Seller rent-backs are used when the seller, for several reasons, needs to occupy the home after escrow closes.
This usually happens when the seller has logistical reasons that prohibit them from vacating the property after a normal 30-45 day escrow. Perhaps they need more time to move, or need more time to find a home of choice.
Rent-backs can be a deal-saver in certain situations when there is a wrench thrown into the escrow process due to move-in/move-out logistics between buyer and seller.
There is a proper form to fill out for this purpose that is part of your California Association of Realtors standard forms called a Residential Lease After Sale.
The important thing to remember is that the buyer's lender will, in most cases, either not allow a rent-back longer than 30 days, or perhaps not allow a rent back to be part of the contract altogether.
This probably stems from the fact that the buyer has agreed to purchase the home and obtain a loan from the lender, stipulating that it will be there primary residence. And anything that smells like a rental is a different situation to the lender entirely.
Be sure to check with your lender with their guidelines in this matter.
It may be best to try and write the longest possible escrow period that the buyer's lender will allow, if that will help the sellers moving logistics without having to deal with a rent-back at all.
If it's absolutely necessary, some people have found a lease solution to be drawn up completely outside of escrow. But once again, you may run into trouble with the buyer's lender if this is not handled properly.
The amount of rent is calculated by either agreeing to a price that is based on comparable closed leases in the area, or by calculating the new buyer's PITI (Principle, Interest, Taxes, and Insurance) per day to calculate a monthly rent-back amount.
Just remember, when this happens, the new buyer of the home by default, puts themselves into an applied landlord/tenant scenario, which creates a different legal spin completely.
Ralph, I have three contracts with rent-backs happening in the next 10 days. The at-the-time expiring tax credit had buyers clamouring to get into homes and settle quickly -- meanwhile the sellers had not found the house they wanted to move to yet!!!
It does create an interesting relationship that most people don't think about, though! The sellers have to fully understand it isn't their house anymore!
Ralph - mixed feelings on this, yes, it could possibly be a deal saver, or breaker, and in most cases, is benign. However, here in Georgia, once the seller becomes a renter, they are now to be treated under tenant laws, and, if something happens, the new owners have to follow all of the required steps and months to actually move into their property, which also doesn't account for damage to the property, etc.
Ralph - As you stated, some loan programs will not allow rent backs and in the case of tenant occupied property, some may not even fund until it has been verified that the tenants have vacanted the property. I have even seen prior to doc conditions on tenant occupied properties where verification of eviction must be provided before the buyer will even receive final approval.
As for not putting it in the contract, I think you open a whole can of worms by going that route - be careful with that strategy.
I have a situation as you describe. The big problem is most lenders require the buyer to occupy the property withing 30 days or else it's considered a rental. I really don't think this is right in many situations. I think they should give it a limit of 90 days instead.