In Real Estate, possession is when you actually take control of the property. The question often comes up as to when that actually occurs. I have seen this issue to be more important than the price received or paid on a property! At closing of escrow the buyer is given the keys to the home and any other pertinent items belonging to the property; mailbox keys, garage door openers etc. At the close of escrow the buyer legally owns that property and is free to move in and begin to enjoy their new home. Maybe they will paint before moving in or renovate the property first.
This is true unless the buyer and seller have made special arrangements for the seller to stay in the property for a longer period of time or for the buyer to move in prior to closing. Neither of these are normally recommended nor are either customarily practiced but the question does come up in almost every transaction and occasionally it does occur.
There can be special circumstances that may appear to be legitimate reasons for one of these to occur. Perhaps the seller is building a new home and it won't be finished for another 4 weeks. Or perhaps the buyers lease is up a week before the closing. Maybe the circumstances are understandable to both the buyer and seller and they work out a deal for this to happen as a matter of convenience for one another.
There are some things to consider in these situations that can have some painful consequences. I'm sure most of us have heard the saying; "Possession is 9/10th's of the law." To some extent that phrase is not all that far from the truth. Let's say the buyers in all good faith really do need to move in early for some very legitimate reason and you the seller have a place already to move into. You pack up, move out and move into your own new home and pretty soon the closing date has come and there has at the last moment been a problem with the buyers financing or loan process. (Don't roll your eyes, this happens) The buyers really can't close on the property after all. Now what? They have moved in with nowhere to go. You the seller now have to put the home back on the market in the hopes of getting a new buyer as soon as possible. In the meantime the buyers are at a loss of where they are going to go and in no hurry to move their belongings out. It is possible that the buyers could have created damage to the property and you are going to have to repair this before putting the property back on the market. On top of having to put the home back on the market what is the likely hood that now you have two mortgages to pay? Ouch!
From a buyers point of view; the sellers need additional time to move for one reason or another. Again, something has come up and usually it does. The sellers are having difficulty getting moved out and the time is being extended and extended. Possibly the home they are building still isn't ready for occupancy. How many times has this happened in the building of a new home? As a buyer and possibly of greater consequence, God forbid, your new home has caught fire while the previous homeowners are still occupying the home. Guess what? Your insurance company will most likely not cover your claim because your new home was not Owner Occupied! If you purchased your home as your primary residence, your mortgage company isn't going to be too pleased to find out that you are not living there and legally they could call your note due! You haven't even moved in yet!!
Given these possible consequences what is the best policy to follow? 1. Possession at closing with the Sellers moved out and the buyers ready to move in at closing. 2. If this just cannot happen, then postpone the closing until it can happen.
It's not a perfect world and as I mentioned above occasionally there is going to be a seller that needs additional days to move, so how do you deal with this? Your attorney can put a contract into place for an extended seller possession and a common practice in this situation is to have a portion of the closing funds put into escrow and to be released to the sellers once they have vacated the property. Another common practice is to charge "rent" to the sellers which should include your expenses including your prorated monthly mortgage payment, taxes, insurance, homeowner dues and utilities that would be in your name as the new owner of the property. This can be prorated to a daily rate. Often it is recommended to build in a substantial increase in the rate if for some reason the sellers attempt to stay longer.