It's Closing Day! Everything has gone like clockwork and you have nothing but the formalities of closing between you and home ownership! The mover's truck is in the driveway and your family and friends have gathered to help you move in. Tonight you will spend your first night in your new home!
THE PLAN: You'll spend an hour at your attorney's office with your Realtor, signing all the closing documents, and then you'll be presented with the keys to your new kingdom. You'll head straight to your new home, open the door for the waiting crowd and let the unloading begin! You will happily eat pizza while sitting on the floor, hang sheets over the windows for instant privacy and search high and low for the bath towels that somehow ended up in an unmarked box. But that's all part of the fun. What could possibly mess up this day?!
REALITY: The phone rings just hours before closing. The loan package from the lender has still not arrived at your attorney's office. They cannot prepare your HUD-1 closing statement for signature. The underwriters have been doing their final perusals before issuing the package and releasing the funds you need to buy your home. They have hit a snag. (I'll leave it at that...the form those snags can take in this new world of lending can be myriad.) Your attorney, your lender and your agent all assure you that it will be worked out. But...your closing is going to be delayed! A couple of hours? Maybe. A full day or even two? Possibly.
PLAN B: First, let's talk about what Plan B is NOT. It is NOT that you will call your agent and ask them to get you the keys so you can move in anyway. It is not that you will unload the entire contents of the van into the driveway and wait. The movers need to unload and get on to their next job? I hear you. You have a tight schedule the next day/week/month and NEED to have the initial phase of moving behind you by tonight? I hear that too. The whole family is with you and a hotel will cost you a fortune? Yep, I get it.
Unfortunately this is what you need to hear. The seller still owns the home. This means the seller STILL carries the insurance on the property OR may have canceled it effective this morning. Stuff happens. This new home is unfamiliar territory so how about a worst case scenario; a child or a friend is seriously injured on the property. Someone leaves packing paper on the stove and a fire starts. Insurance only covers “stuff” if they can't prove it isn't their responsibility. Your “stuff” is not the sellers “stuff” and therefore the seller's insurance is most likely NOT going to pay for it, especially if you are in the home without the seller's agreement. Since you do not own the home until you have closed on it, your insurance is most likely not going to pay for anything that happens either, under the theory that you cannot insure what you do not own. A better Plan B is clearly in order.
A BETTER PLAN B: Give yourself a buffer of at least a day between closing and moving in.
Don't close on a Friday because if things go south you will be waiting until Monday to close. (Talk about a quick way to mess up your carefully laid plans!)
If you absolutely must move in on your scheduled closing day, negotiate ahead of time, through the agents involved, exactly what will happen if your closing is delayed. In North Carolina you may be able to negotiate a Buyer Possession Before Closing agreement. Keep in mind that the seller is not required (and in most cases not smart) to give you occupancy until you own the home.
Talk to your insurance agent and ask if there is a plan available that would cover such a scenario.
Above all, understand that some things are simply out of the hands of even the best lenders, agents and attorneys. Plan B may not necessarily be your ideal but it is always better than the alternative...especially if you don't have one!