Close of Escrow or Settlement = Move In Day. Maybe. (A debate)

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Real Estate Agent with Solutions Real Estate CA DRE #01490977
https://activerain.com/droplet/4vrj

The main purpose of this article is to generate discussion and debate, with advice offered by fellow agents, and a sharing of good, and bad, experiences. 

The moving van is ready, but will you be able to move in?The issue?  When does the buyer get to move into the new home? 

In general, once escrow has closed, or settlement occurs, the new home owners are given the keys to their new home and can move in. Occupancy is specified clearly in the Offer to Purchase Contact here in California and is part of the negotiation and contract. But there are a number of scenarios that can occur. 

Is occupancy by the end of the day at Close of Escrow? Maybe.

  •  What if the seller wants or needs some more time (e.g., buying another home at the same time, relocation)?

 

  • What if the seller wants to be SURE the closing has occurred and recordation has as well before moving out?

 

  • What about liability for the new home owner if the seller remains for a few days after closing?

 

  • What terms and conditions should be negotiated if buyer occupancy is not immediate? 

 

  • What if closing does not occur as planned at the last moment?

Close of Escrow or Settlement = Move In Day. Maybe. (A debate)What is the normal practice in your area? I talked to a friend in Orange County and there it is pretty standard for occupancy to be COE (that's close of escrow, or settlement in some part of the country) plus 3 days for homes that are occupied. 

I'm not in favor of letting sellers stay on once recording has occurred - it's now the buyer's home, let the buyer move in. BUt there are times when an alternative must be negotiated.

And I am really not in favor of letting a buyer move in early, before closing. But there are many circumstances where these, and other, scenarios might be entertained. And folks ask about this stuff, especially if a home is vacant, they are relocating and need a place to live, or for other reasons. 

So share your thoughts. 

When does the buyer get to move into the new home?

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Rainmaker
413,043
Lisa Heindel
Crescent City Living LLC - New Orleans, LA
New Orleans Real Estate Broker

In Louisiana, we close at the table, so the buyers walk out with keys in hand and can start moving in right away.  I've had a couple of deals where the seller needed to stay for a period of time after the closing and it's a mess trying to make sure that everyone is covered - I try to avoid that scenario at all costs because of the potential for things to go wrong with claims of damage, etc.  Buyers moving in early?  No way.  Too many deals fall apart at the 11th hour for me to even suggest that to a seller.

Jan 29, 2010 01:42 AM #1
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Rich Jacobson
Fathom Realty West Sound - Poulsbo, WA
Your Kitsap County WA Real Estate Broker

Here in WA State, possession is typically after closing (defined as when the transaction has been funded and the new deed has been recorded by the County). With mutual consent, there can be exceptions made. Early possession is possible, but clients are usually advised against it, unless there is a 'Hold Harmless' clause put into place, and some kind of rent-back agreement. Sellers who require to remain in the residence after closing normally keep their homeowner's insurance active until the date of vacancy, and may also pay the Buyer a daily rental amount.

Jan 29, 2010 02:02 AM #2
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Jeff... lol.. you bring up an good debate/argument that I think will always be screwed up, until the day I die in this business. Seriously.... First off, I wish they would make it the same in every state. How the hell did this get away from us?  Damn politics at it best... meaning, in New Jersey... the day the house closes and all documents are signed, it's the buyers house... the keys are given. Now, I have seen where the buyer gives the seller until that day.. or the next. I have seen where the buyer rents back to the seller for a week to a month. I think I have seen them all.

Now, let's go across country to California...  you have close of escrow to where we have it as a settlement/closing... and most states are like NJ on the east cost.  But in Cali.... correct me if I am wrong.. just stating what I know and have heard... but the buyer doesn't obtain the house until it's been recorded, correct? I have heard a few different things.. but the bottom line.. the buyers and sellers don't even close on the same day and or together. 99% of the time, in NJ, the closing takes place the same day and usually together... in the same room.. unless they hate each other.. which I have seen happen.

Overall.. in regards to your questions?  I would not have a problem with the buyer allowing the seller more time and or to rent back for a week or so... as long as they have a legal document in hand drawn up by a lawyer. But here are a few problems... first off... why couldn't the seller be 100% ready at the time of closing?  Unless, they had issues with their settlement or still selling their house. Secondly... as many of us know, when you rent property, unfortunately it's harder to evict a renter than it is a homeowner when they own the home.  Each state is different... but that agreement in hand might still mean diddly squat and could be longer than anticipated, if that seller really wanted to put the screws to the buyer. Secondly, how do you know u will get the house back in the same condition? Lastly, the mortgage documents are important here. On a FHA mortgage, the buyer signs a document stating that they have up until 30 days to occupy that property.

Anyhoo... would be interested to see the discussion in this one.... especially since all states aren't the same. Don't get me started, but I wish NAR and congress would get on the same page on this one,,,,

jeff belonger

Jan 29, 2010 02:06 AM #3
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Lisa - well that was how it was in MAssachusetts, too, so I am used to that. It's different here. I have persoanlly been through som eugly situations with loan issues, relocation, working with attorneys, etc. so I have mixed feelings in certain situations. Moving in beforehand, while it can be a big help to the buyers, can be a bad scene. Have heardc of a few horror stories.

Rich - similar situation in California

Jeff

Jan 29, 2010 02:11 AM #4
Rainmaker
84,462
Terri Adams-Scott
J. Rockcliff, REALTORS - Walnut Creek, CA
Realtor, Walnut Creek CA Real Estate

It's all spelled out in the (CA) purchase agreement when possession takes place.  If any last minute scenarios come up before closing, I'm adamant that it is spelled out in an addendum.  If I represent the sellers and the buyer requests early occupancy (vacant) or to store boxes in the garage, I highly recommend against it for many reasons other than just liability.  If it's my buyers requesting early occupancy...I tell them it's NOT in their best interest to do so and state the liabilities involved.  We live in an area with plenty of hotels that can accomodate either side.  To answer your question as to when the buyer gets to move into the home...when both sides have agreed in writing...whether it's the original contract terms or addendum. 

Jan 29, 2010 02:11 AM #5
Rainmaker
1,158,822
Jane Peters
Home Jane Realty - Los Angeles, CA
Los Angeles real estate concierge services

Jeff, isn't everything negotiated in the contract?  i.e. the purchase contract clearly states occupancy shall occur at .... on.... If a seller needs to find another property that would be part of the counter.  A buyer should not be moving in before close of escrow although it does sometimes happen if the seller agrees, but then someone needs to be carrying the insurance for that.

Jan 29, 2010 04:39 AM #6
Rainmaker
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Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Jeff, In my area it's when the deal is funded. Once the seller receives their money we give the buyer the keys. This usually day of closing. Rarely do I recommend post or pre closing possession.

Jan 29, 2010 09:41 AM #7
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Jeff let me see if I can answer these questions as they pertain to Connecticut.

  • What if the seller wants or needs some more time (e.g., buying another home at the same time, relocation)?  They can negotiate that as part of the contract, pay rent for the time they are there, and money is held in escrow to cover potential damage that might occur while they are there.  This is usually done through there Attorney's but the lender has to also be agreeable to this.
  • What if the seller wants to be SURE the closing has occurred and recordation has as well before moving out? To the best of my knowledge that is not a choice that they have here. Here in Connecticut the Closing is done at the Buyers Attorney's Office most of the time.  The Bank wires the money into the Attorneys Account, then the Attorney cuts all of the checks from his account needed for the Closing.  The Sellers get their money at the Closing Table, and the Buyers get the keys.  I guess they could some how wait until the Deed is recorded, but that would mean they would not get their check either, and they always want their check as soon as possible.
  • What about liability for the new home owner if the seller remains for a few days after closing?  Same as the answer to #1
  • What terms and conditions should be negotiated if buyer occupancy is not immediate? Again I basically cover that in #1
  • What if closing does not occur as planned at the last moment?  That could be a long answer because it depends on why the Closing did not happen and if there are any more days left on the rate lock.  This one could be a  blog all by itself.

 

Jan 29, 2010 11:51 AM #8
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Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

JEFF...When  the property is closed at settlement..papers are signed  money is exchanged..and then keys are given to the new owner..i agree with you ..it is not a good idea for the buyer to move in before ..or the seller to stay in the home after settlement..It can create problems...but then again you are from Philly area originally if I am not mistaken..and know the drill....:0)

HelpfulHannah

Jan 29, 2010 02:27 PM #9
Rainmaker
575,553
Terry & Bonnie Westbrook
Westbrook Realty Broker-Owner - Grand Rapids, MI
Westbrook Realty - Grand Rapids Forest Hills MI Re

In our area it is getting more typical to have possession at close. With all the delays in the business sellers are nervous until the closing occurs and they have their equity in hand. If I had to guess I would say a few days after the funds are dispersed the seller would give possession to the buyer. In a lot of cases the seller will pay the buyer an occupancy fee. When I started 30 years ago the standard was a free 30 days to the seller after close and the buyer received nothing.

Jan 29, 2010 02:28 PM #10
Rainmaker
550,924
Lynda Eisenmann
Preferred Home Brokers - Brea, CA
Broker-Owner,CRS,CDPE,GRI,SRES, Brea,CA, Orange Co

Jeff,

It's pretty much close of escrow + 3 days for almost all of our transactions. And Teri above is correct, using the PAA, purchase agreement addendum if closing and possession do not take place the same day. That's also where it spells out additional terms about delivery, condition, insurance, etc.

In addition if you/we have a seller who is also buying, it's almost impossible not to have a few days between recording and moving.

One of our issues as you know in CA, is that we don't sit around a table while the closing takes place. We (buyer & sellers) "instruct" the escrow company to record once all the terms and conditions are met. Many times don't have confirmation until later in the day, especially if it's a late/special recording, yet I know they're not allowed in all counties. We normally use the "recording" as the bench mark of closing, escrow actually prepares the settlement after wards. To digress, that's why every now and then you will have a settlement date after the day of recording.

Bottom line, we're accustomed to close +3.

 

Jan 29, 2010 02:56 PM #11
Rainer
21,407
Jennifer St.Clair
St.Clair & Associates - Sotheby's Int'l Realty-San Diego, CA - San Diego, CA
CNE

Question.  If we close on a Friday and do not record until Monday (in CA) is there any liability to allow the buyer to move in over the weekend?

Jan 29, 2010 05:44 PM #12
Rainmaker
1,045,227
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Given that I am from Massachusetts I would hate to surmise incorrectly what the right answer is. I know in Massachusetts LEGALLY you can not take possession until papers are passed and recorded.

Jan 30, 2010 04:50 AM #13
Rainmaker
354,783
Damon Gettier
Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert - Roanoke, VA
Broker/Owner ABRM, GRI, CDPE

In our area possession takes place at settlement.  The problem with this is when a loan does not get funded on time....especially on a Friday.  I am a huge fan of no possession until the funds have arrived at the Settlement Company.  I mean....what happened to the Wet Settlement Act anyway?

Jan 30, 2010 08:00 AM #14
Anonymous
Eileen

COE plus 3 has two parties, the buyer and the seller, paying interest on the property at the same time.  The buyer begins paying interest on the closing date.  The seller does not get his money until three days later, so pays until COE plus 3.  Who gets the interest for those three days?  I imagine the escrow agent.  This system was awful when I bought Ca real estate 8 years ago and it is ridiculous now.

 

Jun 14, 2011 03:32 PM #15
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