So my brother is buying his first house in Northwest Ohio. He is suppose to close next week and was telling me that their contract with the seller stipulates that the seller can stay in the Home for up to thirty days after closing... I kind of freaked out for a bit and he called his realitor and she said this is "normal in their area and happens all the time"
The sellers are an older couple and have TONS off stuff and need time to move out... they have not started moving at all yet even though they have had a contract for 45 days now.
Is it just me or could my brother be in for a mess! Is this actually normal?
It's normal.....if you can get a buyer to go for it. Apparently your brother did go for it as he signed the contract. Trouble with long-time entrenched owners (and tenants) is that they are often delusional about what they can accomplish. Or where they are going to go. Or both. The other problem is that if they don't leave, you end up dealing with them through the courts. It's not like the police come and say "your time here is up". I'd never let a former owner stay without a specific rental agreement for that 30 days. I'd never let someone stay in possession of my house without having everything lined up so I could start eviction if I needed to.
I'd not close on that house unless the sellers signed specific rental agreement for the 30 days. There would be a deposit, there would specific terms regarding vacating and removing personal property. But that's me and because I learned it the hard way
My experience has always been that 30 days is typical. Who would move until there is a closed sale? Also the terms will always be in writing with penalties for over staying and I'm surprised that no one has mentioned escrow holding funds until the property is vacated and a final walk through is done. I think you'll get the desired result if $5-10,000 is held in escrow.
Now if you're looking for trouble let's talk about buyer occupancy BEFORE closing.
It just goes to show you how real estate is LOCAL. Customary things in one place can be completely unheard of in others. Understanding your own market is key to being successful.
Dont listen to the Realtor with a financial interest in closing the deal.
I would require an escrow hold back with stiff penalties. Walked away from a deal like this before, and it took the tenant way more time to move than promised and still left the place a mess. I did close after seller vacated.
i let the Seller of my 2 on 1 stay for 90 days. They were looking for flexibility on possession as much as they were looking at selling price. Worked out well and I am glad that I did it. Actually ended up renting them (after the 90 days) my 2000 sq ft detached garage on the same property for $1,000/ month for 5 months.
I'd do it this way too. But the owners would have to qualify as tenants. I've bought a lot of properties from people who would never qualify as anybody's tenants. My biggest mistakes to date were assuming that the sellers would have income from seller carry backs we created. Hence they'd have money and resources to pay rent and/or move. HUGE mistake. And I did it more than once. One seller got a $10K downpayment and it disappeared into one of her boyfriend's drug deals within a week. Oh, and he left her too. So my brand new "tenant" has no money and no one to help her move. Don't get me started on the owners with too much stuff, that are actually hoarders. No amount of money will solve that problem.
You are correct. Always good to make sure they can pay the rent. I didn't have too many worries because they had over $1,000,000 in cars in my garage.
I've seen this MANY times over the years, and don't think it's uncommon at all. As @Nazz Wang mentioned, the sellers probably wanted to make sure the deal was going to close before they started putting out deposits, scheduling movers, etc. Usually the rent is pro rated and it's paid to the buyers through escrow when it closes. I think you're stressing your brother out over what probably is nothing @Joshua D. .
Exactly right. When it comes time for me to downsize if I ever do, I am not removing one picture, decoration etc or packing anything until escrow closes. If, god forbid, my escrow fell apart, my house would look terrible in the "unstage" sense while looking for my next Buyer.
I am a Realtor in Orange County in the People's Republic of California.( I say this because they are tenant friendly and if someone is in your home that you own the proper contracts must be in place) This should have been in the contract on a Per Diem (Cost per day) of the PITIA (Principle Interest Taxes Insurance Association Dues) rent back no longer then 29 days with a deposit(usually 1 month of PITIA) that can be taken out of the net proceeds to the seller. (simple credits and debits) Anything outside this timeline should be put into an official rental agreement. Escrow will not get involved in anything outside 29 days.
This is not uncommon especially when dealing with a seller who is contingent on purchasing another property. This is a way to have them sign off that part of the contract to close the deal. So the buyer wants the home and wants to close escrow, but is waiting for the seller to find another home in order to close on the transaction. Also, this could strengthen the buyers offer by allowing this to take place. I have done this numerous times. This is a way to get the contract closed but that can be a whole different discussion.
So in regards to this transaction the Realtor majorly failed to insure the client's interest were first. It is amazing how this could have been missed by the agent's Broker or manager.
I find it interesting that many here are relating what is common or not common for their market. Regardless of what is common, I suggest you never rent back to anyone who wouldn't easily qualify as a tenant per your standards. Just because someone is selling their house does not make them eligible to live in your property. Withholding proceeds in escrow is a good plan IMO. However, post Bubble there are still tens of thousands of borrowers selling via short sale. Most will not be receiving any funds at closing, not even "moving money". Someone who didn't/couldn't pay their mortgage and and who will not have proceeds from the sale....is that who you want in your property?
The minimum an agent should be doing is making their buyer aware of the risk. Of which there is one. The buyer can decide after knowing more about the risk.
@Account Closed Thank you for that comment! This sums up exactly what I am thinking. So many people keep saying (including my brothers Realtor) How this is "perfectly normal". just because it is normal don't mean its a good idea! There are huge risks involved in this (I think we mentioned 5 or 6 in this post) And your right, my brother needed to be aware of them before he signed the contract.
Now with that said, my brother does not seem to care a bit... Oh well
@Account Closed Thank you for that comment! This sums up exactly what I am thinking. So many people keep saying (including my brothers Realtor) How this is "perfectly normal". just because it is normal don't mean its a good idea! There are huge risks involved in this (I think we mentioned 5 or 6 in this post) And your right, my brother needed to be aware of them before he signed the contract.
Now with that said, my brother does not seem to care a bit... Oh well
IMO times have changed. It is "perfectly normal" to ask for time after closing to move as part of the terms of sale. But agreeing to such terms should be done with some vetting. Just because the seller owned the house one is buying doesn't make them trustworthy. The typical buyer using an agent won't know anything about the seller's financials or plans to move without some kind of application process. Some sellers will be receiving little or no proceeds at closing. Many sellers are not people you would do business with.
A few months ago I had a seller call me with a listed condo, as a short sale ($320K purchase, loan balance was $500K). She was looking for an investor buyer to purchase it, because she wanted to rent it back for a year before moving out of area. I told her I wasn't interested in the property. Also I told her to be mindful that when short selling she would probably be required to sign an affidavit that says that there are no side deals and that the seller will not remain in the property. She said she knew about the affidavit but that her agent told her it wasn't that big of a deal to just sign it anyway. HER AGENT. So the seller is telling me right off the bat that she and her agent have no problem signing affidavits that aren't true. Why would I want to do business with her?
Is your brother getting a loan that requires him to be an owner occupant? If so, do the loan docs require that he occupy the property within some period of time? If he is unable to occupy the property in the stated period of time, he could face legal issues on his side. Just something to check into, and another reason he would need to be certain he could get them out quickly if they chose not to leave on their own.
Personally, I'd never let a seller stay in a property unless I was planning to do a major rehab, as there is very little recourse should the property not be left in good condition when the sellers leave.
I've never really thought the insurance question through all the way. I've bought rehab/vacant policies to take effect at closing. And then let sellers stay 10-45 days. Sometimes I didn't actually "let" them stay, but that's the way it worked out. What a slam dunk for an insurer -- to deny a claim based on occupancy of a supposedly vacant unit. It goes the other way too -- deny a claim when the property was supposed to be occupied but was actually vacant. Hmm.
Can someone summon Eric Belgau? I'm thinking maybe he can chime in on what actually happens. @Steve Babiak Can you help with the mention?
Amazing how many different opinions are out there. Very Very interesting.