There is an old-school habit in the home-selling business to give the seller a few days after the close of escrow to vacate. Back in the day it would accomodate the cashing of checks, and closing escrows upstream – but with today’s standard of wiring funds and concurrent closings, the extra time isn’t always needed.
But some listing agents still insist on 3-5 days of occupancy for their sellers after closing – many times without any written agreement. Usually it all goes fine, and they move out as planned – but I hate the potential liability for principals and agents alike.
Recently we had an example of what can happen when a seller doesn’t move.
An agent who works for me had a buyer who was getting their loan from an out-of-state mortgage lender (not recommended). There was a delay, and all parties agreed to a two-week extension.
As the two weeks was coming to an end, it became obvious that closing in time would be tight, and the seller was asked to sign another extension fot an extra week.
He goes ballistic, and tells his agent to cancel the transaction, and put the house back at the market – at a higher price! He thinks that, because the market is hot, he must have under-sold the property, and wants an additional $50,000.
The C.A.R. purchase contract says a seller must give a buyer a ‘Notice to Close Escrow’ that includes a time frame within which the buyer must close, or seller can cancel the deal.
He gave us one day to close escrow.
By this time, I am involved as broker/owner – all Klinge Realty agents know that I want to help determine our fate at the first whiff of a lawsuit.
I drive by the house and see that it is still occupied. If we can close in a day, we still have a problem. Miracles happen, loan docs get signed, and the lender goes to fund the loan the next day.
But the seller sends a letter to escrow demanding to stop the closing. Even though we complied with his wishes, he still wants more money.
Everyone consults lawyers, and we give him a ‘Notice to Close Escrow’ and allow three business days.
His lawyer convinces him that he has to close this deal, but there is no movement at the house. We are forced make a decision – either close with him still in the house, or cancel.
At this point, I haven’t met or talked to the seller – I’m discussing this with the manager of the other brokerage. He tells me that they had to throw in their whole commission to try and make this guy happy – and he still isn’t. But the message was clear – I’m on my own.
I do my best Jim Rockford impression and stake out the house.
When the seller comes back, I introduce myself and we discuss his troubles – he has work obligations. etc. The C.A.R. form used for these situations is the SIP, seller-in-possession, and I am very familiar with it because I insist it be used on any of these possessions-after-closings.
The form calls for a rent and security-deposit amounts, but no provision for what happens if the seller doesn’t move – and without a specific agreement, this guy may never move.
We agree to give him five days free rent, and no deposit. But I include a clause for holdover rent – if on Day Six the seller is still occupying, the rent is $500 per day.
Originally he objected, and suggested $200 per day. But the holdover rent needs to include a heavy penalty for not moving to ensure compliance – and it doesn’t cost him a thing, if he moves out as agreed.
I stick to my guns, and he agreed. He moved out on Day Five without fanfare, and buyers moved in.
But you have to add the holdover rent clause!
Today’s real estate market already suffers from having fewer sales to use when evaluating other properties. We’ve seen how some buyers, particularly those using Big Cash are paying prices that are hard to justify using traditional methods. As a result, the comps are more suspicious than ever as an accurate reflection of real value.
Thinking of selling your home?
