How common is it for a buyer to move in before closing? The buyer has bought the insurance for this Temporary Occupancy prior to closing.

Asked by Mukta Gokhlay, Alpharetta, GA Thu May 31, 2012

The closing date was push back by a week, but the moving arrangements were already in place and will be too much expense to change the moving-in date. What should the Seller do? Or should he just say no?

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20
Jim Olive, Agent, Key West, FL
Sat Jun 2, 2012
I don't see a single example here of a this happening and actually HAVING the problems listed. Of course they are all POTENTIAL problems, but has anyone actually seen them happen? If the players have gotten here through no fault of either party and the players seem legit, you can make this happen in such a way that protects both sides (as stated below, get an "as-is" addendum, close contingencies, get a non-refundable deposit). I think most of the fear of this situation stems from the unknown. Of COURSE bad things COULD happen, but losing the deal and ending up with nothing but the good faith deposit is pretty bad too! I've seen this sort of thing work. Honest people with good intentions sometimes find themselves in a pinch (moving expenses paid for date of closing is not unreasonable if you're close, and it would be unfortunate for them to lose that money). Our litigious society has made us all afraid of our own shadows!!
2 votes
Unfortunately, I am currently going through the situation where my house was suppose to close and the buyers moved in. They finally vacated after 32 months and left my house with mold and plumbing problem. I am currently seeking help from an attorney to try and collect damages. I do not recommend ever letting a buyer move in before closing. EVER!
Flag Mon Feb 24, 2014
Hank Miller, Agent, Alpharetta, GA
Sun Jun 3, 2012
Jim -

I've had two instances, both times sellers "felt bad" for the buyers and caught bullets for their trouble. Both had moving trucks sitting there so they let them in on a friday expecting to close monday. In one, heavy rains came the day after they moved in and the septic backed up. That reulsted in damage to the floors and....you guessed it - the buyer's furniture to the tune of about 5K. It was also discovered that the leach fields were inadequate - even tough they had a septic inspection prior.

Other one was a contingenty buyer, they were delayed and same story with the trucks and a firday afternoon. You guessed it...Monday came, Tuesday came, Wed came....they never closed their home. So my folks had to pay to be uploaded, stored, then off loaded back into their home.

A good friend of mine had a buyer in the home waiting to close trip over a scatter rung THEY installed and break a hip - guess who was sued because the "buyers" were in their home?

I always ask for 48 hours for my sellers to clear their homes AFTER closing. This is routine and ensures that this doesn't happen. There are too many variables in this biz.....and there are many more examples I could relate from other agents - but it happens.

I've also seen agents say exactly what you are...."I heard, I haven't seen, We'll write this and that....". That's fine in theory but let it hit the fan and have to deal with things while your folks are expecting you to have answers - and do it on a Friday....you'll change your opinion.

These guys went against my recommendations so it wasn't on me - but they are poster children for what can go wrong.
1 vote
Jeff Aughey, Agent, Alpharetta, GA
Thu May 31, 2012
Do not let the buyer move in before closing. Nothing good can come of it other than making life a bit easier for the buyer. There are many negative possibilities that can arise for the seller.

Also do not discount the fact that when a closing is delayed for a week it increases the chance that it never closes at all. Then you would have a huge problem.

The buyer can make other arrangements. All the best, Jeff
1 vote
Tim Moore, Agent, Kitty Hawk, NC
Thu May 31, 2012
Realtors try to avoid this at all costs. Once they are in if anything happens they won't leave and it can be a nightmare. Once in they look for problems and complain about things they find they did not see before, it is something I avoid - period!!!!
1 vote
Jakovach52, Home Buyer, New York, NY
Wed Jan 20, 2016
We are still going through the nightmare of allowing someone to move into our home a "couple" of days before closing. The "buyer" wanted us to move out of our home on Dec. 23rd. We were told by our agent that a lease was oerfectly acceptable before closing. I should have looked at this site before proceeding with her recommendation. Supposedly, they had to be out of their home by the 23rd. That proved to be untrue. Who insists on someone moving out of their home two days before Christmas? This should have been an early warning sign. After it became obvious closing would not happen until the end of December, we stayed put. We were told closing was moved to Dec. 30th. We were also told that the buyers wanted to move in by the 27th. We began moving quickly to be out of our home by the 27th. We were waiting on the "field review" often done with jumbo loans. Our agent kept telling us this review was merely a formality, and NOT a second appraisel. We kept wondering why we were not seeing this second review "happen". Finally, we told our agent we were not going to continue with the move out of our home until we had some guarantee this closing was actually going to happen. Our agent, yes, OUR agent, called the buyer's lender and had him call us. Basically he told us the buyer had such wonderful credit he could purchase our home with cash. Really? He told us the same thing our realtor did...field review not appraisal, just a drive by review of first appraisal. His words exactly..."a mere formality". He basically assured us there was NO WAY this closing would not happen. We moved out and as we were moving buyers were moving in. Then we find out closing is postponed again. We start making phone calls and find out the drive by field review, which happened from the highway (our house is 600 feet off of main road) had come in $100,000 less than first appraisal. The nightmare begins. Buyer threatens us if we do not let him completely move in, though there was no charge for them moving into our home. Half of their belongings are in our home, walls and floors damaged, front door frame cracked, etc., and they want to continue moving in with FIVE dogs. There was no lease money, and we allowed them to move in based on Dec. 31st closing. Therefore, when closing was postponed, we blocked anymore moving into our home. Buyers agent asked for more time, but insisted they would walk away if we did not allow them to lease house for nearly entire month of January. Can you blame them? They must have thought we were either the most stupid or most trusting people they had ever met. There was never a discussion by the buyer as to how he planned to resolve the $100,000 difference in appraisals. So, can you imagine the difficulty we would have had getting these bullies out of our home if they had moved in and signed a lease? It was a nightmare allowing them in for two days. I can only imagine what would have happened had that turned into a month. The result of all of this? We had to pay a lawyer just to keep a small portion of the earnest money for damages to our home. The x-buyer did not even want to be held responsible for the damages his moving company did to our property. Our realtor and agent have taken no responsibility for this mess. We missed our closing on another house, the low interest rate we had procurred, and caused another family to move out of their home before it was necessary. We are paying, at this moment, for all of our belongings to be stored in pods. We are on air mattresses, camping in our home. Too much detail? I say, not enough. PLEASE, do not EVER let anyone move into your home before the closing date, even if they seem to be the most trustworthy people in the world. Things can go wrong at the last minute. We are proof of that!
0 votes
I understand your frustration.I am in a similar situation and would love some feedback.We are selling our house and buying another house in the same town .Our buyers are wonderful. Our sellers, whom we thought we knew well, moved out of their house and hours away, about a year ago. After we signed offer/acceptance papers, we thought we should help them and us and start mowing the yard. We live in a small community and knew these sellers. They complained about us doing this and about everything they could, to their own realtor (who also happens to be friends with us). They won't move their stuff out of their house! Their own realtor can't get them to move their stuff out. We (us and our buyers) have been told we will be closing before Memorial Day weekend. That gives us about a week to finish up packing and moving out. We thought we would be able to at least put some of our stuff in the new garage. What should we do?
Flag Thu May 19, 2016
Thank you, thank you, thank you! I am so sorry for what you're going through and so grateful you took the time to share your experience. Our buyer just requested early possession today after their mortgage company failed to file paperwork in a timely manner, which will delay closing by a mere three days. I got a sob story by email from the buyers about the magic of their first home being diminished because they cannot move in when they wanted - literally 48 hours time difference is squashing their magic. I want to do this for them, but I have been screwed too many times. I came to the Internet for some direction. Thank you - you gave it to me when my own agent is, at best, gray on a recommendation. Best of luck.
Flag Wed Apr 20, 2016
Andy Anderson, Renter, Garden City, MI
Fri Jul 17, 2015
If a buyer who's closing has been delayed due to a title issue that the sellers agent agrees is their fault. If they are willing to pay insurance and a agreed on rent amount along with a signed temporary occupancy agreement what are the possible repercussions. They are considering pulling out since they now are looking at another months rent and a higher interest rate. While I understand all the concern. Their lender has verified everything. It is basically the seller and the agent who messed up. Should I consider letting them move in a week before closing.
0 votes
redjackelope, Home Seller, Alpharetta, GA
Thu Jan 22, 2015
My home has been on the market for 7 years and is 50% below 2007 appraisal price in a town whose job market was cut almost as much. My realtor called me with a deal to rent to own and I turned it down. Later she said it was probably a good thing I turned it down. A couple years later she had a contract drawn up for a lease to buy.

"Buyers propose to lease the house for 6 months at $1500 a month with $650 going to rent and $850 going into escrow for purchase at the end of 6 months."

As anxious as I am to sell after so many years, to me this smelled fishy. Under the Residential Landlord Tenant Act, which many states have adapted all or portions of , these prospective buyer can have you over a barrel in making repairs on an already drastically reduced property prior to closing the deal.

OK, maybe I'm too suspicious, MAYBE. But the house has been reduced from 109k appraisal to 60K asking over the years. They offer 57k and they can't come up with down payment. If you have good credit, my understanding is you don't have to have 20% down like the majority of the population.

Well, the prospective buyer is the wife of a doctor. Give me a break! I can come up with 20% and I haven't worked in 8 years. Heck I can get it on a credit card if I had to.

Anyone seen this deal or gotten caught in one of these? In case you are wondering I live 1k miles from the property, a 3 bdrm 2 full bath with garden tub, separate shower and dbl sink in master bath, full kitchen, dining rm, 15 x 25 foot living rm with fire place, a 1/4 basement, front porch, built in the 40's of adobe and block and it also has an apartment out back with kitchen, shower bathroom and 3 more rooms. the yard is fenced and has a fire place built into the stone part of the fence. also I am retired from the military. Oh yeah, there is only one realtor in town.
0 votes
I sold a house this way and it was a dream. They had bad credit and needed time to build it up with on time payments to me. They were always early with their rent and remodeled the house increasing it's value while they were there. I applied 200 a month to their balance, which is really the most I've ever heard of. They gave me a 3000 downpayment which I would keep if they backed out. that is used for repairs. Do not let soemone move in without giving a downpayment they would as buyers. You need that to fix anything that happens if they neglect something and back out of the deal. A contract is written to buy the house and the lease to own is only part of it. It worked beautifully for me and I purchased a house like that also and it was wonderful.
Flag Mon Mar 30, 2015
Michael Malo…, , 42140
Tue Jan 6, 2015
I guess it really depends on how soft hearted you are? You've really got to weigh the risks of letting some stranger move in to your house and basically treat it as glorified storage until things are finalised. At the end of the day, I think you're the only one that stands to lose out, so best to be firm about what you think is right, or else be ready to accept the consequences if any.
0 votes
Hank Miller, Agent, Alpharetta, GA
Thu Mar 28, 2013
Everything is fantastic until it's not.

Real estate is really a prime example of this idea. Everythig is easy, everyone gets along, agents make all kinds of money for nothing. Then a closing is delayed, buyers do something to lose a loan (like buy a car day before closing), sellers damage a house the morning of closing, a missed lien pops up, guys loses his job.....

Jim you must be pretty lucky with things - I always advise my clients to be sympathetic if needed but be firm as well. While I've not had major issues, I have had things that could have gone very badly very quickly had we not removed the emotion form a business transaction.

RJD - too bad your agent didn't caution you about moving out before closing - never advise that, especially now. I don't know what agent would advise letting people use YOUR home as a storage facility...not smart - ask your helpful agent to cover your added expenses, see how that goes.

It's not about being afraid - it's about doing what you can to help but within reason. No good deed goes unpunished!
Web Reference:  http://www.hmtatlanta.com
0 votes
rjdlhh82, Home Buyer, Alpharetta, GA
Wed Mar 27, 2013
We are faced with this now....We got a solid committment letter from their lender prior to us moving out. We moved out the week before closing and in the final hours their loan was denied. Now they are seeking alternative financing, but if they don't unload their household goods off their moving van, they will be hit with an additional $5000. fee for storage and won't have enough money to close. We feel like we are being blackmailed. Our realtor initially advised us against letting them move their stuff into our house prior to closing, but now that her commission check is in jeoperdy, she is pressing us to allow it. At best, the closing will be another 2 weeks, but we have no committment and even if we get one, it will be addressed to the buyers, not us. Our stuff is also on a truck and we will be faced with additional moving and storage fees. What are we to do??? Because our contract is contengient on buyers obtaining financing, and the committment letter is addressed to the buyers, not the sellers, we have no recourse in this matter.
0 votes
Edith Karoli…, Agent, Winnetka, IL
Sat Jun 2, 2012
no do not say no to a good solid buyer...... But sit down with your real estate attorney to make sure that your are compensated for anything that happen

it is not the normal way!!!!!!

Just do not make it an oral friendly arrangement, make it legal, also your attorney can take some
money in escrow for that period of time just in case....

Also you want to make sure through your Realtor/Attorney that the loan will be approved for this
buyer....

Just be very careful...

EdithSellsHomes@gmail.com
@Properties North Shore, 30 Green Bay Rd, Winnetka, Il. 60093
covering the city of Chicago, all N and NW suburbs and the fine homes of the North Shore
Edith always works in the very BEST interest of her clients, Buyers, Sellers and Investors alike and she certainly goes the x-tra Mile with a Smile for all her clients with experience and market expertise

Have a wonderful Day!
0 votes
Deryk Harper, Agent, Alpharetta, GA
Thu May 31, 2012
Hi Mukta,
In most cases I would say heck no but we have a current scenario where the Seller is comfortable with allowing this to happen. I think it really depends on the specific details of each situation. It is actually pretty rare, and quite risky, to allow a Buyer to take possession prior to closing. We have never allowed this to happen in our 11 years in real estate. If you are confident that the closing will take place, and you have a good, solid, Temporary Occupancy Agreement, it is really up to the Sellers comfort level in taking on the extra risk. 99% of the time I would say no but it is ultimately the Seller's decision to make.

In our case the Buyer wanted to make significant improvements ( including new hardwood floors ) before she moved in. Our Seller has allowed the early occupancy with a daily fee, insurance and the understanding that if the sale does not close the Seller gets to keep all the improvements, the earnest money and Buyer must vacate immediately . The Buyer's loan has already been approved so we were confident enough to move forward with this one.

Also just had a similar inquiry on another of our listings. Buyers were in a bind because they sold their home with very short contract to close time frame and needed to move in about 2 weeks. Lender could not get loan approved that fast so they wanted to move in a week or two early so they could avoid a double move....wife had just had a baby the week before. Seller would be OK with this, under similar terms, but would want to make certain the Buyers are rock solid as far as financing goes.

I would definitely suggest that the Seller include a real estate attorney in their dicsussions to make sure all their risk is explained, and mitigated, in heavy favor of the Seller. I am NOT an attorney and this reponse should NOT be considered legal advice. Always consult a skilled attorney in matters such as this.

Regards,
Deryk Harper
Broker Associate
Keller Williams Realty North Atlanta
0 votes
Donald Steve…, Agent, Fontana, CA
Thu May 31, 2012
The current owners insurance company could easily deny a claim. Either they have a policy for a vacant home which it will not be once the new owner moves in or the current homeowners insurance company doesn't know the home owner is not the person living in the house anymore. Homeowner policies are for owner occupied homes. The future new owner does not have an insurable interest in the property yet. Worst case scenario is that the future new owner accidently burns the house down before closing and the current owners insurance company denies the claim. That is a very bad situation. There is a solution but probably not worth the bother. The current owner could buy a landlord policy for the week and that would at least cover a potential claim.
0 votes
Guy Gimenez, Agent, Austin, TX
Thu May 31, 2012
I don't know what is customary for your area, but I would NOT allow a buyer to move-in prior to the closing and funding under any circumstances as this creates liability for the seller and presents major issues should the loan NOT close as expected.
0 votes
Darrell Hess, Agent, Asheville, NC
Thu May 31, 2012
So much can go wrong it might not be worth it. I suppose this begs the question why was the closing date pushed back. Was it fault of the seller not being able to hold up to their end of the bargain or was it a financing issue that needed the extension?
0 votes
Rodney Mason, Mortgage Broker Or Lender, Atlanta, GA
Thu May 31, 2012
Alowing a buyer to move in prior to closing is a disaster waiting to happen. There is no guarantee the buyer's loan will be approved. Some lenders check credit the day of closing. I have heard of buyer's making purchases that then disqualify them from mortgage financing.

Regards,
Rodney Mason, NMLS #151088
Sr Loan Officer
Prospect Mortgage
825 Juniper St NE, Atlanta, GA 30308
Office: (404) 591-2453
rodney.mason@prospectmtg.com
Apply Online at http://www.rodneymason.com
Licensed in Alabama & Georgia

Prospect Mortgage offers a full selection of mortgage programs including:
Conventional | FHA | FHA 580-639 FICO | FHA 203K Renovation (Streamline & Consultant) | HomePath® | HomePath® Renovation | HomeStyle Renovation | VA | USDA | GA Dream | Jumbo Financing
0 votes
Hank Miller, Agent, Alpharetta, GA
Thu May 31, 2012
It's a disaster waiting to happen. I would never have a seller of mine do this prior to closing, the list of potential issues goes on for miles.

Close the house and the buyers can move into an extended stay - don't put the seller's through this.
0 votes
Katherine Mo…, Agent, Alpharetta, GA
Thu May 31, 2012
It used to be very common years ago, as was allowing the seller to stay in the property after closing. The pitfalls are many, these days, but the big question is why was the closing pushed back? Was it the buyer's lender (and if so you need the details, because this could be a sign of more serious issues) who requested the delay?

If you want to accomodate the buyer, you may wish to make the earnest non-refundable (unless it's a government loan), request a security deposit, have them sign an as is clause, remove any contigencies in the contract...all things to protect the Seller.

While John's answer is interesting, but because he's from another state with different practices, he perhaps doesn't realize that in Georgia, each side normally does not have an attorney representing them. While getting legal advise is always advisable, there will be an additional cost to the parties requesting it, since the only attorney in the deal is the closing attorney who represents the lender.
0 votes
Rick Musto, Agent, Roswell, GA
Thu May 31, 2012
There is always a risk with doing this, so seller beware! Make sure you have things in writing signed by both parties and also, is the buyer going to pay a per diem for moving in early to the seller? I would also get confirmation for the seller that the mortgage loan is approved! Good luck.
0 votes
John Sacktig, Agent, New Jersey, NJ
Thu May 31, 2012
Mukta -

Use and Occupancy agreements in various forms are common and they happen all the time, no, not like every transaction but every once in a while. Discuss with your attorney the legalities of the use andoccupancy and have both attorneys agree and cover both parties.

But do note what Tim states below, from a seller perspective it can be a scary proposition as the "what if's" are tremendous.
0 votes
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