What is a reasonable security deposit on a 60 day leaseback?

13 years ago

We are selling our home in Texas and we agreed to lease back for 60 days from the new buyers. We agreed to a security deposit of $5000. We countered and asked for less, but he did not want to get less. He did agree to a couple of our other items, so we did not push on this item.

Now we are starting to think a $5,000 deposit seems high, since we will only live here for another 60 days. Is there a general rule for calculating a security deposit amount? Does this seem high to anyone?

Since we do not know these buyers, we are afraid that they could keep the whole thing pretty easily since there is nothing in the contract that specifies what type of damages are necessary for them to keep it.

Basically, does $5,000 seem high for a lease back of 60 days. We are estimating that his monthly payment for a traditional mortgage with 20% down plus taxes and insurance will cost him about $6300 a month.

Thanks.

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Comments (6)

artemis78
13 years ago
I don't know if there's a rule of thumb with lease backs, but with normal rentals, it's pretty standard for a security deposit to be a month's rent. So it seems on par with that.
brickeyee
13 years ago
It depends on what the holdover charge/delayed possession charge is going to be, plus a damage deposit.

Calling delayed possession a Ã¯Â¿Â½leaseÃ¯Â¿Â½ is generally not a good practice.

You want to avoid invoking any landlord-tenant law as much as possible most of the time.

The new owner wants to make it VERY painful if you fail to get out in time.
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lyfia
13 years ago
Can you use the escrow company to hold that deposit as part of your contract? This way you both have to agree to the release of the money on way or another. This is how we did it when doing the rent-back about 10 years ago in TX.
gopack
Original Author
13 years ago
lyfia, that is a good idea to have the deposit put into an escrow account. I will ask about that.
ncrealestateguy
13 years ago
Gopak,
Someone can cause just as much damage in one day that others may take a year to do. $5000 seems fair, if that is what the monthly rent is too.
Usually there is a refundable deposit, usually one or two months payment... on top of the regular monthly rent.
The rent should be based off of local market rates. (or whatever can be agreed to while negotiating the deal)
Deposits, option fees lease purchase deposits... should always be held in an attorney escrow. It is actually law here in NC, even though most sellers don't do it.
Brickeye is right about trying to keep the relationship below the radar of the Landlord / Tenant Laws. But, here in NC, any lease back over 7 days has to be written up on a standard NC lease, and all Landlord / Tenant Laws come in to play. But, there are parts of the code that protect the seller too.
You also should have completed a Move In Inspection Form or a Condition Report, the day you moved in. This way, you will know what damage was there prior to you, and which damage must have been caused by you. W/O this form, it is word against word... something you never want in RE deals.
brickeyee
13 years ago
"The rent should be based off of local market rates."

It is either local rents OR the new monthly PITI, whichever is higher.

The PITI is often higher on a house purchased with the intention of occupying it.
Investors are often forced to put more down.