Home Buying in San Pedro>Question Details

Terry, Home Buyer in San Pedro, CA

I've found a house, negotiated an acceptable price, now the seller wants to lease back after escrow closes til they find a new home. Now what?

Asked by Terry, San Pedro, CA Sun Jul 8, 2012

Protection for buyer, duration, falling prey to potential eviction process, damage after the fact, insisting on escrow closing after seller moves. Protection for seller so as not to have sale fall though at last minute.

Help the community by answering this question:


Check page #3 Item 5. B. of your purchase agreement. It states property possession at close of escrow. That is a binding contract between you and the seller. If you decide to rent back to the seller. make sure you make them sign a lease agreement.
0 votes Thank Flag Link Sun Dec 16, 2012

Rightfully so, you appear to be reluctant to take on potential risks brought about by a Seller wanting to maintain possession after close of escrow. Allowing a Seller to occupy the property even for one day after the original possession date can create tenancy rights. Therefore, issues and topics common with rental property come into play.

If you still are considering this option, one that I advise my Buyer clients not choose, I would suggest you obtain a crystal clear agreement in writing regarding the following terms before moving forward:

1) The exact term of possession
2) Compensation to cover Buyer’s costs
3) Late charges
4) Responsibility for utilities
5) Buyer’s entry rights
6) Responsibility for maintenance
7) Assignment/subletting
8) Responsibility for insurance
9) Any other special terms deemed necessary.

Make no mistake; not having such an agreement would be unwise. Consider it the cheapest insurance you will ever invest in.

Section two of CAR Form Purchase Agreement Addendum (PAA, Revised 4/11) was created to address the considerations above when Buyer’s possession is delayed due to the need of the Seller to remain in the property past COE.

I would highly recommend you cover section two with your Realtor® to decide whether its use might be appropriate in your situation; however, personally, my answer would also be a respectful "Sorry, we have already planned to move in as soon as escrow closes".

Also, make sure you take advantage of RPA Para 16 "Final Verification of Condition", which allows you to perform a final walk-thru within 5 days of close of escrow. I would do this closer to the COE date to confirm the Sellers are prepared to move.

0 votes Thank Flag Link Tue Jul 10, 2012
HOLD onto seller proceeds in the escrow account.

Example: If the owners are to receive $100K in net proceeds from the sale, tell them they can rent back with $5,000 still be held in the escrow account until the completely move out in a neat & orderly fashion. If the current escrow account won't hold these funds, you can set up a new escrow acct. with a 3rd party to hold these funds. This way if the now previous owners don't want to move, you say, "well, have fun not getting your $5k back".

Shoot me an email directly if you'd like to talk to me some more. I don't look back on this same Trulia thread for answers posted after mine.

562-430-3053 c
Realtor Since 1996
Main Street Realtors
0 votes Thank Flag Link Mon Jul 9, 2012
“No” is a full sentence, if you are using an FHA mortgage this isn’t allowed.

They want you to assume all of the risk, why would you assume their problem? All owner occupied mortgages specifically address occupancy, if they do not get out in a timely manner you could be in default of the terms of your loan even making payments on time. Good luck,
Jim Simms

NMLS # 6395
Financing Kentucky One Home at a Time
0 votes Thank Flag Link Mon Jul 9, 2012
Your Realtor should be able to help you with this If letting the sellers stay works for you. It concerns me a bit that they haven't found one yet. Post occupancy lease-backs can work well for both parties, but expectations must be clear on both sides. MUST be in writing.
0 votes Thank Flag Link Mon Jul 9, 2012
This is a fine time for the sellers to ask for this concession - if you have a signed and fully executed sales contract - with all contingencies met - you can simply say "no" to their request.

If, however, you are still at a point where they could cancel the deal, then I suggest, if you are willing and able to allow them to remain in the house, you have an attorney write up a specific "use and occupancy" agreement to make sure you're protected.

This will be very much like a lease with all stipulations spelled out in regard to what amount you will be paid, calculated either per diem or weekly as "'rent".......money should be held back from the seller following the closing to cover this rent and even an amount similar to security.....also to be decided is......who is responsible for what in the event something breaks........insurance coverage...and penalites built in if they don't vacate on the agreed upon date.

And.............By alll means, limit the amount of time they have to find a new home. Select a time frame you are comfortable with 30 - 45 days might be a consideration.
0 votes Thank Flag Link Mon Jul 9, 2012
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