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Does Your State or Brokerage Allow Seller Post Possession?

By
Real Estate Agent with Keller Williams Realty Sonoran Living

There are times when sellers want  to remain in their house after the close of escrow.  Why would  they want to do this?  They may be closing a few days later on a home they are purchasing and want to avoid a double move.  They might have an unexpected delay in a mover schedule.  There could be a last minute delay with their loan on a home being purchased.  This may also be a situation negotiated as part of the purchase contract where a buyer wants to close on a property to ensure they own the house and aren't moving for a few weeks and collecting rent for several days after closing is appealing.

 

I have had clients, both as sellers and as buyers in this situation. While I always try to avoid this situation for many reasons, there are times when this is a better alternative for a client than putting household items in storage and staying at a hotel or with family for a period of time and paying for a double move.

 

Some Real Estate brokerages to not allow for post possession documents as part of the real estate transaction. That means any agreements would be made by the buyer and seller without the assistance of their Realtors.  In Arizona post possession  is legal and my brokerage does allow this with the property documentation. (though my Keller Williams broker  prefers we not to do this)

 

If the home seller is to remain in the house for an extended period of time, a better option is to have the buyer and seller draw up a rental agreement.  The "Post Possession" option is generally used for a short period such as a few days or weeks, not extended periods. 

 

 

Five Key Factors For Post Possession

 

1.  Agreement by Owner and Seller - Obviously this has to be agreed to by all parties.  

2.  "Post Possession "  document -This is the document which states the rights and responsibilities of the owner and occupant during the post possession period,  never just a verbal agreement.

3.  Former owner Obtains Rental/Liability policy - The party remaining in the property is required to obtain a rental insurance policy that includes liability sufficient to cover the property with the owner as an "also named" on the policy.  This allows the owner to file  claim on the property should there be damage and the claim goes on the claim history of the renter, not the owner.  This type of policy is prudent for any landlord to make part of a normal rental in the event a renter damages a house.  With the owner named on the policy, should the renter cancel the policy, the owner is notified.  If the occupant burns down the house, the liability claim goes against the occupant's insurance claim history report (which insurers look at in determining risk which in turn determines insurance rates).  The owner's claim history will not reflect this insurance claim according to Rebecca Kossmann of Liberty Mutual Insurance.  

4. Security Deposit - The new owner should require a security deposit.  This can be held buy the title company and refunded after the occupant moves out and the new owner confirms the property is in the same condition as it was at close of escrow.

 5. Rental Payment - Determine the rent to be paid by the seller. The amount collected may be the going rental rate prorated for the number of days the house is occupied.  There may be no rent collected if  the occupancy was taken into consideration as part of the sale price of the house.

 

With planning most buyers and sellers can avoid this situation, however we all know that even with impeccable planning unexpected situations do come up.  Sometimes a buyer or seller must have a particular closing date not to their liking but necessary to meet the contract needs of another party.

 

We all want our clients to have a great experience when buying and selling a home or investment property with us.  Part of the job is thinking outside of the box (but within the law and common sense) to make the sale process as smooth as possible for everyone.

 

 

Posted by

Shirley Coomer

Keller Williams Realty Sonoran Living

602.770.0643

15905 S 46th St, Ste 160

Phoenix, Az  85048

scooer@kw.com

searchingphoenixhomes-az.com

Comments (9)

Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

While it's not a recommended procedure, it's allowed here.  Best practice is to have a post possession agreement drawn up by an attorney.

Aug 05, 2015 08:40 PM
Shirley Coomer
Keller Williams Realty Sonoran Living - Phoenix, AZ
Realtor, Keller Williams Realty, Phoenix Az

We definately want to have legal binding documets in place.  I view this as a last resort with all parties fully aware of the risks.

 

Aug 06, 2015 02:52 AM
Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400
The Top Team @ Charles Rutenberg Realty 255 Executive Dr, Plainview NY 11803 - Plainview, NY
Long Island Condo and Home Specialists

Very RARELY does this happen her,e as once closing takes place...the keys are handed over to the buyer!

Aug 14, 2015 03:04 AM
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning Shirley. I know most recommend that this never be done, but as an owner, I have done it and it's worked out just fine. I would make sure the deposit is sizable.

Make it a great weekend!

Aug 15, 2015 12:13 AM
Shirley Coomer
Keller Williams Realty Sonoran Living - Phoenix, AZ
Realtor, Keller Williams Realty, Phoenix Az

Thanks for the comment Joe.  I agree.  I have clients doing this now.  The buyer is a an agent from another brokerage.  We used his brokerage's post possession addendum, title does have a sizable deposit on file, Liability insurance in place naming the buyer also on the policy, and we used the AAR Move in check list to document condition of the property. His mom wasn't movig to the area for a several weeks and my sellers are buying another house needing work.  Great for everyone.  But...not something I do very often.  Having a Realtor on the buying side gives me a well informed buyer. We will use the Move-in checklist at move out to confirm any condition issues.

Aug 15, 2015 12:24 AM
Noah Seidenberg
Coldwell Banker - Evanston, IL
Chicagoland and Suburbs (800) 858-7917

We do it Shirley it is called a rent back. Not the best idea but if that is what it takes to make everyone happy then so be it.

Aug 15, 2015 12:31 PM
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

Shirley

The State of Florida allows sellers post possession . . . . It' highly recommend not to do it.

Good luck and success.

Lou Ludwig

Aug 15, 2015 01:46 PM
Mary Yonkers
Alan Kells School of Real Estate/Howard Hanna Real Estate - Erie, PA
Erie/PA Real Estate Instructor

Shirley Coomer Pennsyvania law does not prohibit pre or post possession, however, it is strongly advised to have paperwork to document the agreement between buyer & seller along with insurance coverage by both parties.  The relocation/third party companies we deal with prohibit pre/post possession.  Many times the buyer wants the seller to pay per diem rent and put $$ in escrow, just in case.

Aug 22, 2015 04:47 AM
Shirley Coomer
Keller Williams Realty Sonoran Living - Phoenix, AZ
Realtor, Keller Williams Realty, Phoenix Az

Mary Yonkers thanks for the comments.  I always ensure there is paperwork in place.  My Brokerage has a post possession document we use and I ensure the title agency hold the security deposit.  I prefer not to use this process but sometimes there are reasons that make sense for the buyer and seller.  As long as the security deposit is in place, documents are in place and there is liability insurance in place this can work.  I also always have a pre-move in check list completed so there is no issue as to the condition at move out.

Aug 22, 2015 01:11 PM