In this turbulent real estate market sellers are often frustrated when their home sits on the market for an extended period of time with little or no interest being generated by prospective buyers. When these sellers are unwilling, or unable, to reduce the asking prices, their Realtors often offer an alternative—renting the home.
If a seller has to move out of the home, or has already relocated, and cannot afford to have their home languish on the market indefinitely, one way to offset the cost of carrying the home is to rent it.
When a client approaches me with this idea I counsel them as follows:
- Realize there is someone else living in your home and the possibility of selling it diminishes when there is a tenant in a property unless a potential buyer can wait for the lease to expire, or is interested in keeping the tenant.
- You will need a tightly drawn lease agreement (I caution against using a “standard” realtor lease or other “prepared” lease from the internet or other source) to ensure that you are adequately protected. Remember, someone else is living in your home and you want to restrict how many occupants will be in the house, whether animals will be allowed, who pays for what maintenance, etc. Just collecting a monthly rental payment is generally not going to cover all of the financial and/or repair issues that may arise during the lease.
- You need to notify your insurance company that the property is no longer occupied by you or you will most likely not be covered if a claim is made. A standard homeowner’s insurance policy does not cover you when you rent and do not live in the home (or even if you simply have vacated and left the home empty. Within 30 days of vacating you need to have proper insurance in place).
- Is the tenant interested in purchasing the home but needs time to get their finances in order to be able to meet a lender’s strict requirements for borrowing money to purchase a home? If so, then perhaps a lease with an option to purchase is a better vehicle. I generally suggest an upfront non-refundable option fee payment, or a higher rental amount, and at the time of purchase the additional rental paid is credited toward the purchase price or forfeited as rent if they do not purchase the home.
I can help you navigate the legal issues that can arise when you rent your home. Please telephone me at (203) 744-1234 to discuss your specific needs so that we can create an agreement that works for you. I may also be reached by email at email@example.com.
Other Cramer & Anderson attorneys who practice Residential & Commercial Real Estate Law include Perley Grimes, Robert Fisher, Jr., Kenneth Taylor, Ted Backer, Dolores Schiesel, Thomas Mott and Christopher Sochacki.
Cramer & Anderson has offices in New Milford, Danbury, Litchfield, Kent and Washington Depot. For more information, see the website at crameranderson.com or call the New Milford office at (860) 355-2631.