Date for possession:
The sales contract usually stipulates that the buyers take possession at closing or shortly thereafter. The house keys are passed to the buyers when the documents are signed. But not always.
Tradition may allow the sellers to remain in the house for periods of up to 30 days after closing. This custom is obviously disappearing. Buyers, especially those from out of town, gave possession of their last house at that closing and it's critical that they have a place to move into.
The issue of possession affects the negotiations and often the final price. Demand 30 days of post possession or even a week, and you’ll eliminate a lot of good prospects. Shoot for a day or two and you'll probably get it.
The contract specifies both a closing and a possession date. It’s best not to specify an exact possession date since the closing could be postponed for a variety of reasons. Therefore, the possession should be entered on the contract as "at closing", "on the date of closing" or "X" days after closing" at 6:00 PM on day of closing.
This is a good example why it’s important to get as much information as possible about the buyers’ situation before negotiating begins. You may have the upper hand on this issue if you know the date the buyers must move out of their home.
If you request an extended possession period, be prepared to pay a daily fee. If the length of stay is anticipated to go beyond a day or two you may be asked to put up a security deposit at closing in addition to the advance rent.
The common daily charge sellers pay to stay past the closing date is calculated by using PITI. This lender/real estate term stands for Principal, Interest, Tax and Insurance. These four items are what make up the buyers’ costs to live in a home (excluding maintenance, utilities, etc.). It can be calculated for a day, and that is often what is agreed upon as a fair charge.
In a cash transaction this method wouldn't apply (no principal or interest) and in order to arrive at a fair rental amount there must be agreement between the parties. Lawyers are great for working out details like this.
Sometimes one party has to agree to move their belongings into storage because of the difficulty of coordinating the possession date. This inconvenience is usually expressed during the home sale negotiations in determining the agreed upon contract price.
Rent back option:
You may have the opportunity to enter into an agreement to rent the property back from the buyer for a month (or several) after closing. If (a big "if") this is part of the Purchase Contract, have the buyer check with their lender to make sure the lender doesn’t view this extended stay as a rental situation. This would categorize the buyers as investors and potentially raise their interest rates. On the other hand, if it's not on the contract and the lender is unaware of this arrangement, no problem.
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