Understanding the Possession Date for Homebuyers

When can a buyer move in?

Happy couple in new home laying on a group of couch cushions among moving boxes
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When a home buyer picks a house to purchase, the transaction process can be lengthy and somewhat complicated. The buyer possession date, in particular, is often a point of confusion.

Some of this has to do with when the seller is vacating, but not always. It's frequently one of the biggest headaches in many real estate transactions, often rearing its head midway through the process when needs or circumstances might change. Sometimes, unfortunately, the date of buyer possession was never clearly established in the first place. In that case, the buyer and seller may develop contradictory expectations of when possession will change hands.

Buyer Possession Date at Closing

Bear in mind that a real estate closing doesn't always coincide with the recording of the deed, because in some parts of the country, counties are weeks behind in recording deeds. In those situations, closing happens when the money changes hands, the deed is drawn, and all conditions of the contract have been met. In some cities, buyers don't get the keys until the title company has confirmed the deed has been recorded.

Customary Buyer Possession Dates

Local custom will dictate how the buyer asks for possession, but possession is typically an issue agreed upon at purchase contract acceptance. It's not unusual for a buyer to receive keys on the day the transaction closes. In some parts of the country, buyers give the sellers a day or two after closing to move. Sometimes sellers rent back from buyers.

If you agree to any delays in possession after closing, be sure the terms for any rent, utility payments, and other concerns are clearly spelled out in writing. Maintenance and insurance-related issues are of particular concern, and you should review these with your lawyer.

How Market Conditions Can Influence Buyer Possession Dates

Market forces can affect the way the parties handle possession dates as well. For instance:

  • In seller's markets, buyers will often give sellers several days to move. This is to gain an edge in the event the seller receives multiple offers.
  • In buyer's markets, buyers will generally insist upon occupancy at closing and have been known to refuse to close if the property isn't going to be vacant at closing.
  • In neutral markets, possession typically changes hands upon closing.

Early Buyer Possession

As a general rule, real estate experts frown upon giving buyers early possession because too many things can go wrong at the last minute. Eviction is neither easy nor inexpensive. For that reason, professionals advise that sellers and buyers execute some type of rental agreement. rather than transferring possession before the sale is complete.

Instead of specifying possession on a certain date, it's smarter to write contracts that give possession either on or X days after closing.

Seller Rent-Backs Retain Possession

Buyers want sellers to pay a sum equal to their mortgage payment, plus insurance and taxes. That amount is often a lot more than the seller's original mortgage payment, though, and they may not be willing to pau it.

Whatever amount is agreed upon, put it in writing, and execute a rental agreement to protect all parties. The amount is negotiable and there is no real reason it needs to be based on the buyer's PITI. An argument can be made that the rental amount should be based on average rental amounts for the area.

Be sure not to agree to a rent-back lease agreement of longer than 60 days. If you do, your lender may consider the home an investment property and raise your interest rate.

Possession Delays Due to Loan Funding Conditions

Even the best-laid plans run afoul at times. Your contract can spell out precisely when occupancy is permitted, yet the transaction might not close on time. By the time the loan documents are signed and the lender reviews them, the underwriter might call for a loan condition to be satisfied before funding, and this can easily delay closing.

Consider an example. A recent seller from Carmichael, California, found that she could not find any movers to work on a holiday, the day she was supposed to vacate her home of 40 years. The buyers refused to give the seller an extra day to move out, claiming the seller should have made arrangements far in advance of her move-out day. Reluctantly, and at an additional expense, the seller changed her moving day to meet the buyers' demands.

At the last minute, though, the lender called for a loan condition and refused to fund the loan until the condition was met. This delayed the closing by two days, but the buyers still wanted the keys to the home on the day it was originally scheduled to close. They didn't want to physically move in; they simply wanted to shampoo the carpet. If you were the seller who had moved out and left the home vacant, would you have given the keys to these buyers?

The seller, when informed that keys should not be handed to a buyer until a transaction closes, decided to withhold the keys and delay buyer possession. She was within her rights and knew the risks involved.

The Bottom Line

It's crucial that all parties in a real estate transaction clearly communicate about the possession date before they finalize their sales contract. Your agent (and lawyer, if needed) can help you navigate and local laws that could impact this so you can be informed when you negotiate the details. Buying and selling a home is complicated enough. Don't let possession issues cause one last headache before you close the deal.

Article Sources

  1. Consumer Reports. "What to Know About Rent-Back Agreements If You're Buying a Home." Accessed Nov. 6, 2020.