Should a seller be allowed to stay in a house even after closing for a few days?
There are times when sellers want to remain in their house after the close of escrow. Why would they want to do this? They may be closing a few days later on a home they are purchasing and want to avoid a double move. They might have an unexpected delay in a mover schedule. There could be a last-minute delay with their loan on a home being purchased. This may also be a situation negotiated as part of the purchase contract where a buyer wants to close on a property to ensure they own the house and aren’t moving for a few weeks and collecting rent for several days after closing is appealing.
I have had clients, both as sellers and as buyers in this situation. While I always try to avoid this situation for many reasons, there are times when this is a better alternative for a client than putting household items in storage and staying at a hotel or with family for a period of time and paying for a double move.
Some Real Estate brokerages to not allow for post possession documents as part of the real estate transaction. That means any agreements would be made by the buyer and seller without the assistance of their Realtors. In Arizona post possession is legal and my brokerage does allow this with the property documentation. (though my Keller Williams broker prefers we not to do this)
If the home seller is to remain in the house for an extended period of time, a better option is to have the buyer and seller draw up a rental agreement. The “Post Possession” option is generally used for a short period such as a few days or weeks, not extended periods.
1. Agreement by Owner and Seller – Obviously this has to be agreed to by all parties.
2. “Post Possession “ document -This is the document which states the rights and responsibilities of the owner and occupant during the post possession period, never just a verbal agreement.
3. Former owner Obtains Rental/Liability policy – The party remaining in the property is required to obtain a rental insurance policy that includes liability sufficient to cover the property with the owner as an “also named” on the policy. This allows the owner to file a claim on the property should there be damage and the claim goes on the claim history of the renter, not the owner. This type of policy is prudent for any landlord to make part of a normal rental in the event a renter damages a house. With the owner named on the policy, should the renter cancel the policy, the owner is notified. If the occupant burns down the house, the liability claim goes against the occupant’s insurance claim history report (which insurers look at in determining risk which in turn determines insurance rates). The owner’s claim history will not reflect this insurance claim according to Rebecca Kossmann of Liberty Mutual Insurance.
4. Security Deposit – The new owner should require a security deposit. This can be held by the title company and refunded after the occupant moves out and the new owner confirms the property is in the same condition as it was at the close of escrow.
5. Rental Payment – Determine the rent to be paid by the seller. The amount collected may be the going rental rate prorated for the number of days the house is occupied. There may be no rent collected if the occupancy was taken into consideration as part of the sale price of the house.
With planning most buyers and sellers can avoid this situation, however, we all know that even with impeccable planning unexpected situations do come up. Sometimes a buyer or seller must have a particular closing date, not to their liking but necessary to meet the contract needs of another party.
We all want our clients to have a great experience when buying and selling a home or investment property with us. Part of the job is thinking outside of the box (but within the law and common sense) to make the sale process as smooth as possible for everyone.