March 20, 2023

Can I Sell My House and Still Live In It?

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Can I Sell My House and Still Live In It?

Can I Sell My House and Still Live In It?

One minute you're putting your house up for sale, crafting an appealing listing, adding a couple professionally done photos, and then boom, you got yourself a buyer! With all the paperwork completed, money and house keys changed hands, you're ready to ride off into the sunset in a new home... or so you think.

The market that made it so easy for you as a seller has now turned on you as a buyer, and you find yourself constantly getting outbid on the houses you want.

Understandably, you are in a panic.

You wonder if it's possible to live in your old home as you sort out your new living arrangement. Perhaps you can rent it out for the meantime?

Is It Possible to Pay Rent After You Sold Your House to Continue Living in It?

live in your old home

Yes!

It's not uncommon to sell your house and negotiate with the buyer about staying for a while longer to get your affairs in order. Such transactions are called sale and leaseback.

Like everything else, it comes with its benefits and drawbacks, which we're going to explore below so you can make an informed decision.

Benefits and Drawbacks of a Sale and Lease Agreement

The Benefits

You Get More Time to Prepare for the Move

You Get More Time to Prepare for the Move

If you haven't figured out your new living arrangements yet by the time you close on the sale of your house, having a rent-back agreement in the contract would provide you a safety net. This relieves the pressure of having to make a quick decision regarding your next home, and allows you the luxury of exploring all options available so you end up making the right decision for you and your family.

Furthermore, this can also be beneficial if you have children attending school; you can wait for the school year to end before transferring them to a new school district.

You Avoid the Hassle of Having to Move Twice

Is It Possible to Pay Rent After You Sold Your House to Continue Living in It?

In case your house sold earlier than you anticipated, you might request for a short stay post closing. This spares you from having to get temporary housing before you're able to close on your new home. It also saves you thousands of dollars in moving costs, as you'll only need to do it once.

What's more, if you're requesting to stay for only a few days more, your potential buyer might even allow you to stay on the property rent free!

You Avoid Paying For Two Mortgages

You Avoid the Hassle of Having to Move Twice

If you're struggling to make your mortgage payments and are looking to move to a smaller property, you can negotiate a rent back agreement in the sale contract so you get money for the down payment. This way, you avoid taking on a second mortgage, which can spell further disaster on your finances!

You Release Equity and Convert It Into Cash for Emergencies

Sometimes, no matter how financially prepared you think you are for certain life events, it can still catch you flat-footed. Instead of taking out a loan with onerous interest rates, you can take out the equity tied up in your home by selling it to an investor for cash, and then working out a lease contract so you don't lose the roof over your head.

You Avoid Paying For Two Mortgages

You Get To Stay in the Home That You Love and You Get a Cash Lump Sum for It

Leasebacks are popular in corporate settings. A private firm can free up capital without giving up the use of a property--and this capital can be reinvested to further grow the business or meet financial obligations.

Essentially, the same thing happens in a sale and leaseback transaction for residential real estate. You still occupy the home--you just don't have a stake in it anymore. But the transition from paying your mortgage to paying rent isn't so bad.

You Release Equity and Convert It Into Cash for Emergencies

After all, when you're a tenant, you're not on the hook for maintenance and repairs anymore!

Got a leaking roof? Call your landlord and they'll send someone over.

Of course, you've got to look at the fine print of your rental agreement, but not having to deal with the upkeep sure sounds like a sweet deal.

The Drawbacks

You Have a Shallower Pool of Potential Buyers

You Get To Stay in the Home That You Love and You Get a Cash Lump Sum for It

Since the property sale is contingent on the buyer allowing you to get cash for your house and still live in it, most buyers won't be as keen on getting it, especially first time homeowners. Your potential buyer is most likely a landlord or a real estate investor, so your marketing strategy should be geared towards them.

Your Month’s Rent Is Likely Higher Than Your Mortgage

You Have a Shallower Pool of Potential Buyers

Unfortunately, you can't have your cake and eat it too. To maximize their rental income, your landlord would factor in holding costs such as property taxes, HOA dues, maintenance, and repair costs.

Additionally, you'd likely pay more if you're renting for the short term than if you have a long term rental agreement.

Your Month’s Rent Is Likely Higher Than Your Mortgage

You Miss Out on Future Appreciation

Say there's a big development in your neighborhood which happens after you already sold your home and signed a long term lease with your buyer. That development would cause home prices in your area to soar, so you miss out on the profits you would've made had you sold much later.

Then again, if it is necessary to sell your house now, hypothetical future profits won't matter either way.

You Lose Flexibility

You Miss Out on Future Appreciation

Making the transition from home owner to a tenant means you have to play by somebody else's rules. You lose the freedom and flexibility of modifying your space. You can't just do some home improvements when you feel like it. Sometimes even installing wall mounted shelving requires permission from your landlord, or else your security deposit can take a hit.

You Sell for Lower Than the Market Value of Your Home

You Sell for Lower Than the Market Value of Your Home

Since you'll likely be selling to an investor or to real estate companies, whose main purpose in buying up properties is to turn it into income-generating assets, expect to sell your home for a reduced price.

Real estate investors are savvy individuals who operate using the70% rule in real estate. This means their fair offer won't be beyond 70% of your home's After Repair Value (ARV) after deducting repair costs. This usually results in selling at a deep discount from its full market value. On the other hand, these types of buyers usually pay cash, sparing you the wait and the uncertainty of whether they'd get approved for financing or not.

How Do You Sell Your Home and Still Live In It Afterwards?

Before You Sell: Check if You Qualify for Exemption From Capital Gains Taxes

Check if You Qualify for Exemption From Capital Gains Taxes

Before you proceed with the sale and hash out the lease terms with your buyer, check if you'll be able to claim exemption from paying capital gains tax.

Simply put, capital gains is just the difference between your selling price and the purchase price. If your property appreciated from the day you bought it, its capital gains is a net positive, and is therefore taxable. Thankfully, with the Taxpayer Relief Act of 1997, you'd be able to shield up to $500,000 in capital gains if:

  • the house you're selling is your primary residence and you have owned it for at least two years;
  • you have lived in it for two years in the last five years of owning it; and,
  • you haven't claimed the exemption in the last two years prior to putting your property on the market.
Home Reversion Scheme

If you haven't satisfied the requirements yet, waiting a while before selling your property can't hurt, as it would allow you to maximize the proceeds you'd be able to get from the sale.

Once everything is ready, here are your options in selling your house and perfectly legal ways of staying post closing:

Option #1: Temporarily Stay for Free

Temporarily Stay for Free

When purchasing owner occupied property, the prospective buyer can reasonably expect that the seller won't be moving out as soon as the ink dries on the sale contract. Even landlords who are used to charging rent would easily agree to give the seller a few days to get everything in order before the move, and should you need more than that, you can probably request for more leeway.

Remember to put everything in writing, even if your stay is only for a few days after the close.

Option #2: Have a Long Term Leaseback Agreement

Have a Long Term Leaseback Agreement

A homeowner staying on as a tenant after the property sale is not unheard-of for some buyers. In fact, this can be attractive for investors as they don't have to vet and screen tenants, instantly getting a steady cash flow from their brand new rental property.

Be sure to negotiate not just the rent and the duration of the lease, but be clear on who'll be responsible for maintenance and repair costs, homeowners' insurance, and other associated costs.

A thing of note: negotiating a rent back agreement can backfire, especially if you have failed to maintain the property properly during your ownership. Your buyer won't have a reason to think that, as a tenant, you'd suddenly treat it better, and they might end up with a property that's worth less than they got it for.

Is It Possible to Sell My House and Live In It Afterwards?

In cases like this, expect them to ask for a higher security deposit or require you to pre-pay part or all of your lease. You won't have to worry about shelling out money upfront though, as they can shave it off your sale proceeds.

Option #3: Home Reversion Scheme

This option can be a part of your long term financial planning, as this form of home equity release, called a Reverse Mortgage, is only available for people 62 years old and over. By then, you're likely to have fully paid your mortgage, so why not unlock that equity to boost your retirement?

lifetime lease

Also known as a lifetime lease, home reversions work like this: you sell your house, get the funds either as a lump sum or as regular income, then you stay long term in your own property without having to move. And although you are effectively selling your house, you don't need to pay capital gains tax when you make use of this plan.

A caveat though: in a home reversion scheme, you only get up to 60% of your home's market price owing to the fact that the lender has no idea when they will get their money back, as well as they'll be bearing the risk of what might happen to house prices in the future.

Closing Thoughts: Is It Possible to Sell My House and Live In It Afterwards?

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Selling your home and living in it afterwards is not only possible, it can be simple too.

As long as you are able to make it clear whether you'd like stay for a short while once the sale is finalized, or you'd like to stay on as a tenant, the transition from being owner to tenant should be smooth.

Here at House Buyer Network, we can link you with cash buyers across the United States and Canada, so you get a fast, fair, and honest offer without having to pay a dime in fees to a real estate agent. These buyers are local investors who can easily rent you back your home while giving you cash to get you out of a pickle.

Curious about our offer? Just fill in your property address, email, and phone number and we'll call you with a cash offer in 24 hours!

If you'd like to know more, don't hesitate to call us at (855) 835-2544 and we'd love to talk to you!

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catherine mack
Author: Catherine Mack

Catherine Mack is a seasoned real estate investor and enjoys sharing her expertise through writing on relevant real estate topics. Catherine aims to educate home sellers, so they can make the best decision for their real estate problems.

She’s been featured on a plethora of publications including Better Homes & Gardens, Acorns, Realtor.com, Apartment Therapy, MSN, Yahoo Finance, HomeLight, and Business.com.

House Buyer Network™ since 2004. We buy houses nationwide. As house buyers, we offer cash for houses to homeowners looking to sell their house fast. Our cash offers are free and come with no obligations. See what we can offer and get cash for your house!

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