Possession at Close or Seller Lease Back?

By
Real Estate Agent with Keller Williams Realty

 

An offer comes in and it calls for possession at close.  Your seller currently occupies the property.  What are your options, what are the flaws that can occur?

Risk of giving possession of the property at close, many factors to consider.

  • Seller loads up a moving truck, has the utilities turned off and the home does not close on time, or just does not close.
  • Closing of the seller's next home may delay and they are left homeless.

Risk to the buyer if the seller remains in the property after close and leases back for a short period of time.

  • Seller does damages property in the move.
  • Buyer does not have the opportunity to see the home vacant and do a proper acceptance of property walk though.
  • Property is left dirty with debris.
  • Seller delays or does not move out when is to vacate and give possession.

Risk to the seller if they lease back the property after close.

  • In Texas the seller is still responsible for repairs until they turn over possession. 
  • Can be accused of damage to the property that was created by the buyer when he moved.
  • If have security deposit, getting the funds back.

Some safety nets that can be put in place is to have a walk through before and after the seller leaves the home with a property condition check off.  Have a security deposit from the seller if they lease back.  Communicate some concerns and have an upfront agreement on how things are to be handled.

Even the most smooth transactions can develop problems which can detract from the good experience.  Explaining all the risks and letting the informed parties make a business decision on how they negotiate and accept the question of possession of the property.

When posed the question ... what do you recommend by the seller what would you say?

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Sheldon Neal
Bergen County, NJ - RE/MAX Real Estate Limited - Maywood, NJ
That British Agent Bergen County NJ

Hi Connie !

In NJ we always do a final walkthrough - I like to do it one hour before closing when the seller is completely out.

If the seller is staying in the home for a day or so until his purchase closes, then we keep a good amount ($3000-$5000) in escrow with the attorney in case of move out damage or home adjustment (appliances taken etc...)

We rarely have issues with change of possession here thank goodness !

Hope you are well !

Sheldon

Apr 23, 2009 10:50 PM #1
Rainmaker
543,273
Toula Rosebrock
Diane Turton, Realtors, Forked River, NJ - Lacey Township, NJ
Broker/Sales Associate, Realtor, Lacey Township,

ToulaRosebrock.comHi Connie:

As what Sheldon mentioned, that's our policy here in NJ, to do a final walk-through right before closing.

What timing on this post of yours, I'm working on a closing with the seller needing to rent back for a week or so...

Apr 24, 2009 06:28 AM #2
Rainmaker
1,390,197
Kristin Johnston, Waukesha Realtor 414-254-6647
RE/MAX Realty Center - Waukesha, WI
Waukesha County Realtor, RE/MAX Buyer Agent

Morning Connie:

 

In WI, we usually do a final walk thru wthin 3 days of closing, and most buyers take possession after closing (although I have had a few rent back situations too).

Apr 24, 2009 07:08 AM #3
Rainer
109,977
Larry Riggs
Re/Max Achievers - Frederick, MD
Your Frederick County Specialist

In Maryland we usually do a walkthrough the day of settlement with the house empty. In the rare occasion the seller rents back we hold an escrow and collect rent pro-rated for the time the seller is staying at settlement. It is a risk but I haven't had one go bad yet. HOWEVER!!! I don't know that I will never do a pre-settlement occupancy again. I won't go into details but an irresponsible buyer combined with an irate seller and then throw in a few sherrif's deputies. Oooooh, really bad memories.

Apr 24, 2009 08:32 AM #4
Rainmaker
826,722
Richard Weeks
Waller Group - Dallas, TX
Realtor, Associate Broker - Manager Business Development

The buyer should never move in prior to closing and funding, and the seller should never stay after closing and funding without a temp lease in place. 

Does not make any difference if it is 89 days or a few minutes.

ps, don't forget about the insurance issues

 

Apr 24, 2009 11:55 AM #5
Rainmaker
750,860
Gabrielle Kamahele Rhind
KGC Properties LLC, Tucson Property Management & Real Estate - Tucson, AZ
Broker/Owner

GOOD MORNING CONNIE!  This has always been a challenging decision!  I negotiated a seller lease back --  once.  Although it worked out, it made me certain that it's best to wait until close! -- Gabrielle

Apr 25, 2009 07:01 AM #6
Rainmaker
263,685
Kim Daugherty
www.RealFamilyRealEstate.com - McKinney, TX
d + b real estate, McKinney, TX REALTOR Broker/Owner

Connie - I have only had the buyer move in BEFORE closing ONE time - and it was a vacant property. We made sure we had everything in writing and what expectations were up front, and it worked out fine, however I'm not sure I would do one every time. Made me nervous the whole time!

Apr 28, 2009 03:59 PM #7
Anonymous
Anonymous
Anonymous

Hey, Connie.

It's your turn today to host me, so I'm camping out here for a little while.

I've done both, and from both sides of the transaction. I can highly recommend not leasing the property back to the Seller, but if you do, get a darn good security deposit with a darn good security deposit agreement.

Apr 29, 2009 04:28 AM #8
Anonymous
Anonymous
Anonymous

As I was scrolling back through your blog, I noticed the picture here. That looks like a row of large and old crepe myrtles that my wise old grandmother had in her yard.

Apr 29, 2009 04:34 AM #9
Rainer
42,223
Wendy Welborne-Kimery
Keller Williams-Lake Norman Mooresville,NC - Mooresville, NC

This can be a sticky situation.  I did it once as both parties agreed.  And like Russell get a good sec deposit.

Apr 29, 2009 08:01 AM #10
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Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

Connie, walk throughs are critical prior to closing and leasebacks should be avoided if possible. All inspected items that need repair need to be fixed of course.

Apr 29, 2009 09:55 PM #11
Rainmaker
1,108,397
Jim Frimmer
HomeSmart Realty West - San Diego, CA
Realtor & CDPE, Mission Valley specialist

Someone would have to put me on the federal bailout program before I would ever recommend a leaseback again, even with a good security deposit.

Apr 30, 2009 04:58 PM #12
Rainmaker
287,238
Cherimie Crane
Cherimie Crane & Associates, Ballenger Realty - Beaufort, SC

Connie,

I always schedule a final walk thru the day of, or the day before closing. Lease back is an option that may sometimes seal the deal, however, educating both parties is a MUST. I have no doubt that with you as their REALTOR, they are in extremely good hands!

 

May 09, 2009 06:41 AM #13
Anonymous
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Hey, Connie.

Zoey the Cool Cat and I are just moseying around ActiveRain to leave some Mother's Day messages here and there. Had to stop by here, of course.

Happy Mother's Day!

A lovely rose for the lovely lady

May 10, 2009 12:20 PM #14
Anonymous
Anonymous
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Hey, Connie - Jim and I haven't heard from you recently. We hope all is well with your and yours, that you're really busy with real estate, but that you'll soon be back to Play in the Rain with us. We miss you.

Jun 04, 2009 12:28 PM #15
Anonymous
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Hey, Connie - I'm back! Where are you? We miss you. Please come back and Play in the Rain with us. (Use the mouseover.)

A lovely rose for a lovely lady

Aug 10, 2009 01:17 AM #16
Rainmaker
543,273
Toula Rosebrock
Diane Turton, Realtors, Forked River, NJ - Lacey Township, NJ
Broker/Sales Associate, Realtor, Lacey Township,

Hi Connie:

So glad to hear from you my friend!

It's been way too long...

Hoping all is well with you and your family.

Nov 03, 2010 07:58 PM #18
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Connie Goodrich

CRS ABR (McKinney Realtor)Texas
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