It's Tempting, but Don't Do It: The Perils of Moving in Prior to Closing

 
 
It is not a given that every sale will close on the contracted closing date. With this in mind, it is important to have contingency plans to cover any delays that will hinder moving plans for both buyer and seller. The buyer who wants to move in prior to a delayed closing and the seller who accommodates such a request may find themselves in a predicament if things don't go according to plan. Keep in mind that even if there is a written agreement to allow an early move-in, a legal dispute can still evolve from the unforeseen.

Early occupancy by a buyer means that the seller will have to maintain insurance on the property until closing, but there will be a potentially costly change to that policy. The new coverage would be landlord insurance to cover the now "tenant-occupied" home. Part of the closing process is the funding of the buyer's loan and a final check of clear title. If a final verification of employment is not in order for the underwriter, funding will not occur and may cause the lender to withdraw the loan commitment. If the final title check reveals a last-minute recorded encumbrance against the property, the sale closing could be indefinitely delayed. These are all good reasons for early occupancy to be avoided.

While the buyer benefits the most from an early move-in, the seller potentially suffers great loss in the event of any buyer default. The seller will have vacated their home, thinking it was sold. This, coupled with the house possibly having been altered or damaged by the buyer during early occupancy, could create unanticipated financial hardship. The seller still owns the house and remains liable for activities on the property.

In any of these scenarios, it wouldn't be long before buyer and seller would find themselves entangled in a legal battle over monetary damages. The message is loud and clear. Both the buyer and seller need to plan their moves with a flexible timeline and avoid early buyer possession in the event unexpected delays cause a late closing.

If you're considering upsizing or downsizing, let me know what I can do to help make that transition as smooth as possible for you.
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