Question Details

Susan Wesely,  in Saint Paul, MN

Pre-closing occupancy - I know it can be done (I'm negotiating one now). What has your experience been?

Asked by Susan Wesely, Saint Paul, MN Thu Jun 26, 2008

How often has it been successful? And how often does the closing fall through, and what problems have you had as a result?

Help the community by answering this question:

Answers

10
If the property is vacant, you can ask your broker of course, but you can contract a short early occupancy agreement at a set price per day, as agreed for your clients. Think of how much it would cost to stay at a hotel, get your price from there! But a norm is $45.00 to $80.00 a day. depending on the cost of the home. How long also is an issue! But, do not jump, if financing is not solid, and if any thing is in question! do not allow a squatter in, or any way to do improvements until after closing! That opens another issue! Look it up in NAR regs Q & A.
1 vote Thank Flag Link Fri Aug 22, 2008
Thanks, everyone. My buyer ended up moving in before the close, paying rent on a day-to-day basis. It all worked out OK in the end. The seller's comfort level went up once they got a lawyer nephew involved, who demanded am addendum that matched almost exactly what I would have proposed. It included a clause saying "they will leave and pay a penalty of $nn if it doesn't close by Xdate". We addressed the liability issue by having the buyer's insuance go into effect at move-in, and by adding the seller to the policy temporarily. The insurance company clerk complained, but she got the update done, and I thanked her profusely. It as nerve-wracking but only because the re-inspection and subsequent final approval process took what felt like forever. (The disadvantage of a remote e-lender... NOT my recommendation!). Thanks again.
1 vote Thank Flag Link Thu Aug 21, 2008
Susan,
Pre-closing occupancy can be an issue if the property does not close or even if it does. If it does not close the seller may have to evict the buyers from the property as the buyer had personal property in the home ( any location, even the garage). If it does close, and you represent the sellers, you have put them in a potential bad position due to the fact that the buyers have had access to the property and will most likely come up with more issues that need resolution prior to close.

All the best,
Gary Geer

http://www.GaryGeer.com
0 votes Thank Flag Link Sat Dec 18, 2010
I would agreevin great part with the previous replies.

1. Solid agreement is mandatory
2. Occupant to be held liable for any damage.
3. In the unforeseen event that closing does not happen- seller to be compensated.

WATERWAY REALTY, REALTORS
0 votes Thank Flag Link Sat Dec 18, 2010
I am not sure if it is all as bad as you make it sound. If you have a good pre-close agreement it should state something to the fact that the buyer accepts property AS-IS and is responsible for any damages incurred. In the agreement it should also state an amount due from buyer if closing doesn't happen to compensate the seller for their time. The seller gives the tenant a 30 day notice to vacate - much like a rental property. Refusal to move out would be handled the same way a property goes into foreclosure, or a stubborn rental tenant would be handled. Seller maintain's insurance on the property until closing date which would protect them from being liable for accidents, or natural disasters. That being said... it's not terrible likely any of that will be an issue. Most people aren't going to go through the trouble of getting approved for a loan, packing up all of their stuff, pay earnest deposits and appraisal fees, just to have to move out a few months later.
0 votes Thank Flag Link Sat Dec 18, 2010
Usiually everything works out fine. It is the odd occaision that things get outof control. Many things can potentially happen; appliances break, natural disaster, etc.

Also, when a person lives in a property- they find things that they did not notice before... A SOLID pre-closing occupancy agreement is mandatory.
0 votes Thank Flag Link Fri Aug 22, 2008
Hi Susan. As the others said, pre-closing occupancy should be avoided. I think it's a liability issue. Even if the deal closes, as long as the seller is still the owner, any injuries that might occur on the property prior to closing might expose the seller to liability. While you can try to include language in the contract (whether it's in the form of an addendum to the sales contract or a separate short term lease agreement) that would eliminate liability, you as an agent should not attempt this by yourself as it's really the job of an attorney to draft a release/waiver of liability agreement.
If the deal falls through, you could also have a nightmare on your hands if the buyers won't move out or have caused to the property. Personally, I have never negotiated a pre-closing occupancy. I have negotiated a rent back and ended up helping the sellers move out to make sure that they'd get out in a timely fashion. I know the buyer's agent was nervous about the whole situation and was certainly relieved when I informed him of the moving date. Anyway, if you represent the seller and can't avoid a pre-closing occupancy, make sure you include the necessary safeguards for your clients and I would recommend your clients have the terms reviewed by an attorney.
0 votes Thank Flag Link Sun Jun 29, 2008
Ute Ferdig -…, Real Estate Pro in New Castle, DE
MVP'08
Contact
If you represent the seller, DONT DO IT. Maybe let them deliver their stuff to the garage, but no occupancy. If you represent the buyer - well, it's less risk.
0 votes Thank Flag Link Sun Jun 29, 2008
I would not recommend pre-closing occupancy. I have had couple of experiences that was successful, but it was only 1-2 days prior to closing and was a nail biting until it closed. I wouldn't do it again. it's a risky business. What if the escrow didn't close? How do you get rid of them? What if they found out they didn't like it anymore? What if something is broken? How do you prove who broke it? etc....
0 votes Thank Flag Link Thu Jun 26, 2008
If you can avoid it I would, I haven't had any personal experience but associates have. You don't want to have the closing not go thru then have to get a tenant out of the property. I'm not sure what the laws are in St. Paul but it is tough to remove individuals from property out here in CA, it takes time and there is a process.
0 votes Thank Flag Link Thu Jun 26, 2008
Many of these replies are so disheartening, like assuming that the buyer is out to get you. I am in this situation and am no way going to take advantage of anyone, I am just waiting on tax transcripts. Go easy, and trust a little.
Flag Thu Mar 19, 2015
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer