The Housing Scene by Lew Sichelman

Occupancy Can Be Touchy

To the surprise of some homebuyers, the day they are able to take occupancy of their new digs does not always coincide with the closing.

An occupancy date is always a negotiable item, just like price. Traditionally, in most markets, occupancy takes place simultaneously with settlement. You sign the papers, and the place is yours.

But that’s not always the case. In agent Judi Barrett’s Idabel, Oklahoma, market, for example, it’s not uncommon for buyers to allow sellers seven to 10 days, post-closing, to remove all their belongings. But in Chicago, it’s unheard of to agree to delayed possession, reports agent Jennifer Allan-Hagedorn.

In the Los Angeles area, Beverly Hills agent James Engel says sellers need to be out three days prior to closing so buyers can do their final walk-through. In the Denver market, sellers expect three extra days after the closing to move out. Just up the interstate in northern Colorado, reports Loveland agent Rob Proctor, possession takes place at closing.

Negotiating when the keys change hands can sometimes be a sticking point -- more challenging than haggling over any other item in the contract. And with good reason.

From the buyer’s point of view: What if something happens to the house between the closing and the time the sellers actually leave? Will the seller, who is now a tenant, be required to repair it? Or will the buyer, who’s now the owner? What if the buyer does move out but leaves his junk behind? Or worse, what if he trashes the place because you drove too hard a bargain?

Will the seller-tenant have to pay rent, and how much? What if, for some reason, the seller decides to extend beyond the agreed-upon move out date? What if the seller never moves out?

Ideally, buyers would like the house to be totally empty a day or two prior to closing so they can do a final inspection of the place and spot any damage that had previously been strategically covered up by a rug or hidden behind a box. Or damage that was caused when the sellers moved out.

But on the seller’s side: What if they move out and then closing’s delayed? Or their new home isn’t ready and they have nowhere to go? Or the buyer changes his mind?

What if the buyer has some last-minute glitch in obtaining financing, and the deal falls through altogether? It is not unheard of for lenders to come up with some deal-breaker at the last minute. And it’s not uncommon for buyers to make some big-ticket purchases prior to closing that lowers their credit score or pushes them beyond the required debt-to-income ratio.

And what happens if the buyer’s sale of his previous home runs into problems, and he can’t get the money he needs from that house to complete the purchase?

It’s a complicated issue, for sure. But there are ways to figure it all out.

For starters, agents suggest that sellers alert would-be buyers in their listings that they need “X” amount of days beyond closing to pack up and move out. That way, if a buyer has a problem with that, he can either move on to another listing or counter that requirement in his offer.

If the parties agree that the seller will remain post-closing, they should state in the contract the exact number of days he will stay. Also, when the seller becomes a tenant, he should pay rent on a per diem basis. The amount is negotiable: Sometimes it’s a token $100 a day. But in other instances, the daily rent is calculated at 1/30th of the buyer’s mortgage payment.

The contract should also specify who pays for any damages post-closing. What if the movers damage a staircase handrail? What if a mover carrying a heavy box trips and breaks his ankle? Or, heaven forbid, what if there’s a fire?

Since the seller is no longer the owner, his homeowner’s insurance won’t cover the cost of these or a myriad other possibilities. So the buyer should make certain his new policy will, even if he hasn’t taken occupancy. If so, that the seller-tenant will cover the buyer-owner’s deductible should also be part of the contract.

To protect themselves even further, buyers should require their sellers to set aside a certain amount of their proceeds in escrow at closing to cover damages or extra days beyond the specified move-out day. How much? Also negotiable. But realize that if there is any kind of dispute and the seller will not permit the settlement agent to release the funds, you are likely to end up in court to seek redress.

Another suggestion: If there is a garage, or perhaps a storage building somewhere on the property, the buyer can allow the seller to use it as a transition area where he can store some of his belongings for a few days after closing. That way, the buyer can move into the main house right away, and the seller can come back after he moves out to get the rest of his stuff.