A buyer moving in before closing gives me cold sweats.
The house is sitting there vacant, and the new buyer will ask the seller, is it OK to move in before closing? I hear this and get cold sweats. My response to the seller NEVER, EVER let a buyer move in before closing. Don’t even let them store stuff inside the garage. You may ask “why not, the home is sitting there empty and sure would help out the buyers.” The answer to that question would be–anything can happen.
Factors for sellers to consider.
The buyer has moved in, and a fire occurs. Who is responsible for repairing the damage? Would that be you, your insurance company or the buyer, particularly if they were the cause of the fire? What would you do if your insurance balks at covering the repairs? Insurance coverage is the elephant in the room.
The buyer now has possession of the home, and for some reason, the transaction does not close. The locks get changed, and the buyers decide they are not ready to move out. What a legal mess that will cost you, the seller, time and money to rectify. You have a home you need to sell and you can’t. Not to mention the buyers could damage the home when they eventually move on.
Another situation concerning early possession and the transaction not closing would be in the case of the buyer having performed repairs or remodeling. Who has financial responsibility? One more caveat to this scenario. The buyer doesn’t pay the contractor, and a mechanics lien suddenly appears. Someone has to pay for removing the lien. Be sure to have a lawyer on speed dial.
The point is once you give up possession you just don’t know what’s happening within the property. To make matters worse, you could be refused entry into a property you own. In California mitigating unlawful possession is challenging.
I repeat, NEVER, EVER let a buyer move in before closing.
So, you are going to defy my advice.
As the seller, if you do let the buyer move in early, please as a minimum do the following. Make sure you execute a separate landlord and tenant agreement. Legally, you have become a landlord, and you need protection. Purchase a landlord insurance policy and require the buyer to purchase a renter’s policy. Doing so should remove the ambiguity of responsibility should something negative happen.
Seller extended stay after closing.
It is not uncommon for a seller needing an extension for moving after the closing. Sometimes it is called a rent-back. Conversely, perform the same steps listed above with the buyer becoming the landlord and seller the tenant. Execute a landlord and tenant agreement and purchase the necessary insurance policies. Protect yourself and all parties involved.