Have you been asked to let the buyer move into the property prior to the close of escrow?
If so, BEWARE. Recently two different transactions have come to my attention. Both involving short sales where the same agent represented both the Buyer and Seller. In both cases, the Buyer moving in prior to close of escrow resulted in headaches for the parties to the transaction and litigation or threats of litigation with the Real Estate Professionals involved. Let me illustrate:
Short Sale approval was taking a very long time. The house was vacant and the Buyer wanted to occupy the property prior to the close of escrow since Buyer’s lease was up and the buyer had to move. Seller consented. As luck would have it, the bank was not cooperative and the sale fell through. In this case the Buyer and Seller executed a lease. However, when the Buyer (and now the tenant) found out that the short sale was becoming a problem with the bank, the now tenant decided to stop paying rent and started looking for a different house. The Buyer found a different house and ultimately closed the deal on this new house. Buyer also cancelled the escrow on the house being occupied. Well, the Buyer would not move out until the newly purchased property was going to close. Still not paying rent. Of course, this resulted in the Seller having to commence eviction proceedings. At the same time the Buyer and Seller got into a dispute over Buyers’s earnest money deposit. Eventually after the dust settled, the matter was resolved. However, Seller was unable to market the house for a few months because of the problematic Buyer.
Much the same scenario as above, however, in this case the Buyer was unable to qualify for the loan. In this case no lease agreement was signed. Buyer remained in the property for months without paying rent. Seller again had to initiate eviction proceedings. Further during the time Buyer occupied the residence Seller began getting notices and fines from the city because of the condition in which the Buyer was maintaining the property. As luck would have it, Buyer also damaged the property when moving out. Seller because of Buyer’s lack of cooperation was unable o market the property for a considerable period of time.
If anything is to be learned from the above examples, I hope the message to Sellers is to avoid allowing a Buyer to take possession prior to the close of escrow. If for some reason, the Seller feels that they have to let the Buyer take early possession, then the Seller should treat the rental separate and apart from the sale of the property. Get a rental agreement, get a deposit. Make sure you as Seller protect yourself as now a Landlord. If rent isn’t paid handle it as though you were only engaged in the Rental business. In all cases where the agent is representing both Buyer and Seller and this issue arises the Seller should seek separate counsel other than from the Realtor regarding the proposed rental arrangement. For the Realtor, if this issue arises, the Realtor should advise in writing both parties to seek separate counsel regarding the wisdom and manner in which a rental relationship between Buyer and Seller is to occur.