A leaseback is when a homeowner sells the property to a buyer and then leases it back for a set period of time.
Let’s say you are about to sell your house, but you need to remain in the home for some reason (like your new place is not ready to move into).
While they are usually short term, leasebacks can last for days, weeks, months or even years, depending on the situation and agreed upon terms of the sale.
In order to set up a leaseback, you would have had to discuss the matter with the buyer during the negotiation period, prior to closing.
Additionally, both you and the buyer would have had to agree to a timeline and the amount of compensation that the buyer would accept for leasing you back the property.
Essentially, you are now renting the home you just sold. You will also have to sign a lease agreement that covered other issues such as damages, rights and responsibilities and the like.
Leasebacks can be an attractive option because you have the cash from the sale and you continue living there for however long the agreed upon period lasts.
The new owner is now entitled to tax breaks and they may even use the leaseback to create a long-term rental income. They can use your rent payment to cover the new mortgage, if there is one.