement

• House Buyer Guide

• House Seller Guide

• Area Guide

• What Adam Offers Sellers

• What Adam Offers Buyers