Seller Rent Back Costs Soaring

After receiving an offer on their home, a seller formulated a counteroffer which tidied up some terms and included a request for renting back the property for 29 days after the close. Rentbacks can help sellers bridge the gap between the sale of their existing home and the move into their replacement property.


While the buyer cannot occupy their home during the rentback, they still pay their mortgage, taxes and insurance (PITI). To cover the buyer’s costs, the premise is to have the seller pay a per diem of 1/30 PITI. If the property has an HOA fee, this would be included as well.

While a common practice for years, current sellers are feeling the bite of increased prices and interest rates. 

 Historically, if a buyer had an 80% loan on a home costing $500,000, their monthly mortgage payment at 4% would be approximately $1,909.66 ($64.00/day). Property taxes on $500,000 came to $17.36 a day and, if insurance was $1,200/year, the daily amount was $3.33. The combined per diem was $84.69, or $2,540.70 for the month.

Things have changed, however. Dramatically. That same home could easily sell for $1,200,000 today and, coupled with higher interest rates and soaring insurance costs, the rentback numbers are quite different. 

Given the same 80% mortgage, the loan on a $1,200,000 property would be $960,000. A 30-year mortgage rate of 6.3% produces a monthly payment of $5,942.14. Property taxes would be $1,250/month and insurance would be in the range of $250/month. The total is approximately $7,442/month, or $248/day. That is a whopping increase from the rentback numbers of yesteryear.

 When the market was red hot, many buyers were willing to cover the rentback costs just to secure the contract. With the market softening, however, free rentback is disappearing, with the result that sellers are once again being asked to cover the costs of remaining in the home for any period of time after the close of escrow.

Sellers, while excited about current higher sales prices, are shocked when they discover what their rentback will actually cost. Consequently, many are actively seeking other less expensive options. While some stay with friends or relatives, others move into extended stay hotels or month-to-month rentals. Another option that is increasing in popularity are AirB&B rentals.

Whatever the temporary destination, one thing is certain: sellers, faced with the increasing sticker price of rentback, are out looking for cheaper solutions.

Carl Medford is a licensed Realtor with Keller Williams Realty and a licensed general contractor.