What happens when the seller needs to stay in the house after settlement? Sometimes it's as simple as settlement happening on Friday and the movers aren't coming until Saturday. Sometimes the seller's new home isn't ready quite when expected. Sometimes it's planned for from the very beginning and sometimes it pops up at the last minute.
When this happens, it's called a Post-Settlement Occupancy. Typically, the seller will pay rent, which amounts to the buyer's mortgage payment, broken down into a daily amount. The seller will also pay a security deposit against damage done during the rental period. The Post Settlement Occupancy Agreement for Prince George's County is six pages and lays out in detail what is expected of each party and what happens if and when things go wrong.
In this situation, I recommend that buyers do two walk-throughs of the property. Once prior to settlement and then again once the post-settlement occupancy period has ended and the seller has moved out. I've had agents argue with me that the first walk-through is unnecessary since the seller is still living in the house. Once I've explained why two are necessary, I've never had a problem.
The first walk-through allows the buyer to determine that the property is in substantially the same condition it was in when the contract was accepted. It is a step in bringing the contract itself to a close. However, in the case of a post-settlement occupancy, it also establishes a baseline for the second walk-through. The parties have changed roles in the second walk-through -- the buyer is now the owner and the seller is now the tenant. The second walk-through has nothing to do with the contract of sale and has everything to do with the new contract, i.e., the Post Settlement Occupancy Agreement.
Of course, there are risks involved in granting a rent-back, (the seller may not move out on time, damage may be more than the security deposit, etc.) so it's important to have a thorough discussion prior to agreeing to one.
Next time I'll discuss Pre-Settlement Occupancys and some of the risks involved.
(C) 2006 Susan Pruden.
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