Seller can stay 30 days?

Question

Hi All! We are OOS investors in the Columbus market and about to close on our 20th unit. We wondered if it's standard practice in purchase contracts of SFH to allow a seller to stay up to 30 days in their home before buyer can take possession? And, without paying any sort of rent? Asking for a friend :-)

Greg Scott · Answer

Everything is negotiable, but in my experience, if someone stays longer, they pay rent.  Also, you want the rent high enough that they are incentivized to move elsewhere.  I'd want to see holdover rent at least 125% of market rates.

Greg Scott · Answer

@Joe Splitrock offers some good ideas.  The idea of the escrow would be to act as a security deposit.  Again, all negotiable, so I'd make it bigger than a security deposit.  Make sure the language allows you to charge for damages, if any, not just "move out, get money".

Bruce Woodruff · Answer

I've only ever head of sellers paying at least market rent after a sale....not sure what the motivation is in having them stay for free at your new house....?

Theresa Harris · Answer

It isn't normal, but I did it with one place I bought however they had to pay rent and sign a short lease.  If they don't want to pay rent, have them lower the purchase price.  I'd also have money held back until they vacate.  Some people don't have the funds to buy another place right away and require the money from the sale of their current home to buy their next home.

Hold back enough money that it is incentive for them to move.

Andrew B. · Answer

Sellers asking to stay after close is common.

Buyers giving them everything for free, with no recourse is a bad idea tho.

Your first goal is to protect yourself. You need a "stick" that you can use to get them out in a timely fashion. Otherwise, they will take their time. My typical recommendation is to have title company hold a portion of the proceeds until they vacate. Also stipulate that these funds become yours to use towards eviction costs if you must file an eviction against the seller.

You can also consider charging them a high rental rate to incentive them, or charge stiff penalties if they overstay.

My personal favorite option is to just delay closing until they are out. This avoids headaches and liability for everyone, but it is not always possible if the seller needs the funds to close on their own house.

Good luck.

Kristina Anderson · Answer

Agree with both responses; we are told by our agent in Columbus area this would be pretty standard. In our market (NYC) it would be a flat out no and in others it would be "pay rent if you want to"...

Timothy Murphy III · Answer

Very dangerous IMO, as if the seller doesn't leave when agreed, you're now an accidental landlord. It's not typically caused because the seller planned to screw you all along, but often their other housing doesn't come through as expected and it's easiest for them to just stay until they figure it out.

I helped a colleague of mine buy a home for his family last summer and the seller asked for this because she was using some of the proceeds from the sale of her home to close on her new condo. My colleague was working on a case where this very thing happened so he was keenly aware of the risks. The way we dealt with it was by giving the seller X number of days of possession after closing, rent free, with a substantial per day charge if she did not vacate by the agreed date. This was secured by having a portion of her sales proceeds held in escrow and not to be released to her until possession was granted to the buyer. This ensured she has proper motivation to actually leave when she agreed and it made sure the buyer has security in the event something went wrong and she was unable to leave as agreed.

Dave Poeppelmeier · Answer

@Kristina Anderson "all Real Estate is local". This is very common in Ohio, and is generally expected when purchasing a SFH from an owner occupant. You definitely want them to put money in Escrow with the Post Closing Addendum to make sure they move out on time and don't leave a bunch of junk in the house. Once they leave with all of their stuff, they get the money back. I simply look at it as the cost of doing business. Yes, you can fight them on it up front, but then you have lost negotiating power if stuff comes up on the Inspection. Just my 2 cents.

Steve K. · Answer

This has become extremely common just over the last few years and is done through a "post closing occupancy agreement"/ rent-back (it's common in my market at least, where inventory is extremely tight and sellers need time to find their replacement property). Usually just 30 days but I'm working on a deal right now that is a very competitive property and the seller's are asking for 6 months completely rent free (would normally rent for $10-15k/month and it's a $2M property). There are multiple offers on the property so it appears that buyers are willing to accept the seller's terms. I would recommend holding money back in escrow until they vacate/ definitely get a security deposit and have them sign a lease like a normal tenant would. Also make sure that it won't effect your financing (some loan products such as FHA require the buyer to occupy the property within a certain time period, often 30 or 60 days). If you aren't able or willing to accommodate the seller's rent-back requirement, you might work with them in exploring other options for how they can solve whatever issue is causing them to ask to stay. I've used bridge loans, helped the sellers find a replacement property and get it under contract contingent upon closing the sale of their current home (tricky in a tight market but not too bad if they have their home under contract with a flexible closing date), and I've even placed sellers in one of my medium term furnished rentals while they shopped for their new home.

Seller can stay 30 days?

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