Post-Settlement Occupancy

By Liz Burrow, Realtor®

Coordinating selling one property and buying another is a delicate balance and figuring out how to schedule the change-over can betricky if you are not in a position to afford both mortgages at once. One option might be a post-settlement occupancy agreement forthe home you are selling, but how does this work?

In simple terms, you settle on your home and then rent it back from the new owners for a period of time in order to pack up andmove. Sounds easy, but it depends on whether the buyers are in a position to pay for their new house but not move immediately.With first time home buyers, renters and re-locations, this may be an option, and in a seller’s market, something that can often benegotiated. There are, however, pros and cons that sellers should be aware of.

The Positives

  • Security – you close before you have to move out physically, so if something were to go wrong at the last minute and the buyersnot be able to settle, everything is still there, and you can be ready to go back on the market with a fully furnished home.

  • Timing – you are in a position to pack up more leisurely and move over a prolonged period rather than having to cram it intoone day.

  • Payment – you are paid on the sale of your home and do not necessarily have to settle on your new one immediately, ensuringthat there is not the stress of trying to get funds transferred back to back.

  • Moving Costs – If your buy and sell settlements are on the same day you have to move at least the day before in order to get thehome cleaned for the walk-thru. Then there are costs incurred for storage for one f more nights before you can move into yournew home.

    The Negatives

  • Deposit – As with any rental, the buyers of your home will require a deposit which will be held by the title company until youhave moved out. This can sometimes be sizeable as your buyers now own the home and need to ensure that you leave it in goodcondition after your move.

  • High Rent – You need to cover all of the costs that the buyers will incur on a day to day basis now that they own the home. Thisincludes not only their mortgage, but insurance, taxes, HOA, and any other ongoing costs they may have. What most sellersoverlook is that the new buyer’s mortgage is likely substantially more than their own and so the daily charge is often far higherthan expected. This is a very important fact to remember as many sellers feel they are being overcharged, but this is really notthe case.

  • Final Walk-Thru – The new owners get to do a second walk-thru to determine the condition of the home after you move. Nowthat there is no furniture, small defects which might have been missed in the pre-settlement walk-thru, are now more evident.This has been known to cause issues or delays with the refunding of the deposit.

    While renting back can be very helpful in alleviating the stress of the move, do be aware of items above so that you have the rightexpectations if choosing this option.