Thursday, April 3, 2008

Why Pay PITI for Rent Backs?

PITI - principal, interest, taxes and insurance - is typically prorated if a buyer is renting from a seller, or if a seller is renting from the new owner during, before or after a close of escrow. This is rent. Why should it be the amount of what a seller is currently paying in PITI or the amount it will cost a buyer to own the property on a daily basis? It shouldn't be this number at all. A better number to use would be what the fair market value is of the home as a rental and then prorated to a daily basis. So, why use PITI? Because it is easy and nobody will argue that number. Some people like easy. Although easy is not always fair. Depends on what side you're on.

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