Can You Sell Your House and Still Live In It?

Selling your home and continuing to live in it might seem counterintuitive, but it’s possible through specific financial and legal structures. This arrangement can be considered for various reasons, including accessing home equity, facilitating estate planning, or managing financial resources later in life. These structures allow for a change in ownership while preserving the seller’s right to occupy the property.

Sale-Leaseback Arrangements

A sale-leaseback arrangement involves a property owner selling their real estate and then immediately leasing it back from the new owner. In this type of transaction, the original homeowner transitions into the role of a tenant, while the buyer becomes the landlord. This strategy allows the seller to unlock the capital tied up in their home equity without having to move. Businesses often use sale-leasebacks to free up capital for operations or investments, but it can also apply to residential properties.

The agreement involves two primary components: the sale of the property and a simultaneous lease agreement. The sale price and terms are negotiated, and concurrently, the rent amount, lease duration, and any renewal options are established. The lease agreement also specifies responsibilities for property maintenance, repairs, property taxes, and insurance.

The process generally begins with finding a buyer who is open to a sale-leaseback arrangement, often an investor seeking stable rental income. Once a willing buyer is identified, negotiations encompass both the property’s sale price and the terms of the lease. Both the purchase and sale agreement and the lease agreement are executed at the same time, legally binding both parties to their new roles.

Life Estate Deeds

A life estate deed is a legal mechanism that allows an individual to retain the right to live in and use a property for their lifetime, even as ownership is transferred to another party. This arrangement divides property ownership into two interests: a “life estate” held by the individual who continues to live in the home (the “life tenant”), and a “remainder interest” held by the future owner (the “remainderman”). Upon the life tenant’s death, the property automatically transfers to the remainderman, bypassing the probate process.

Creating a life estate deed involves the original property owner, known as the grantor, executing a deed that conveys the property to a remainderman while specifically reserving a life estate for themselves. The life tenant retains the right to occupy the property and is responsible for ongoing expenses such as property taxes, insurance, and maintenance. The remainderman holds a future ownership interest but has limited rights to the property until the life tenant’s passing.

There are variations of life estate deeds, including “enhanced life estate deeds,” sometimes referred to as “Lady Bird deeds.” These enhanced deeds offer greater flexibility to the life tenant than traditional life estates. With an enhanced life estate deed, the life tenant can sell, mortgage, or otherwise manage the property without needing the consent of the remainderman.

Key Considerations for Selling and Remaining in Your Home

Entering into an arrangement where you sell your home but continue to reside in it requires careful consideration and professional guidance. It is advisable to consult with legal counsel specializing in real estate and estate planning, along with financial advisors. These professionals can ensure the chosen arrangement aligns with your personal goals and provide a comprehensive understanding of all legal and financial ramifications.

Any agreement, whether it is a lease for a sale-leaseback or the terms within a life estate deed, must be meticulously drafted and comprehensive. A written contract is essential because verbal agreements are not enforceable in real estate transactions. The document should clearly define responsibilities for property taxes, insurance, utilities, and maintenance. It must also specify the terms for occupancy, conditions for termination, and a mechanism for resolving any potential disputes that may arise.

The financial and tax implications of selling your home, even while remaining in it, are significant. For instance, the sale may trigger capital gains tax, though homeowners can exclude a certain amount of gain from the sale of a primary residence. For 2025, this exclusion is up to $250,000 for single filers and $500,000 for married couples filing jointly. The responsibility for ongoing property taxes and insurance can shift to the new owner or remain with the occupant, depending on the specific terms of the agreement.

Such arrangements also integrate into broader financial and estate planning goals. They can impact future housing needs and how the property affects heirs or beneficiaries. While primary residences are often exempt assets for certain programs like Medicaid, selling the home converts this exempt asset into countable cash, which could affect eligibility for means-tested government benefits.