Realtors tend to use industry jargon in their contracts, and regularly you’ll see the term, ‘COE + 3′ in a counter-offer coming back from a seller. It means they get to occupy the home for three more days after the close-of-escrow date, at no charge – and usually no other written agreement.
Agents are very casual about these arrangements, because everything usually goes fine and the sellers move out as agreed. They’ve never seen one go bad.
For buyers, it’s a nightmare waiting to happen.
An example: The seller (who was a realtor) was buying another home that was virtually brand new. The buyer of her house agreed to the COE + 3 days, figuring that was plenty of time for them to move out. But once the seller closed on the new home, she found that it needed modifications/improvements to suit their needs.
She hung out the buyer for two weeks, without compensation.
If it is a hot property and fresh on the market, the buyers don’t have much bargaining power and get stuck with COE + 3, whether they like it or not.
What can you do?
1. Don’t agree to COE + 3 days, especially if tenant-occupied.
2. If you do agree, then bargain with the listing agent that it’s in everyone’s best interest to complete our SIP form that spells out the terms of tenancy.
3. If the listing agent refuses to include the SIP, then he/she is crazy – if the sellers don’t move after their three days, then the agent will get sued for damages too. But how hard can you press them if they are threatening to take another offer? Make the deal, and hope for the best.
4. If you can include the SIP, be careful about the terms. Use the form to ensure they move out as agreed, not to make a couple of extra bucks on 3-days’ worth of rent. Sellers get bugged about renting their own house, and asking for a security deposit really sets them off. I’ll forego both, and instead add a note at the bottom that any holdover rent past the three days be at least double the norm as an incentive to move. Sellers always object to the amount, but I’ll point out that it doesn’t cost them a dime if they move as agreed. The form covers other specific terms too; including maintenance, insurance, utilities, and buyer entry.
5. Do your final walk-through at the last minute, and if you don’t get a warm fuzzy feeling that the sellers are about to move, then don’t close escrow.
Back in the day, we used to hand-carry a sellers’ proceeds check from one escrow company to the next for their closing – and they weren’t cashier’s checks. It took an extra day or two to get the next escrow closed, so it was natural to give the sellers the time to close and move into their new home. But today there is no reason to COE + 3, because we wire funds, and close concurrently every chance we can, even with different escrow companies involved (has to be the same title company).
Listing agents who insist on adding COE + 3 are just being tough guys and wanting to show everyone who the boss is – or on brain-dead automatic. Unfortunately, they must be ignorant to the liability they are forcing on their sellers and themselves.
If you get stuck having to accept a COE + 3, be cautious about making your moving plans for an exact date. If the sellers don’t move in three days, keep track of your expenses/damages and prepare for small-claims court – where you will win 100% of the time. If you have to evict, it’s not the end of the world – it’s a three-month inconvenience for which you should be reimbursed.