In California, we have a form called the Provisional Occupancy Agreement that sets out the terms of that agreement. It is essentially a short-term lease that relates to the purchase agreement, the expected completion of the escrow date, and the procedure if the escrow agreement is terminated without closure. There are plenty of checkboxes and gaps to fill, but it was designed and formulated by the California Association of Realtors (”CAR”) Legal Department to meet the needs of most buyers and sellers. Real estate agents generally advise against early occupancy contracts due to the possible liability of all parties involved. Sellers and home buyers who agree on early ownership of the home should each consult with their lawyers and insurance advisors to reduce their liability. Damage to the property or a severe slip or fall into the house during the early occupancy period are just a few examples of what can go wrong with the early ownership agreement. Other issues that arise and may complicate the transaction include: the buyer discovers problems with the house or neighborhood that cause them to withdraw; Title problems that prevent the sale of the house are discovered; the buyer cannot close due to financing issues. Although I think this is a very one-sided agreement, the seller takes all the risks and the buyer benefits from early ownership. If anyone has any other suggestions or tips, your comments are welcome.
Some points that must be addressed in the early occupancy contract include, but are not limited to, the date and time of the start and end of the occupation, the amount of rent or daily allowance for the transition period, liability for incidental costs, maintenance of the property, and insurance coverage for sellers and buyers. The deal can be as detailed as necessary to smooth out the bases and potential pitfalls, such as pets, extra people living in the house, and what happens if the transaction is not completed on time or at all. Home sellers and buyers can create an addendum to the purchase agreement to cover important issues related to early occupancy. The lawyer or broker handling the transaction can assist a seller or buyer in drafting the separate agreement using a general addendum to the purchase agreement, or they can use a state-specific form for early or preliminary occupation. For example, the CAR offers two forms: the ”Buyer`s Early Occupancy Addendum” and the ”Provisional Occupancy Agreement”, the latter for temporary occupancy periods of 30 days or more. I signed a purchase contract and agreed to move into the house for 2 months until the loan could pass. An addendum states that we will lease real estate for such an amount of $ until the end of the escrow account. The seller has found another buyer who offers more than $and wants us out. Can he do that? Does the purchase agreement protect me in any way? We gave $5,000 for the open escrow account, but the seller says our contract is not valid.
Most home sales in the San Francisco Bay Area are written on the California Association of Realtors Residential Purchase Agreement or on the RPA CAR form. The RPA states that ownership will be transferred at 6.m p.m. on closing day. Graduation is considered the date on which the title is transmitted and registered with the county. The buyer`s occupation before this time is considered a premature occupation. RPA also allows buyers and sellers to opt for an earlier moving in period, but does not specify other important terms that buyers and sellers should consider. Real estate purchase agreements and their supplements vary from state to state, but usually contain provisions for simultaneous closure and ownership of the property – not for early occupancy. An early occupancy agreement can solve the logistical problems that many home buyers and sellers face before closing, but taking over or granting a home in this way presents potential pitfalls. Allowing a home buyer to move in before closing carries legal and financial risks for the seller if the sale fails.
Similarly, moving into a home before buyers can call it their own becomes a huge inconvenience if the deal doesn`t go as planned. Home buyers and sellers can protect their own interests by taking into account the risks of early occupancy and writing down all the terms of their agreement. A dramatic event such as a major fire in the house during an early occupation can cancel out the entire closing process. Both parties should consult with their insurance company before agreeing to early occupancy. Irina – In my last case, we charge 3% extra money to send directly to the seller, leaving an additional 3% in trust. I think the remaining 3% in the escrow account is ”lump sum damage” in case it is never closed, and the extra 3% would cover the majority of repairs and legal fees to empty the house and clean it if necessary. .
