I am often reminded of the lyrics to a favorite song, “Closing time: you don’t have to go home, but you can’t stay here.” You’ve listed your house. After prepping it and showing it, you receive the offer you’ve been waiting for. You negotiate counter offers and reach an acceptance. You get through the inspection, the appraisal, and any other contingencies. Finally, the closing date approaches. You pack and prepare to move out. But when, exactly, do you NEED to vacate the house you are selling?
Although there is very specific language in the standard IAR Purchase Agreement that addresses transfer of possession, this is often an area of confusion and miscommunication for both buyers and sellers. And, like many nuances in the Real Estate industry, this is an area whose protocol and customary expectations have shifted in recent years. There was a time that it was not unusual for sellers to have 30 days post-closing before they needed to transfer possession to the buyer. This allowed them time to close on their new house, get it ready, and move in at a comfortable pace. Today, however, it is rare to see even a few days of post-closing seller possession, which can create stress and havoc for sellers if they are not prepared.
In the purchase agreement the buyer indicates when possession is to be handed over (at closing or on another date). For each date the seller retains possession of the property post-closing, the buyer is entitled to a fee from seller (a form of rent, if you will). This fee is open ended, but usually falls between $100-$200 per day in my experience. Although this is negotiable between both buyer and seller, it is buyer-generated in the initial purchase agreement. Here is where I’ve seen the biggest shift: MOST buyers these days expect and want possession of the house at closing. The reasons for this are many. They may be vacating their former property and have to move the same day. More often, the buyers are concerned about possible liability should any damage or injury take place to or on the property during the interim. A house is usually the most expensive purchase one will ever make. The fear that something will happen to their investment to damage it during the move-out of the prior owner can be overhwelming. Insurance issues can also be tricky. Once closing takes place, the new owner’s homeowner’s policy goes into effect. However, this may not cover the prior owner’s personal possessions. So, if something were to happen such as a fire, would the seller’s belongings be covered? If damage to the physical property takes place during the move out, who has to make the insurance claim?
While there are still many, many real estate transactions every day in which the seller is able to retain post-closing possession, I always advise my sellers from the beginning not to expect it. If that means planning a double move or budgeting to keep your furniture on a moving truck for a few days, so be it. If the seller has the financial resources to close on their new house prior to closing on the old one, that can be a way to avoid the double move/storage issue. If not, arranging for both closings to take place back-to-back might work (although that can have challenges as well…but that is a topic for another day!).
From a buyer’s perspective, allowing post-closing seller possession can be a way to generate a little extra revenue in the means of the daily fee seller must give to buyer in exchange for staying on. However, please make sure you have carefully considered the risks before agreeing to this arrangement.
If you are planning a move in the near future, just remember, “Closing Time” doesn’t necessarily mean you need to be out the door that moment, but it sure is the safest route for all concerned, and probably the one you should plan for.
By Alyce Penry, talktotucker.com/alyce.penry