You have put your home on the market and have accepted a purchase offer. It’s right at listing price, so you’re very happy about the situation and even put down escrow money on another property. You’re lining up a moving service and can’t wait for the closing. Everything is falling into place and you’re excited to get into your new home.

As settlement day draws near, you begin to pack up your stuff and donate a lot of things you no longer use. Then, you get a call from your real estate agent, there’s a request from the seller’s agent. The seller wants to stay in the property past the closing date because they are not ready to move. At first, you feel a bit disappointed and angry, then you begin to think that it will give you more time to move all your things. However, you don’t really know what to expect what your real estate broker calls a “post-closing possession”. You know the basics, the seller will rent your new home from you, but what does it really entitle? What kind of agreement will you need?

The Right Post-Closing Possession Agreement

The problem with these situations is they are not straightforward like a year long lease. There are many things to consider and factors which will come into play in a holdover rental. The smart thing to do if you are open to the seller’s request to stay and rent for a couple of weeks is to have an attorney draft a licensing agreement.

“The reasons why a seller might need to rent back after closing vary, but it’s not uncommon for a seller to request a rent back. The home the seller is buying might not be available at the time your transaction closes or the seller might not be able to find a moving van on the last day of the month, when demand for moving vans is high.” —About.com

You don’t want a run of the mill lease, because if the situation turns sour and the seller does not vacate the property, you’ll have to go through the eviction process, which will likely be long and costly. Though this is unlikely to happen, it’s not the only consideration you will have. First, the mortgage lender you went to purchase the property might not allow you to agree to a post-closing possession, which will effectively kill the deal, even if you accept. In addition, the homeowner’s insurance company will also have to sign off on a holdover rental. Even if you do get both entities to agree to the rent back, if the home is under a HOA, you’ll also have to clear it with the association.

Buyer Rent Back Risks

Getting the mortgage lender, the insurance company, and the HOA is just the beginning to the potential pitfalls of a post-closing possession. You’ll have a few other considerations to take into account and each one on its own can spell disaster in time, money, and emotional stress. Here are some of the biggest problems you might face:

• Property damage. The seller isn’t likely to take a sledgehammer to the kitchen cabinets and toilets, but accidents do happen. It only takes a grease fire in the kitchen or a candle left to burn in the living room to cause a world of damage. Afterward, it won’t be an easy task to sort out who pays for the repairs and there’s bound to be a lot of frustration which comes with it.
• Not vacating the property on time. This might be one day or more, but if it does happen, you’ll have the right to revoke the license. However, just signing a document won’t magically move the seller out of your house. You’ll still have to deal with the situation and that can be at the very least an unpleasant one.
• Removing appliances and/or fixtures. If this does happen, the seller is probably violating the terms of the sale, which of course, voids the deal, in part or in full. Regardless, there’s a real problem in this happening and again, it will be a battle to try and get it rectified in a reasonable amount of time.
• Unpaid rent. Should the seller not pay the agreed rent, either in part or not at all, you’ll have to find a way to collect. Yet again, this is just another reason to avoid renting back to the seller. If you do a holdover, then put in a monetary penalty for unpaid rent.