Homes are selling faster than ever before, and at the same time finding a new one to live in has become such an arduous task that some sellers are facing big problems.
With existing home inventories super tight and competition among buyers for the few homes that are listed for sale, many have struggled to buy a new home before they leave the one they’re selling. As a result, some have had to look at other options such as short-term rentals or leaseback options, while others are declining offers until they can find a place to replace theirs.
Data from Redfin shows that almost 60% of homes go under contract within just two weeks, while 47% are sold in a week or less.
Matt Van Winkle, owner of RE/MAX Northwest in Seattle, told Money.com that this is causing some major headaches for sellers, who struggle to know what to do next. “Timing a purchase and sale is incredibly difficult in most markets but especially when most sellers won’t accept an offer contingent on the sale of the buyer’s home,” he said of the reality of today’s market.
A lot of home sellers have tried to get around the problem by asking for a leaseback or rent-back agreement after the transaction has closed, to give them more time to find a new home. Such an option enables the seller to rent the home back from the buyer for a specified period of time at an agreed upon rate. And some buyers are making such an option even more compelling by waiving the extra fees involved with a leaseback agreement, or even free or discounted rent for the duration of the leaseback, to try and make their offers stand out in bidding wars.
Van Winkle’s colleague Gordy Marks told Money.com that this has become a very common arrangement.
“I’d say a third of the current contracts being written have a rent-back of some length, and it’s usually free to the seller,” Marks said. “If the buyer doesn’t want to give the seller a rent-back, they just won’t get their offer accepted.”
One potential problem with leaseback agreements is they can lead to home warranty and insurance issues. Real estate agents say both the seller-tenant and the new buyer must be aware of these issues and ensure they’re both covered for whoever is living in the home.
Other sellers are exploring options such as temporarily moving in with family or friends, or else renting a short-term unit through Airbnb, VRBO or a similar service. Those sellers then typically move their furniture into storage, which can cost anything from $60 to $225 a month.