Recently, during the most competitive times in the seller-favoring real estate market, more sellers were asking for the right to stay in the home after the closing. This makes life much easier for the seller.
Under typical circumstances, the seller and all their possessions must be out of the house before closing. The buyer walks through just before closing to confirm that all the items that should be in the house are there, and the seller’s personal property has been removed.
This leaves the seller’s personal property sitting in a truck, if the sellers are buying another home the same day. If anything is delayed, the sellers are stuck. Having a few extra days and some cash can make a real difference to the stress of the move-out.
The way this is done is to have attorneys draft a “Use and Occupancy” agreement. That is a legal document. It is like a short-term lease, but the language in the document clearly states that there is no tenant-landlord relationship, and the former owners do not have the same rights as a tenant would have. The sellers have the right to live in the property, for a specific number of days for a specific price per day. They leave a deposit in escrow to protect the buyers if anything is damaged or missing after the former owners leave.
Most of the time a Use and Occupancy Agreement works out well for all parties.
What is a buyer to do if the seller requests a Use and Occupancy?
If as seller wants or needs use and occupancy of the house after closing, it does not change things all that much for the buyers. These are the extra steps that are added:
You will need your attorney to create a Use and Occupancy Agreement. This is an important document. It should be designed to protect your interests if anything goes wrong:
- Is the seller covering your costs while they are living there?
- Is the seller taking care of the property while they are living there?
- Who pays for repairs during the use and occupancy period?
- What happens if the seller leaves a mess or takes things out of the house that belong to you?
- Instead of doing one walk-through just before closing, it is good practice to do a walk-through before closing and another one after the sellers leave. Because the sellers are still using the house, the walk-through before closing is optional. Some buyers will skip it. The seller remains obligated to deliver the property in the same condition as inspection day, except with their personal property removed.
- The final walk-through happens after the seller leaves. Since closing has already happened, the buyers’ only recourse if something is wrong is to keep the deposit that is in escrow or go to small claims court. Under normal circumstances, a buyer has the leverage of not closing on the property if the seller has not prepared the property for sale by removing all their things and leaving everything that comes with the house.
Most of the time, all is well.
As a stereotype, sellers who want to stay after the closing are likely to be people who have a lot of work to do to move out. If they are asking for more time, it is often because they are determined to do the right thing. Were they the type of people who do things rushed and sloppy, they would be the type of people who are less likely to bother with a Use and Occupancy Agreement.
Stereotypes aside, things do go wrong. They are the same types of things that go wrong at a pre-closing walk through.
- Large pieces of furniture or failed appliances are left because the seller ran out of time to remove them.
- Large pieces of furniture or failed appliances are left because the seller couldn’t find a mover who could remove them. This is usually old couches, pianos, or other marginally useful big things.
- The seller ran out of patience for the move. Significant trash was left inside the house.
- Sometimes the seller inadvertently forgets something in a closet, cabinet, or crawl space. The civil thing to do is to return those items to the sellers.
- The oddest thing I found was the seller’s wallet in the kitchen cabinet. He took his wallet out when he was emptying the under sink cabinet, then forgot about it.
- I also found a team bag with about two dozen hockey sticks and padding sets.
- Once, there was a huge bag of stuffed toys in a cabinet above the closet.
If your real estate agent was not specific about objects that are on the borderline between real estate and personal property, there can be a dispute about things that were taken that the buyer expected would be staying. The items that are not entirely obvious can be added into your Purchase and Sales Agreement, so there is no question later on. These are some of the commonly disputed items:
Built-in shelving. If it is bolted into the wall or is built to fit in a specific space, it is realty (part of the house) and should stay.
Wired-in electronics. Wired wall-mounted speakers are realty. The controller for the surround sound is not wired into the house, so that is personal property. If the surround sound system is included in the sale, it should be documented in the Purchase and Sales Agreement. If the seller plans on removing the speakers, it should be documented in the Purchase and Sales Agreement.
Light fixtures. Some sellers are attached to their chandeliers or ceiling fans. If they plan to take those fixtures, the buyer needs to agree to that and note the condition that the ceiling will be in at closing. Sometimes, the seller will install another fixture; sometimes the seller will cap the hole; sometimes the buyer will purchase a new fixture, and the seller will have their electrician install it when they remove the one that the seller is taking.
Sometimes the heat, air conditioning, or hot water heater fail between inspection, closing, or the end of the use and occupancy. Sinks might leak. Washer hook ups might leak when the washer is removed.
Sometimes walls or floors get scratched, or windows are broken during the moving process.
Sometimes a storm comes through and there are branches blown down in the yard, or a tree. (That’s happened!)