Please help? I am selling my home and my buyer wants to move in before the closing day.?

Question

We tried closing twice before but it was contingent upon him selling his house in Maryland, which eventually got sold on Friday. Would you let someone lease or possess the house before closing? Answers needed please...

Answer 1

Yes, there are ways to protect yourself but you need to know your own situation and have a well drafted agreement. You need to ask yourself a few questions as well.

1. Can you qualify and afford two mortgages if the buyers sale falls through?

2. How long your house has been on the market and do you need to move soon? Your local market condition may impact your decision.

3. How solid is the buyer's contract for the sales of his home?

You may try the following:

1. Have a short term lease agreement and the buyer pays rent equal or larger than your mortgage payment together with the proper deposits. You do not want a long term lease because it would be difficult to sell your place if the current buyer defaults.

2. Remove all contingencies on your sales contract with the buyer. That means whether the buyer's own deal falls through or not, they have to close regardless and set a new and firm closing date. Your contract probable says that the buyer will close if and when his house is sold and "Close". Remove that !

3. Increase the good faith deposit of the sales contract to equal to at least one year carrying cost of your present home. If the buyer defaults, you keep the deposit and you are safe for 1 year.

4. Stipulate in the lease that if buyer defaults in the purchase and sales contract with you, it triggers a default on the lease as well and they have 30 days to vacate unless you want to extend their lease. In either case, they forfeit their deposit in the sales contract.

5. Have someone knowledgeable in real estate contracts review the buyer's contract for the sale of his own home to see whether that is a good contract. If that is a reasonable contract, it may be worth while taking a calculated risk. If not you need to be real careful so you don't leap from the frying pan right into the fire.

Hope this helps.

Answer 2

I'm going against most everyone here and say that I would strongly consider it, but there are some other factors to consider. First, if you are already out of the house, it is just sitting there empty and you get to keep making payments. Second, you know that his house as already been sold so there is no longer a contingency on your contract. If you don't know it for a fact, you want to get third party verification on the sale of the home. Get them to sign something to release the contingency on the contract. Your realtor should have a form for this. Third, you want to be sure that he has been approved for the loan to buy your house. Get third party verification of this fact. Finally, I am assuming you have a good sized earnest money deposit from the buyer. If not, get one. If you do a lease, it is not at all improper to ask for a larger earnest money deposit. If he closes, it is applied to the down payment.

The way to do this is to lease the house to him at an above-rate price. I would ask for at least 1% of the sales price per month. Once the loan closes, the lease will "merge" into the deed and he will pay you rent up to closing. Get a security deposit equal to 1% of the value of the home as well.

Your downside here is that the person does not close on your house or that he trashes the place. You protect yourself by getting big deposits. He can use his down payment funds for that. If he fails to close, you can keep the earnest money. You can also sue for other damages you suffer and can offset those damages by keeping the security deposit.

You want to be careful to not let it be under the lease for a very long time. Be wary of the tax implications of this. If he leases it for too long, you could run into trouble with the current gain exclusion on the sale of homes. You need to be sure that it has been your principal residence for two of the last five years, so make sure that the term of the lease will not blow that up. This will complicate your tax situation somewhat because you will want to depreciate the home while he occupies it (a good thing). You may have depreciation recapture on the sale which makes your depreciation a "wash." Still, you might get some other good write-offs while you operate it as a rental, so check with your accountant. Ultimately, this means that the entire question of whether you should do this should be ran by your accountant to make sure you aren't killing yourself on the tax side. I repeat. Do not lease this out until you talk to your CPA. Once you do that, there are ways to protect yourself to make sure you get what you want which is (i) selling the house and (ii) not getting screwed.

Good luck.

Answer 3

Absolutely not. If your buyer gets in before the deal is closed, and something goes wrong with closing you could end up having to evict them. You are not doing charity here. If you feel you must help out, ensure that an attorney experienced in real estate law draws up a contract that your buyer must agree to.

Answer 4

NO WAY - do not let them move in until those papers are signed. I realize it may seem a little harsh but its not a good idea, especially considering the track record. If he needs to move that bad talk to the loan originator and closing attorney about moving up your closing date.

good luck

Answer 5

Absolutely NOT!! You will be liable for accidents and anything else that happens there. Further, they may discover they don't like the place because of something like too few electrical outlets or low water pressure and try to back out of the deal. Ask your Realtor. I am sure he/she will agree that you are at risk if you allow them in before they officially own the place. Good luck.

Chow!!

Answer 6

Leasing the property should not be a problem as long as you have a lease agreement or addendum to the original sales agreement of your home. If it's going to put you out in any way that's your call.

Answer 7

I moved into this my house 1 week before the sellers closed. It was very risky on both parts and would not suggest it. If something happens, it will be hard to get them out

Answer 8

it is up to you, but only if they are CLEAR TO CLOSE which mean they can close purchase transaction with you at any time.
most of the time people are not doing this, because it is risky.
you should ask for clear to close from them and then decide.
also remember then before you will sell this property to them, you are paying your mortgage, tax and insurance on this house, so you need to estimate rent they will pay you till closing and if for some reason they will not close on time- put in the contract some penalty for them like couple thousand dollars to be not worthy for them to play with you.

Answer 9

No way Jose!

Get the greenbacks in the bank before handing over anything. The buyer can find a hotel.

Answer 10

Never! Tell your realtor and let them sort it all out. It's your house until papers are signed. Don't let them force you out early. The buyers are going to have to suck it up and deal.