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Be Cautious in Agreeing to Delayed Possession

By
Real Estate Agent with Real Estate Buy Sell Invest www.SanDiegoHomeSold.com

Be Cautious in Agreeing to Delayed Possession
All Signed and sealed, got the keys in your hand, arriving at your brand-new address for the first time with children gathering around to have a look at your furniture. Perfect picture of a moving day, right on the agreed date! That's what you had in mind. But wait! What's that? A delay?

In some cases, a seller will ask to remain in the real estate for a time after closing. You may say yes or no to the request, but before you make your decision, there are some important things to keep in mind.

Requests for Possession Delay
Sometimes just prior to contract closing, a seller may ask for time to vacate the home, or to take care of other issues on the transfer of possession. While the request may seem to be in order, a buyer should consider it with caution.

If you choose to allow the request, the prior owner should at least be made to pay rent for any extra time. There must be a firm limit on the time the seller can stay in the property after the signing of the contract, and it needs to be in written form. An agreement setting forth the details of the after-closing possession can be provided by the real estate attorney or, in jurisdictions where attorneys are not involved in real estate purchase contracts, by the escrow officer.

If the seller announces at the time of closing that he or she has to stay in the home longer, and you agree to allow it, it is usually advisable to delay closing on the property until the seller can clear out, rather than become an unwilling landlord to a potentially troublesome tenant.

Why is Possession Following Closing a Problem?
Once you close on a property, it's yours. It is your responsibility. Anyone living there can do so only with your permission and they should be under a rental agreement or equivalent; even that does not insulate you from the risk of a loss. If the prior owner accidentally starts a fire that damages the house, you are responsible and you are accountable for the loss. The "tenant" will not be accountabile for the loss unless it is clearly included in the agreement -- and even then the inclusion may be hard to enforce.

Additionally, sellers who stay in possession after closing have a lower level of motivation to take care of the property and make needed repairs or do any maintenance. When the deal closes, you accept it in the condition in which it stands at the time of closing.

Whatever damage that occurs after the contract closing accrues to the buyer, irrespective of who is living there. So if a carpet gets torn up or a furniture mover drags an appliance and scars a wall or kitchen tile, you will end up paying for the entire cost of the repair work.

A frequent problem with letting the seller keep possession past closing is that items that should remain with the home can disappear between closing and the time the buyer takes possession. Even in this case, the buyer is responsible for the loss because that liability goes along with ownership.

As the buyer, you assume a responsibility commensurate with your investment. It is safest to stay with possession at the time of closing, or to reschedule closing until the former owner has moved out from the property and can deliver the keys.

This article was furnished through Automated Homefinder, the Longmont real estate experts in Colorado. From my website www.GaryGiffin.com Articles

Judith Reppert
United Country Countryside Realty - Mount Vernon, MO

I've had buyers "pre-occupy" with a written agreement on insurance, rent etc. in place.  It all turned out fine but I lost some sleep til closing day!  Wouldn't want to do it again...

Jul 23, 2009 09:18 AM
Bob Bloom
Keller Williams Realty - Vancouver, WA

If we do this long enough, we see it all. Usually no problems. USUALLY. The one time there is, you'll remeber forever. 

Jul 23, 2009 01:23 PM
FN LN
Toronto, ON

Once you get into a situation where the former owner is living in the house as a tenant, the Landlord and Tenant Act (or equivalent local legislation) applies.  This includes rules relating to evicting tenants and a slew of other issues that the buyer likely did not have any intention or experience in becoming involved.

Jul 23, 2009 11:17 PM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Gary:

Some excellent points raised here. Too risky to allow this to happen, although there are often situations that arise with transactions, particularly when selling a home and buying a new one, when this transition is a challenge. When using attorneys back in New England for closing (as is practice) the asner was always no. Have never done it, on either side, but it is often a request. I have heard some horror stories.

Jeff

Jul 24, 2009 01:42 AM
Anonymous
Derec Shuler

We had a conversation with our attorney about this issue.  When possession takes place after closing, it is imperative that the occupants (they were the sellers) sign a lease AND have renters insurance.  Your homeowners insurance will NOT cover any damage if you're not living in the house and theirs won't since they don't own the house. 


Make sure your clients know this to protect themselves!

Jul 24, 2009 03:03 AM
#27
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

The last time I moved I needed my funds from escrow to effect my move.  The buyer's lender screwed up and we closed late, I had to make other moving arrangements.  Hence I was out of my old house about a week after closing. 

Jul 24, 2009 04:42 AM
Kerry Jenkins
Prime Properties - Crestline, CA

Nope, get them the heck out on day of closing or before.  Right now, with about 45 days for closings, there is plenty of time to pack up.  There were some tenants in a foreclosed property with 2 small kids and a sick newborn and that woman packed up here entire house in 2 1/2 weeks.  If SHE could do it, anyone can do it.

Jul 24, 2009 06:22 AM
Stanton Homes
Stanton Homes - New Home Builder - Raleigh, NC
Design/Build Custom Home Builder in North Carolina

Great thoughts - not something that always comes up, OR is explained thoroughly when it does.

Jul 24, 2009 06:39 AM
Carol Simonson
ReMax - Westlake Village, CA

Great post Gary...and something to keep in mind for all the future escrows of tomorrow!

Borker-Granny

www.ActiveSunshine.com

 

Jul 24, 2009 12:52 PM
Todd & Devona Garrigus
Garrigus Real Estate - Beaumont, CA
Broker / REALTORS®

Closing is the deadline, period. I never recommend extending possession. It leaves too many variables and liabilities.

Jul 24, 2009 07:22 PM
Georgie Hunter R(S) 58089
Hawai'i Life Real Estate Brokers - Haiku, HI
Maui Real Estate sales and lifestyle info

Those are all good points.  I currently have this situation happening where the sellers are staying on and renting for a month.  So far so good.  They are providing their own insurance though.

Jul 25, 2009 11:42 AM
Raine Carraway (Michelle Carraway)
EXP Realty - Lenoir, NC

Good post, Gary. I've always strongly advised against posession after closing, just too many variables involved, and too many possibilities for a buyer to lose out in the process.

Jul 26, 2009 03:15 AM
Chad Boyers
The Danberry Co.- Toledo, Perrysburg, Sylvania, & NW OH - Toledo, OH

I tend to agree w/ possession at closing, but as Dee mentioned above, here in Ohio (especially Toledo area) it's quite common to have possession after closing.  I have not personally heard any horror stories from our area, but I'm sure it does happen sometimes.

I will offer another viewpoint for you: You represent a seller in a transaction.  The seller agrees to possession at closing.  The seller packs all belongings and has movers come the day before (or even the morning of) the closing.  Whoops, closing just got delayed for who know what reason.  What does your seller do now?  Get a hotel room for a few days, weeks, etc.?  Or even worse, the deal suddenly falls through.  Time to move everything back in.

This is why delayed possession can actually make sense.  The seller wants to make sure that the sale closes before committing time & money to moving out.  I understand the possible implications, but it's not as crazy as some of you may think...

Jul 26, 2009 05:28 PM
Anonymous
Bill Whetstone

Our daughter and son in law are buying, all set to close, have to be out of current place on 7/31.  Seller didn't get all paperwork cleared and closing will be delayed.  House is owned by bank, nobody in the house.  They would like to rent the house till closing.  I see the risks on all, but carzy options on what do they do in interim.  Does seller have any liability on their delaying closing? 

Jul 27, 2009 12:05 PM
#36
Mark Velasco
West Shores Realty - Whittier, CA
Top Producing Broker Associate

Not only are the Buyers risking the potential insurance liability...they are also risking the chance of non-paying tenants that stay longer than they are welcome.  Get 'em out is always the best policy.

Aug 15, 2009 07:10 PM
Anonymous
Bill Kotchish

I'm preparing 2009 taxes for a couple who allowed a little old lady to stay in the house past closing.  She paid rent to them and there is an item on the settlement "517.  Delayed Possession to (buyers)" for $3,800.  I assume this is the "rental" amount.

I have two questions I hope you RE experts can answer for me.  First, this delayed possession item is a reduction in amount due seller, so I suppose this "rent" has been paid at closing.  But who got paid?  I don't see any corresponding amount on the buyers side.  Second, if buyers did receive or get credit for this rent amount, does anyone know if this is taxable rent income?

Thanks in advance!

Feb 14, 2010 09:14 AM
#38
Anonymous
Liana

According to term paper writing service ,on the off chance that you permit the demand, the earlier proprietor ought to at any rate be made to pay lease for any additional time. There must be a firm point of confinement on the time the merchant can remain in the property after the marking of the agreement, and it should be in composed frame. An assention putting forward the points of interest of the subsequent to shutting ownership can be given by the land lawyer or, in wards where lawyers are not included in land buy contracts, by the escrow officer.

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#39
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LTDD - Cold Bay, AK

We at  term paper writing service take into account marking of the agreement, and it should be in composed frame. An assention putting forward the points of interest of the subsequent to shutting ownership can be given by the land lawyer or, in wards where lawyers are not included in land buy contracts, by the escrow officer. 

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