Investor · Somerset · Member since 2018 · 55 posts · 14 votes
Hello All,
I am a buyer of a property in NJ for which closing is planned soon. The seller is requesting use and occupancy for few days post closing (ie post closing seller wishes to stay in the property for some days untill they move to their next residence for which their closing is also planned). In such a case is there any risk to me as a buyer in NJ? Would this become an eviction issue?
Any of you experienced any adverse issues in such a scenario? Any caveats I must look for? Red flags?
Investor · Manasquan, NJ · Member since 2019 · 70 posts · 38 votes
2y
As an agent - I have seen this happen a lot lately. My advice would be to not close on the property till the seller closes on their purchase. This will force them to actually have a closing in order to get the cash they so desire.
Now if the seller is saying “I need the cash from this sale to purchase my new property”…your agent needs to negotiate and your attorney needs to negotiate very strong terms for their “use and occupancy”. Can you charge them a hefty rental fee if they stay beyond a certain amount of time? I don’t know that answer.
You could also demand proof of the other closing and find out when the date of the sellers purchase is set to close. Maybe ask your attorney to ask the sellers attorney for proof of closing.
Another option could be to hold a large chunk of the proceeds from the sale back in escrow till the seller vacates the property after closing.
Ultimately, trust your gut. If the seller seems sketchy then they are. If they are forth coming with proof of closing then you shouldn’t have any issues. Ultimately, they put their house in the market. They DO want to sell. I have seen your scenario happen many times with no issues at all.
in NJ, an eviction costs thousands or even tens of thousands; make sure you hold back in escrow or a bond an amount to cover that. If his deal falls through, and then he has nowhere to go, and you have to evict, you need to be covered.
Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes
2y
Andy,
Be sure to discuss this with your Insurance agent. If this property is intended to be your residence, they will have quoted a Homeowners policy most likely. That policy does not envision a rented residence. On a short term (days) basis they may make an exception. You want to make sure that there will be no problems for a Liability or Property claim. Also, I would require that they make you an additional insured on their rental policy. $500,000 is normally the highest Liability limit they will be able to get on the Renters. If you want them to have more coverage, they will need an Umbrella policy with you as additional insured. In your contract with them, a strong Hold Harmless & Indemnification clause could be important (discuss with your attorney)
Real Estate Agent · Parsippany, NJ · Member since 2013 · 186 posts · 71 votes
2y
This is very common in Jersey. Your attorney should be familiar with this process and will compose an addendum allowing the U&O.
Why do they need the U&O? A lot of times it is because they need the funds from their sale in order to purchase and need to remove the contingency stating that they need to sell in order to purchase.
I would suggest holding back some of the proceeds in escrow until they vacate the premises. You will also need to do a walk through of the property when you close and complete a second one when they vacate the property. The escrow will be security that the property is in the same condition as you were expecting when you should have closed. Also, if worded correctly by your attorney, it can be damages should they decide not to vacate when agreed upon.
Rental Property Investor · Member since 2019 · 411 posts · 148 votes
2y
@Andy S. How far along in the sale process did this come up? Was this last minute? Depending on timeline could be more concerning. There are certainly ways to protect yourself as others have noted, I would consider making it mandatory the seller leave funds in escrow equal to the amount of rent you would be obtaining for the length of time he/she is occupying the property, plus an additional 10k to protect you for eviction costs.
Investor · Somerset · Member since 2018 · 55 posts · 14 votes
2y
Thank you all for the valuable guidance. Joseph, I am about to close in next 10 days. I will consider all the guidance received on this thread for this deal.