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Buyers or sellers -- Early occupancy?
Has anyone (either as a buyer or a seller) ever dealt with an early occupancy situation??
Our home has been for sale and is currently vacant, and as of yesterday is now under contract. The estimated closing date is August 16th, but I just spoke with our agent, and the buyers are wanting to move into the house under an early occupancy clause.
This is something that we know *nothing* about, and our agent admitted that she hasn't dealt with it many times in the past. She said that she'd put together a packet of required info that the buyer must supply to us, including all of their available funds info, pre-qual letter, etc. The inspection is scheduled for tomorrow, so that will be out of the way before they move in.
She said that it really is a gamble, becasue if something were to go wrong between their occupancy and the closing date (i.e. A/C go out, roof leak, etc), we'd be responsible.
Also, how did you go about calculating the daily rate for occupancy? Based on OUR mortgage or theirs? Ours is significantly higher, as we purchased the home for $20K more than we sold it for, and we also had a 1% higher interest rate.
Thanks for any tips or advice!
Re: Buyers or sellers -- Early occupancy?
We are renting the house from the sellers for approximately 3 months before closing, so that's a bit different than your situation and may be more like renting than just early occupancy. In our case, we included the rental time and cost in our purchase offer, and we suggested the going rate for rentals in the area. Our initial monthly rent offer increased as part of the purchase negotiations, but it is still in line with rentals in the area though now at the upper end. The sellers said that was what they needed to meet their costs, but I'm not sure if that meant their mortgage payment on the house we are buying or the new one they already closed on. I would think it would be reasonable for you to ask them to pay the daily rate based on your mortgage since you are the current owners, but it could be something you negotiate with them if you want. Or you could just tell them what you'll accept and they can take it or wait to move in until closing.
Lots of people on this board will likely tell you not to do this because it does represent a liability to you as the seller. As you already know, you will be responsible for any repairs while they are in the house, and there is always the possibility they will do something awful to the house then not end up buying it, which puts you in the unfortunate position of having to pay to clean up after them and not having a buyer. The risk may be worth it to you, however, if you need the money and/or have a good level of trust built up with the buyers. In our case, I think it was a bit of both for the sellers. So far, it is working out well for all parties.
We occupied our house 3 days prior to close. The seller was living in another state and was reassured by the REA about the unlikeliness of any delays in closing. Our financing was cleared about a week before closing. We signed an addendum to the contract specifying the terms. Seller maintained ultimate responsibility for the house (utilities, insurance, liability, etc.) and we basically rented for three days. The rate was based on seller's monthly costs.
Honestly, it is a big risk as a seller. I wouldn't have allowed it if I were the seller, but was extremely grateful that we were able to do this as buyers. It really helped us out. And we closed right on time with no snafus
Thanks for all of your input, ladies.
Things are still up in the air at this point. We've decided that if we do allow this, we're going to require that the buyers sign a one year lease agreement -- that way, if the contract falls through, they will be required to either pay out the rest of the lease OR remain as tenants, paying a monthly rent. We were days away from putting the home up for rent anyway, so we're hopeful that this approach will work. Additionally, the lease terms would become void at closing, and we would refund the required deposit at that time.
We've gone back and forth on this, and the biggest thing that is leading us towards going ahead with the early occupancy is the fact that both DH and the buyer are military. In the event that he were to default on his per diem payment or otherwise harm the house, we have a quick, easy, and very effective route of recourse -- we simply contact his chain of command. It's amazing how quickly things can get done when an Airman's boss gets involved.
Thanks again for all your input!
The decision has been made for us -- the buyers have found alternative housing until closing date. They weren't thrilled with the lease option or the amount of money that we wanted to charge them, so they found something else. That's fine with us -- we're pretty sure that they thought they'd just get to move in, pay a small fee, and all would be fine and dandy. I doubt they understood what a huge risk it was for us.
Thanks again for the advice! I'm glad we don't have to find out what kind of risk it could turn out to be.