It’s closing day and while ordinarily the buyer is handed the keys and takes possession of their new home, in some cases the seller can’t move out on that day. Maybe their new home isn’t ready or their moving company is delayed. Maybe they want to finish work or school before moving. Or maybe, they’re afraid of moving out only to get the news that the buyer isn’t closing… If this is the case, a seller rent back or Post Closing Occupancy Agreement should be utilized to clarify the terms and conditions of the short term occupancy.
“But it’s only a day or two, what’s the big deal?” Well, a lot can happen in two days and it’s best that all parties involved are protected and terms and conditions are clarified. And that protection starts with proper insurance. The sellers will need renter’s insurance. They are no longer occupying the home as owners and will no longer have their homeowner’s policy in effect. If anything were to happen to their belongings or on the property, they would not be covered without a renter’s insurance policy. Similarly, the homeowners policy the new buyers put in place at closing covers their owner occupied home. If they have “tenants” living in the home, a different policy is required. If the home burns down and they don’t have the proper instance in place, they may not be covered. Don’t take my word for it— speak to your insurance agent.
Additionally, a Post Closing Occupancy Agreement defines what date the seller will move out, the terms and conditions of the seller’s occupancy, and the financial arrangements agreed to by both parties. You will need to determine who will pay for utilities and who will maintain the property.
“You mean I gotta pay rent on my home?” Technically seller, it’s not your home anymore. And from the day of closing, the buyer starts to incur fees for mortgage interest, property taxes, insurance, and water. The easiest way to determine the rent or lease back amount is to divide the buyer’s monthly mortgage payment by 30 days and charge the seller per day they occupy the home. The buyer may also collect a security deposit to ensure the home’s condition when delivered.
Remember, the purpose of the Post Closing Occupancy Agreement is to protect both the buyer’s and seller’s rights. It’s a smart practice and one any real estate attorney would be happy to advise on.