Pre Settlement Occupancy??

Question

I have a property that has been under contract to sell since mid-September. The buyer just went through a divorce and they have been working on splitting their properties etc. We have extended the settlement twice and now it looks like it might not happen till after the holidays due to the lender needing more time to pull everything together. Needless to say it has been a frustrating experience for everyone involved. The buyer is now asking if we would consider a pre-settlement occupancy agreement. She would like to move in before the holidays and is willing to pay additional money and pay all utilities to make it happen. Has anyone ever worked with this arrangement? What are the pros or cons?

Simon Campbell · Answer

The potential for a problem is higher here. What happens if the sale falls through? Now you have a "tenant" who does not want to leave.  You could get stuck in a lengthy, and possibly expensive, eviction procedure. To evict a tenant in the winter in PA, you must give 30 day notice before forcibly removing the tenant.

Meanwhile, you will have trouble re-selling the property since it is occupied.

My advice, make them finish the transaction quickly and encourage your agent to bring you back-up offers.

Jon Holdman · Answer

Agree with Simon Campbell - just say no.  They buyer needs to light a fire under the lender or find a new lender.  If this is dragging on and on, there's some problem.  This may well never close.  If you let her move in, you're now a landlord with a tenant.  But she thinks it her "home".  She's going to start doing homeowner stuff like painting and pounding nails in walls.

If you do this, get a lease.  Get rent.  And not small rent, either.  Above market rent for the area.  And a deposit that's applied at closing but is otherwise non-refundable.

Simon Campbell · Answer

Unless the buyer puts down a big non-refundable deposit and signs a lease, I would avoid this.

I read about a buyer was trying to obtain a VA loan but needed a place to move into because they had been transferred into town and were about to start a job.  The loan dragged a little bit and the seller decided to let them move in 30 days prior to closing.

The buyer ended up getting turned down for the loan and because the parties did not sign a lease, the seller ended up have to evict them which cost them over $1000.  The house was dirtied up and had to be cleaned and touch up paint.  What a mess!

Pre-Settlement Occupancy Should Only Be Used Under the Most Extreme Circumstances