Buyers decided to do some â€œremodelingâ€ and tore down a wall that had a fireplace since that was their original plan anyway, they thought they could have a head start. Lender decided to send an appraiser a week before closing and of course the fireplace that was mentioned on the original appraisal is not longer existing. Long story short, bank decided not to lend and deal fell out of escrow, so the house has no buyer and now needing some repairsâ€¦
This is just one of the many things that could potentially go wrong, so please don't did it before escrow closes.
You have a couple of options. I am still concerned that you and your Realtor do not seem to be discussing these points because they know the situation better than we do.
In California we have a CAR form that deals with occupancy before possession. Normally it is handled like a lease. The buyer's are treated like tenants, they pay a fee, plus they need to have Renter's insurance (which you need to verify).
The big problem I foresee you already figured out. What happens if you don't close. And as you have posted before, this is not a hassle-free transaction, so you want to avoid any further surprises.
Don't you wish you lived in the UK? There are no Realtors there, the banks took over the Real Estate system. You want to buy or sell, you go to your local bank.
Am I right in assuming that your Realtor is representing both buyer and seller? Although not necessarily a legal issue, it would cause you to have more concern about being treated fairly, which I completely understand.
If you really are concerned, and based on your posts, you have reason, I would ask to speak with the Realtor's broker about these issues. Advice from Trulia is all well and good, but the broker has a legal liability and may in fact have wisdom regarding local laws or customs that may take away some of your anxiety.
Technically having renters in your property may not be an issue, however It seems to me that the fact that you don't know when you are going to close is a concern. This is not uncommon with short sales because the lender has a completely different agenda. I don't know how much foregivness you are getting in this sale, but I would be darn sure that you have a letter of agreement with the lender stipulating that your loan is either "paid in full" or "settled". it would be a shame to jump through all these hoops and see a FORECLOSURE on your credit report.