Buyer Possession Before Closing

Proceed with caution when considering early buyer possession

Realtor giving couple keys to new home

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The possession of a home usually transfers from seller to buyer at the time of closing, but in some cases, a home buyer can ask the seller to grant early buyer possession before closing occurs. Buyers usually make such requests when their apartment lease has ended—or their old home has already sold—and they need a place to live before the closing date of their new home. Home sellers and buyers should consult their attorneys with questions and concerns about early buyer possession before signing such agreements.

Early Possession Pitfalls

Sellers make the final decision as to whether an early possession makes sense for their transaction. Most listing agents, however, discourage such situations because too many things can go wrong. For example:

  • The sale might fall through due to a mortgage underwriting problem, meaning the buyers' loan can't be approved even after a thorough review of their documents. Should this happen, the listing agent is back to square one, trying to find another buyer for the home, but this time with an unwanted tenant in place. In a perfect world, the former buyers vacate, but agents find out the hard way that homeowners sometimes have to take legal action to remove former buyers.
  • The buyers might feel the house is already theirs and begin to make changes—maybe changes the owner wouldn't appreciate. If the house doesn't close, the owners may be stuck with the buyers' improvements. Be sure to treat this time as if the new buyers are your guests and that they understand it is not yet their home.
  • The buyers might start making lists of extra repairs they want to see completed before closing. Most often, these aren't genuine repairs, they're simply things the buyers would like to see changed. This can be especially frustrating if you've already gone through the inspection and repair process. Be sure to stipulate that before they move in early that any and all repairs are spelled out in the contract and have already been agreed to.
  • Worst case scenario: The buyers may trash the house.

If you do agree to early buyer possession, it should be handled with a written agreement that describes the duties and responsibilities of both parties. Real estate agents can provide the standard contract addendum that covers early buyer possession. If you prefer, an attorney can draft the document.

Considerations for Early Buyer Possession Agreements

  • Wording should include details about what will happen if the sale does not close on time—​or never closes. How much time do buyers have to vacate? What will happen if they don't?
  • How much rent will the buyers pay and when is it due? Do you want a security deposit?
  • Buyers should agree they will not modify the home without the consent of the owner. If closing doesn't take place, buyers should pay to return the home to its former condition.
  • Decide whether to include utilities in the rent, or whether to have the buyers' transfer the accounts into their names.
  • Buyers are typically responsible for trash removal and should coordinate landscaping responsibilities with the seller if they're not provided by a homeowner's association.
  • Home sellers still own the home, so insurance for the structure is the sellers' responsibility. Buyers must insure their personal items.
  • Buyers should not be allowed to sublet the house.
  • Standard forms usually include a statement releasing sellers from liability if something adverse happens to buyers before closing.
  • Will pets be allowed?

    There are times when buyer possession before closing can help both parties. If you feel it's a good move, simply proceed with caution. Background check your buyers as thoroughly as possible before you agree. You can even charge them pro-rated rent for the days they spend there.

    We would also be remiss if we did not point out that from a listing agent's point of view (not a buyer's agent's, mind you), many are vehemently against early buyer possession. The reason is early possession gives buyers too much time to poke around the house, to think about the purchase. The buyers might notice things that they previously overlooked; things that now they cannot stand to live with.

    From a listing agent's perspective, those things are best discovered after closing the sale, not before. Because before the sale closes, buyers can often cancel. Over the years, we've heard some buyers lament if they had lived in the house for a while before closing, they would have never bought it.

    Edited by Elizabeth Weintraub, Home Buying Expert.

    At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.