When Sellers Stay After Closing
Post Date: March 18, 2011
By: June Fletcher
Q. I’m about to close escrow on my first home. The sellers want to rent the place back for a few days after the closing. I want to be accommodating, but the thought makes me nervous. What if they won’t move out after we close?
— Freehold, N.J.
A. You have reason to worry. Once you have closed, you lose whatever leverage you once had over the sellers. Should they decide not to leave, you could be put in the expensive and awkward position of having to evict or sue them. That’s why it’s always best if sellers hand over the keys and leave the premises before you close.
But because things don’t always happen on a predictable timetable, it’s neither unusual nor unrealistic for sellers to ask to stay on for a few days. For instance, they may be encountering a delay in obtaining a mortgage to buy another home; or, if they are buying a newly built home, it may not be finished by the time your closing is scheduled.
Since the sellers can always move to a hotel or stay with a relative, you don’t have to go along with this request. But if you do, you must insist that they pay rent. At minimum, the daily amount should be equivalent to a prorated share of what you pay for principal, interest, taxes, insurance, utilities, trash collection and other operating costs, plus a cushion to cover any damages that might occur during their tenancy, however short it may be. To make sure you can collect, your attorney, title insurance company or real estate agent should hold this money in an escrow account.
Furthermore, you should tack on a hefty daily penalty—say, $250 per day—for each day that they stay beyond the scheduled departure date.
If all goes well and the seller leaves on the agreed-on day, do another walk-through of the home, even if you already did one before you purchased the house. Flush the toilets, open the windows, turn on the appliances and make sure everything is in good working order. Check your contract to make sure that those things that it stipulated would stay, like chandeliers and window treatments, are still there. If you do find something amiss, take photos to prove it.
Despite these precautions, sometimes sellers do overstay their welcome. If that should happen, you should try to be firm but also diplomatic, as you don’t want the seller to do something vindictive, like pouring concrete down the toilet, that might vandalize or damage your home. Nevertheless, should the sellers decide to become squatters, you should be prepared to begin formal eviction procedures.
And while we’re considering worst-case scenarios, before you agree to allow the sellers to stay on, ask your insurance agent if your policy will cover the time period before you take possession. Should your house be damaged or burn down during that time, you need to be protected.