Though fairly common, occasionally a new homeowner will close on a house and won't be granted possession. Often we assume that during closing we are going to suffer through an hour or two of excessive paperwork, make a bit of small talk, and then we are rewarded at the end with a shiny set of keys! The keys are tangible proof that we are now homeowners.
However, there are homeowners who are going to ask to retain possession for a number of days after the closing, before turning the keys over to the new homeowner. This can be for a variety of reasons:
- They are closing on a new home and simply need more time. While it would make more sense to simply move back the closing date, occasionally this is done to line up better with a mortgage payment, hotel stay, or moving truck rental. Example: Closing on the 30th to avoid the next months mortgage payment, but not giving up possession until the 3rd to lineup with a new move.
- They are building in added protection in case the deal falls through. I can't imagine loading everything up on the trucks, packing it in storage, renting a hotel room, only to find out that you are unable to close when originally planned. By giving a few extra days to move out, in the event that the home does not close the homeowners can simply stay put. That is not to say that they won't need to cancel any plans that they made for post-closing, but it might save them a headache or two.
- The home is sentimental, and they simply don't want to let go. It is my job to be objective and direct. It is imperative to possess these qualities, because the purchase and sale of a home can be an emotional process. Much of our identity is wrapped up in our home, and to give that to someone new is difficult. For some sellers letting go is just remarkably tough.
Let's posit that you are in one of these transactions. How do you protect yourself and what are the potential dangers?
- Your first step is to draw up a Post Closing Possession Agreement. This 2 page document is imperative for the buyer. It will outline the per diem rate to stay in the home, the damages due in the event the seller fails to leave on time, and a security deposit that will be held to cover any damages that take place between closing and possession. Both parties will need to agree on the terms, but as the buyer, you are in the drivers seat.
- Contact your homeowners insurance provider. Explain to them exactly what is taking place and when. They should be able to explain coverage options, and the fees associated. Once the home closes, you own it. This means that your homeowners policy will need to cover the property from the minute you close, whether you have possession or not.
- Complete both a closing inspection and pre-possession walkthrough. We always complete a final walkthrough prior to closing. This is to ensure that nothing has changed with the property since you last viewed it. You will also want to take a walkthrough as possession is being conveyed. As they moved out, did they damage the walls? Once something removed that shouldn't have been? This is why you have the deposit in place.
When the buyer takes possession after closing, they are the ones that are assuming the risk. A new relationship is created between the two parties, as they start to resemble tenant-landlord. This is why it is imperative to have a well-written document that outlines exactly who does what, when, and where. While the vast majority of the time sellers are congenial and able to move out on time with zero issues, you always want to make sure that you are protected!