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Planning an out of state move and will soon be listing our home. Our property is large and we have a ton of stuff to pack and move. In order to avoid having a situation where we are paying for 2 houses simultaneously, we were going to ask for 1-2 weeks seller possession after closing to give us time to move out. Is this pretty common? I haven't sold many homes over the years, and this is my first long distance move, so I hope this doesn't sound too strange. We're just spooked about having the closing go south after we've already moved out.
That's going to be market specific. In my area, 2-3 days is fairly common. After 3 days, most sellers don't want to pay the buyer's mortgage payment as that's what you're going to do. If the buyer's mortgage payment is more than your current payment, you have to be ok with paying it for them. You take their payment, divide it by 30 days and multiply by the number of days. Some buyers want a little more than their mortgage for allowing you the convenience of the move-out because they're still going to have expenses where they have to live also.
Everything is negotiable and you just have to find the right buyer to allow it. Home owners insurance is a nightmare for a situation like this...
If a buyer agrees, it's very common to do a seller lease back. Many times 2-3 days just to move out is very common. I personally sold a home and did a 60 day lease back because I was building.
We certainly were planning to pay prorated "rent" on the house for the time we would need to move out. We were just feeling that under our circumstances, we might need at least a week to get out in an orderly fashion. I didn't want to move things out before escrow closes due to a terrible experiences I have had with closings in the past.
In our area, seller lease backs are very common if the possession time isn't going to take place within 2-3 days. A delayed buyer possession timeline of 2-3 days is very common though, with no charge to the seller who is moving out.
It never hurts to ask. The buyers may want that extra time to pack up and move out of their own place as well.
It is not common in our area. There are insurance and legal issues that need to be considered.
If the seller is not the owner now, whose insurance is responsible? If the seller signs a lease back for a couple weeks, then the buyer will need to have a "landlord" policy, and the seller will need to have a "renters" policy. If the seller just keeps his insurance as it was and doesn't tell the insurance company the home is sold, then it probably won't cover it if there is a claim. If the buyer just buys homeowners insurance and doesn't advise the insurance company that the home is a temporary rental, then that insurance will probably not cover any damage, because it's the wrong insurance.
If the seller accidentally burns the house down during the post closing occupancy, and seller and buyer did not have the correct insurance coverage, what will happen now? Who is responsible?
For the buyer; what if the seller isn't ready to move in two weeks, and wants another month and you need to move in now? How will you get him out?
Lots of legal and insurance issues to think about. I always advise against it, and if they insist, I advise my client to talk to their insurance company to be certain they have the proper insurance coverage; and to have an attorney draft the post or pre possession agreement so they have covered all the legal bases. I don't want to be involved because when a pre or post possession goes wrong, then the agent is going to be the target of the clients wrath, and on the receiving end of a law suit.
It is not common in our area. There are insurance and legal issues that need to be considered.
If the seller is not the owner now, whose insurance is responsible? If the seller signs a lease back for a couple weeks, then the buyer will need to have a "landlord" policy, and the seller will need to have a "renters" policy. If the seller just keeps his insurance as it was and doesn't tell the insurance company the home is sold, then it probably won't cover it if there is a claim. If the buyer just buys homeowners insurance and doesn't advise the insurance company that the home is a temporary rental, then that insurance will probably not cover any damage, because it's the wrong insurance.
If the seller accidentally burns the house down during the post closing occupancy, and seller and buyer did not have the correct insurance coverage, what will happen now? Who is responsible?
For the buyer; what if the seller isn't ready to move in two weeks, and wants another month and you need to move in now? How will you get him out?
Lots of legal and insurance issues to think about. I always advise against it, and if they insist, I advise my client to talk to their insurance company to be certain they have the proper insurance coverage; and to have an attorney draft the post or pre possession agreement so they have covered all the legal bases. I don't want to be involved because when a pre or post possession goes wrong, then the agent is going to be the target of the clients wrath, and on the receiving end of a law suit.
While everything you said is technically correct, you are really over complicating a simple issue. It is very very common in my area and its very simple...people are generally good, and you probably know who your dealing with if you were able to get to a closing...there are risks involved with everything but a sale/leaseback does not carry a disproportionate amount of risk.
As to insurance its very simple - new owner buys the property insurance, and renter must maintain their previous liability insurance. It happens all the time. All of the insurance companies know exactly how to handle it.
It is not common in our area. There are insurance and legal issues that need to be considered.
If the seller is not the owner now, whose insurance is responsible? If the seller signs a lease back for a couple weeks, then the buyer will need to have a "landlord" policy, and the seller will need to have a "renters" policy. If the seller just keeps his insurance as it was and doesn't tell the insurance company the home is sold, then it probably won't cover it if there is a claim. If the buyer just buys homeowners insurance and doesn't advise the insurance company that the home is a temporary rental, then that insurance will probably not cover any damage, because it's the wrong insurance.
If the seller accidentally burns the house down during the post closing occupancy, and seller and buyer did not have the correct insurance coverage, what will happen now? Who is responsible?
For the buyer; what if the seller isn't ready to move in two weeks, and wants another month and you need to move in now? How will you get him out?
Lots of legal and insurance issues to think about. I always advise against it, and if they insist, I advise my client to talk to their insurance company to be certain they have the proper insurance coverage; and to have an attorney draft the post or pre possession agreement so they have covered all the legal bases. I don't want to be involved because when a pre or post possession goes wrong, then the agent is going to be the target of the clients wrath, and on the receiving end of a law suit.
It is common out here especially with so many financing fails these days. Insurance isn't a big deal. The new owner carries the insurance, but none of the seller's possessions are covered just like a rental. The seller has to carry renter's insurance for that time. We have a nicely written addendum here that covers deposits and such. Our landlord tenant laws exempt real estate transactions involving possession for 90 days so we can agree to many things without worrying about those laws.
It is a risk for a buyer that they will have to serve an eviction but there are many risks in real estate transactions and as long as there are reasonable agents and people, things are just fine. I've done many pre and post possessions. I've only had one veer off course, but we got it corrected. It happens. I will concede that the agent on the other end of the transaction is a big factor in how I advise my clients. Agents that educate their clients are no brainers, and bad agents might lose that option for their clients.
While everything you said is technically correct, you are really over complicating a simple issue. It is very very common in my area and its very simple...people are generally good, and you probably know who your dealing with if you were able to get to a closing...there are risks involved with everything but a sale/leaseback does not carry a disproportionate amount of risk.
As to insurance its very simple - new owner buys the property insurance, and renter must maintain their previous liability insurance. It happens all the time. All of the insurance companies know exactly how to handle it.
I'm happy to know that you agree everything I said is correct.
And you do agree that there are risks in pre or post possession. Since this is a real estate business transaction, it isn't about knowing who the person is, or about trust; it's another real estate business transaction and it's about minimizing the risk when entering into a real estate pre or post possession agreement.
While it can certainly be simplified, like this:
Get proper insurance and
Get legal advice.
It really doesn't drive home the extent of the risk to the buyer/seller unless some of the potential problems are described in a word picture.
The typical buyer has no concept of the issues they may face if the seller finds he can't move out in two weeks as planned, and instead decides to stay for a couple months, while the buyer needs to move in now.
The buyer needs to know in advance that this two week sale/leaseback is a landlord/tenant agreement subject to the landlord/tenant laws of the state.
If the seller must be evicted, the buyer (now landlord) must follow the state eviction laws. People need to have that information in advance, and it's the Realtors job to advise them to get proper insurance and to get a real estate attorney to draw up the pre-post possession agreement.
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