Home Selling in Denver>Question Details

now_a_buyer, Home Buyer in Westminster, CO

What happens if a seller moves out before closing and the deal falls through at the last minute, e.g., buyer loses job, accident, etc.?

Asked by now_a_buyer, Westminster, CO Mon Feb 6, 2012

Our contract says that we have possession until a couple of days after closing but our agent is suggesting that we move out prior to closing in order to have a clean transaction and avoid any rentback issues. Plus the buyers want to move sooner than the agreed-upon contract. They are trying to get loan conditions resolved sooner. How do we protect ourselves? What is customary in Colorado regarding the timing of closing and possession?

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Your house in under contract to sell to a new set owners. The buyers want to take possession at closing which is earlier than what the contract you both agreed upon states. You are in the spot of do we grant them a favor with possession at closing or do we stick with the contract as written and give possession a couple days after closing?
It is customary - in my opinion - that the seller's stay in the home for 2-3 days after closing, that is why the buyers agent wrote the contract that way. What has become a point of contention in our litigious society in recent years is "We are the new owners and the previous owners broke, damaged or destroyed something before giving us possession but after closing and we have no rights - we have no control." So into this very small arena of concern steps the Real Estate Commission, whom creates the fill in the form contracts we use, and they produce a new document to protect buyers against the outgoing owners for these 2-3 days of concern. This new form covers insurance, possession, conditions of the home and really clears the air from these few days of stress. They should of provided that in the beginning of the negotiations. There is an inherent value to those few days of you having to leave early, before closing and the buyers should offer to compensate you for there lack of attention to detail.
But you have every right to demand the buyers stick to the contract as written. You could lose the buyers over this stance, but if they really want the house, they will deal with their living situation for a couple days and allow you to ensure a successful closing before moving out of your house.
2 votes Thank Flag Link Mon Feb 6, 2012
There really is no customary timing for closing and possession in Colorado. That is for the buyer and seller to negotiate. Buyers typically want possession immediately, while sellers prefer not to go through the hassle and expense of a move before closing only to find out that the deal fell through at the last minute. The only way to protect yourself is to demand enough earnest money to compensate you for damages that you might suffer if the deal does fail. If you do retain possession after closing, both parties should sign the Post-Closing Occupancy Agreement (Seller Rent-Back Agreement), which has been approved by the Colorado Real Estate Commission.
2 votes Thank Flag Link Mon Feb 6, 2012
Moving out the day of or the day before closing is the best protection for you as the seller, so long as all the contigenices in the contract have been met any the contract has sufficient earnest money that would be potentially lost if the buyer failed to close. With contingencies met and enough earnest money to offset any potential move, the seller is best protected. The primary reason to move out at closing is liability of the premises and damage that may be caused when you, as the seller, are no longer the owner. Insurance carriers may not provide coverage for those added days, or damage such as a fire could cause you potential litigation, as the contract calls for you, as the seller, to delvier the property in the same condition the home was in at time of contracting. It has been customary in Denver to provide the seller some days after closing to move out, which I would say may have been convenient but not in the seller or the buyers' best interest. It's OK to be lucky something did not happen but it is not the prudent pathway to take when selling your home.
1 vote Thank Flag Link Mon Feb 6, 2012
Hi Seller_in_CO:

It sounds like the buyers want to change previously agreed-upon conditions in the contract. Neither you nor the buyers have to allow contractual changes under any circumstances. Still it often is best to work with the other side, especially if it does not cause a problems for you. However, if you feel you cannot make the changes, it is best to let the other side know as soon as possible and to inform them of your reasons.

Residential property deals can cause a lot of stress on both sides. They sometimes fall apart simply because people get frustrated or angry with process, with the people on the other side, with their agents, with their lenders, or even with their own spouses or partners. Working with the people on the other side (buyers in your case) where possible can help keep things much calmer. But, you have to decide when requested changes impose too much of an imposition on you.

I believe agents should help clients make such decisions without pressuring the clients one way or the other. However, sometimes clients feel pressure because the agent knows the deal is in trouble and the agent is trying to keep things together for the benefit of the agent's client.

Best,
Ron Rovtar
Boulder, CO
1 vote Thank Flag Link Mon Feb 6, 2012
In a typical transaction the home is vacated and cleaned for a walk through just before closing after which possession is granted. I usually establish closing "at transfer of funds" for my clients. If the buyer is in default then remedies specified in the contract will apply. Review this with your agent and/or attorney. There is always risk until closing, and more so for a seller when a contract is subject to FHA financing which has no financing conditions deadline. In a vast majority of transactions though everything works out. Learning as much about your buyers and their progress toward closing may help to ease your mind. Early possession though, is not recommended. Normally having an agreement for post closing occupancy would be to a seller's advantage. Colorado contracts now include a form for such a lease. It is important to make sure such a provision does not violate the terms of the buyer's loan.
1 vote Thank Flag Link Mon Feb 6, 2012
My only point in mentioning the loan conditions deadline, is that after that date you would likely have the option of keeping the earnest money. I didn't say after that date there is no possibility of the deal falling through.

I would again refer you to your own contract. You have every right to stick with what you and the buyer have agreed to.
1 vote Thank Flag Link Mon Feb 6, 2012
One more thing -- many agents are under the impression that the "loan conditions deadline" is for the buyer & their lender to have all conditions met and loan is ready to close. NOT TRUE. It's basically the last opportunity for the BUYER to make sure they are happy with their loan conditions. If they aren't they can back out. It's not the lenders deadline to finalize the loan. You can have all conditions met and the deal still can fall through day or even hours before closing. I don't understand why an agent would suggest to their clients they move out before the deal is done. Doesn't seem like that would be in their best interest.
1 vote Thank Flag Link Mon Feb 6, 2012
If the deal falls through then whatever the contract says prevails. If you are past the last of the contingencies, you'd keep the earnest money for your trouble, or at least half of it if your agent gets half.

I hope you feel you can discuss this more thoroughly with your agent, until you feel satisfied with the answer. But I would say, if the buyer can get all conditions resolved and the clear to close comes sooner, great! That's the key - getting the conditions cleared. You are in the position of not knowing all the details of what's going on with the lender. Try to get all the info you can before you make your decision.

What is customary in Colorado - both scenarios apply but I have to say, every one of my buyer clients have insisted on the seller being out of the house before closing. The new form which specifies that if a seller stays they will carry their own insurance, should help.
1 vote Thank Flag Link Mon Feb 6, 2012
I don't see how you'd have any "rentback" issues. I wouldn't agree to possession BEFORE closing! If you can move closing up, and give them possession earlier and it works for all parties, then great. But moving out before closing opens up a can of worms in case it falls through. Your agent is giving bad advice.
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1 vote Thank Flag Link Mon Feb 6, 2012
Seller,

Unfortunately the Colorado sales contract is slanted toward the buyer. So there are no iron clad guarantees as to the buyer closing until the papers are signed and you turn over the keys. It sounds like you are all set to move out and into a different home. I would have your Listing Broker get as much in order and as many of the deadlines past as possible before negotiating a sooner closing date. Especially the 'loan conditions deadline' with a full approval from the lender. I think what your broker is saying is that it is normally better for all parties concerned to have the closing date and the possession date the same if at all possible and not a great inconvenience for you. It definitely is cleaner and eliminates several 'issues' that could come up. From th limited information you have provided here, I see no problem with moving rhe possession date back to the closing date. I definitely would not ever suggest that the buyers get possession of the home before the closing, funding and delivery of deed has taken place. Congratulations on your sale.

Robert McGuire ASR
Realtor/Consultant
Your Castle Real Estate
1776 S. Jackson St. #412
Denver CO 80210
Direct – 303-669-1246
0 votes Thank Flag Link Mon Feb 6, 2012
One more thing to clarify - the buyers aren't suggesting that they move in prior to closing. They want to move everything (closing and possession) forward if it's OK with us. I'm guessing that they're uncomfortable with their temporary living conditions, but they didn't indicate the reason.
0 votes Thank Flag Link Mon Feb 6, 2012
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