Cannot Wait to Move In Early!

Cannot Wait to Move In Early!

Do you remember when you bought your house and wanted to move in as soon as possible?  Does this sound familiar:  I cannot wait to move in early!  Of course, it’s so exciting to start a new adventure, a  new journey, a chance to go out with the old and in with the new!  To move away from past experiences so you can enjoy new ones.  The opportunity to meet and make new friends.  But there is one condition:  you have to move in.  So can you move in before escrow has closed, before the house is technically yours, before the deed has been recorded?  You may need to wait.  And if you are the seller, you may want to think carefully about this. 

In California real estate purchase agreements ( and likely other states), the agreement to purchase states the date and time when the buyer takes “possession” of the property.  In an ideal world, the loan has funded, title has recorded, the seller has moved out and the buyer gets the home keys and moves in on the date of “possession” stated in the purchase agreement.  But things don’t always work out that way.

In some cases, the buyer will want to clean the premises ahead of time, bring their belongings in prior to the close of escrow and the date of possession.  I have had cases where the buyers wanted to bring in their patio furniture and leave it in the backyard where buyers wanted to fill up the garage and start moving, and others where the buyers wanted to clean and just move in ahead of it. Is it permissible for the buyers to move in early?  Permissible? Yes, you can negotiate early possession.  The real question is, is it advisable?  The answer is no.

Let me  give you a few examples: 

 Buyers are ready to close, the cleaners and movers have been scheduled and the property is vacant.  For some reason - whether it is the loan, escrow, title, or other reasons, there is a delay on the closing for a few days and buyers want to move in now.  They want to make some repairs, paint, etc. to get the house in ready to move in condition.

A few questions come up.  What if the buyer moves in and decides after all not to close escrow and to stay.  Now what? The seller now has to bring suit to move them out. 

What if the buyer’s workers who did the work on the house are not paid by the buyers and put a mechanic’s lien on the property to make sure they get paid?

What if the work that was performed by the buyer’s workers is shoddy and actually harms the property in some way? For example, electrical, plumbing, drywall, windows? You name it. If there are no required permits pulled, who will be responsible? And what if there’s a leak or fire?

Or imagine, the buyer decides at the last minute before closing that they really want that car they’ve been eyeing, or decide to buy new furniture or decor for the house.  Now when the lender reviews their credit once more before closing, it decides the buyer no longer is qualified to make the purchase because their debt to income ratio has increased.  Now they cannot get a loan but they have moved in.  And now they decide they won’t move out and won’t get another loan or maybe cannot qualify for another loan. Now what?

Or what if there is an old tax lien against the spouse of the now divorced spouse. Since tax liens take a long time to remove, the buyer again no longer qualifies for the loan. 

Let’s say the buyers don’t want to move in but instead want some work done to the property before they take “possession” per the purchase agreement.  I know of a case where the buyers and sellers got very friendly and the sellers allowed the buyers to come in and paint the house.  The painters left their floor coverings on the floor and also covered the floor furnace.  The heater came on at night, and ignited one of the drop cloths.  The house burned down!

Do you agree that each of these is a potential for a nightmare? Absolutely.

Here’s the warning on the Buyer’s Early Occupancy Addendum form in California:

“BROKERS DO NOT RECOMMEND EARLY OCCUPANCY. BROKER HAS ADVISED BUYER AND SELLER TO CONSULT WITH LEGAL COUNSEL TO DETERMINE WHETHER ENTERING INTO SUCH AN ADDENDUM TEMPORARILY OR PERMANENTLY CHANGES THE NATURE OF THEIR STATUS AS BUYER AND SELLER, AND THE LEGAL CONSEQUENCES AND IMPLICATIONS OF AN EARLY OCCUPANCY. IF BUYER AND SELLER AGREE TO EARLY OCCUPANCY THEY ARE DOING SO AGAINST THE ADVICE OF BROKER AND AT THEIR OWN RISK.”

Hmmm.  With that advice, would you still want to enter into an early occupancy agreement?

I was involved in a transaction where the buyer could not close on time and insisted on moving in early.  The seller’s response was repeatedly, “No” due to the potential for liability.

What about leasing?  Can the buyers lease the property prior to the closing?  Technically, they could.  But again, seller beware!  If you can avoid this, it is better.  But let’s say the buyers are in a really tough position and need to move in early so seek to lease first, even for just a week.

The purchase agreement will still be in place.  But, you’ll need to extend the time of closing in writing and you will need a separate lease agreement. Each one is a separate agreement.

The buyers could offer to give up their initial deposit, pay for the time of the rental, pay a security deposit, make sure they get renters insurance to cover their belongings, and include the seller/owner as an additional beneficiary and more.  Having a lease agreement and not just a purchase agreement with a right to early possession allows the seller to be able to evict the buyer quicker than if there were just a purchase agreement. 

Take photos of the interior and exterior of the property to be able to prove what the property looks like before the buyers take possession.  Both parties should sign off on the condition of the property before moving in.  Perhaps the Buyer Walk Through or Verification of Property Condition Form (found in California) may cover you in this respect if it is filled out close enough to the time the buyers move in.  There’s also a form called a Move In Move Out form.

So, if you cannot wait to move in early, you may want to rethink this. One suggestion is if buyers need to leave their current home but cannot move in early into their next home, they can stay at a hotel, see if they can lease back their current property or figure out any other option.  Be creative, speak with your agent, and see if someone in the transaction can help with the expenses.

*This article is not meant to provide legal advice and is not a substitute for obtaining legal advice for your own transaction.