What You Need to Know About Post Possession
In current market conditions in Phoenix area, we seen seeing more and more sellers are asking for post possession when selling their home. Post possession is when seller asks the buyer for permission to remain in the home for a short period after the close of escrow. Post possession present unique legal issues and substantial risk to the buyer.
What is post possession?
Post possession is when seller remains in the property after closing, and title has transferred to the buyer. In short, the seller is essentially renting the home back from the buyer for a short period of time after settlement with a post possession agreement.
Why seller wants post possession?
A seller may want post possession when selling their home for several reasons. For example, seller may be buying a new home and needs the proceeds of the sale of to complete the purchase. Another reason that we saw is the seller may have a delay in closing on their new home or they could discover an unexpected delay with movers.
What is the duration for post possession?
The duration of post possession has to be mutually agreed by both seller and buyer. If the buyer is getting a loan for the purchase, buyer must check with their lender. Some loan such as FHA, require buyer to move into their new home within 60 days after closing.
Risk of post possession
The risk of post possession falls mainly on the buyer. Buyer is technically renting the home back to the seller and relying seller to vacant the home by an arranged date and maintain the conditions of the home. Buyer can request an “escrow holdback” to protect their interests. For example, the buyer can request that the escrow company withhold $50,000 from the purchase price in escrow which shall not be released to the seller until seller meet all the terms and conditions as stated inside post possession agreement.
Common risks of post possession
Risk of Loss – who has the risk of loss during the post-closing occupancy period?
Insurance – does the buyer and seller have valid insurance coverage during the post-closing occupancy period?
Repairs and maintenance – who is responsible for repairs and maintenance?
Rental amount – what is fair rent for the term?
Remedies – what type of remedies if seller fails to move out when agreed
Post possession agreement
Although post possession agreements create certain risks for the buyer, those risks may be minimized with the proper written agreement. Both parties must agree to the terms of the agreement before a contract is signed – this will prevent a misunderstanding at the time of closing.
Conclusion
Post possession present additional legal issues and substantial risk to the buyer. It has significant ramifications and should only be used only as a last resort. Buyer should seek appropriate counsel from insurance, legal, tax, and accounting professionals regarding the risks of post possession of a property before agreeing post possession to the seller.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ and surrounding area, we hope you will consider us. Contact us today for complimentary consultation.
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