Post-Closing Occupancy Agreements Can Work for Both Buyers & Sellers

Real_Estate_Today_bylineThe technique of offering or requiring continued occupancy for the seller after closing can be a useful and highly effective negotiating tool for both the buyer and the seller. It’s not used that much by most real estate professionals, but Golden Real Estate’s agents, including myself, have learned how to make highly effective use of it.

From the Seller’s perspective, retaining occupancy of their home after closing is a great way to ease concern over having to move twice or not being able to coordinate the purchase of their replacement home with the sale of their current  home.

Many owners want to sell  but realize that while a “seller’s market” is great for selling a home, it makes it harder to find and buy a home.  The big fear is that the owner will sell their home and not have a place to live. This fear can be quite real and quite frightening, but a well negotiated sale that includes a post-closing occupancy agreement can effectively address this concern. I have personally used that device effectively in multiple transactions.

Sometimes this requirement for continued occupancy after closing is expressed in a listing as follows: “Sale must be contingent on seller closing on their replacement home.”

Even when a seller has the means to buy their replacement home before putting their current home on the market, a post-closing occupancy agreement can play a useful role for the seller.  Last year, for example, I listed an Arvada home for a couple that was already under contract for their replacement home.  They had been approved for a bridge loan to finance their replacement home, intending to pay off that loan as soon as they sold their current home. We priced their home just right, so we got multiple offers and were able to sell their home for well above its listing price and have the closing date occur the day before the closing on their replacement home.  They did not have to utilize their bridge loan and, in addition, we negotiated a free two-week post-closing occupancy so they could move from the current home to their new home in a leisurely manner.

Having that post-closing occupancy agreement can reduce the risk of needing to move twice — once into a rental or a relative’s basement, then into the replacement home — but there’s no guarantee, of course. Only one of my clients during the current 3-year seller’s market has had to do so, and that was only because they decided to build a new house after they were already under contract to sell their current home.  So it can be accomplished. Call me or one of our agents for a strategy conversation based on your own particular situation.

When a seller is willing and able to move twice if necessary, I recommend not disclosing the preference for a post-closing occupancy agreement until after the multiple offers come in. That way, we don’t discourage offers from buyers who require immediate occupancy, but we can then work with competing buyers to see whether the best offer financially might also be also be the best offer in terms of move-in flexibility.

From the Buyer’s perspective, offering occupancy after closing can be a useful tool in winning against competing buyers.  Buyers who are currently renting on a month-to-month basis are the best candidates for this strategy, because they can offer an open-ended occupancy agreement or lease-back, confident that they’ll know well enough in advance of when they can move in, so that they can give the necessary notice to their current landlord. With this kind of buyer, I’m always happier as a buyer’s agent when the listing is not vacant, because then there’s the chance that occupancy after closing could be a bargaining point that favors my buyer.

The “Post-Closing Occupancy Agreement” is a state-approved form available to all agents and buyers, but it can only be used for up to 60 days.  If the parties to a transaction agree to flexibility beyond 60 days, they need to agree to sign a lease, which can, of course, contain terms for early termination upon reasonable notice.  [NOTE: If you are obtaining a mortgage as an owner-occupant, your lender is going to require you to occupy the home within 60 days of closing.]

Of course, most other buyers are unable to offer such flexibility, but I always ask my buyers that question, explaining that if that is a possibility, it will enable them, with certain sellers, to make their offer more attractive than many competing offers.

In conclusion, a post-closing occupancy agreement can be an effective tool for helping buyers win contracts for the house they want to buy.  Combined with Golden Real Estate’s ability to offer free use of our moving trucks (and sometimes free labor), it has made us far more successful in winning bidding wars for our buyers than can be claimed by other brokerage firms. To win a contract for our buyer, we once even offered to move the seller twice at no cost. It worked!

Published May 11, 2017, in the Denver Post’s YourHub section and in four Jefferson County weekly newspapers.

Author: Golden Real Estate, Inc.

Golden Real Estate is a prominent member of the Denver/Jefferson County real estate scene. Based in Golden, we service both Denver and Jeffco, representing both buyers and sellers. We're well known for Broker Jim Smith's weekly "Real Estate Today" column published in the Denver and Jeffco editions of the Denver Post's YourHub section each Thursday. The column also appears in several weekly newspapers and is archived at www.JimSmithColumns.com. We have nine agents, all of whom are Realtors and EcoBrokers. Our office is solar powered and several of us drive electrics cars. Known for our sustainable practices, we accept polystyrene (aka "Styrofoam") for recycling, keeping 200 cubic yards per year out of area landfills.

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