Any Real Estate Professional will tell you one of the biggest nightmares in their career is early occupancy. Some buyers or sellers may ask what early occupancy is, it is when the buyer moves into the home prior to the close of escrow. It makes the seller a landlord at the end of the day and can cause problems that could make a good comedy or horror movie.
When you are purchasing a short sale, for all intense and purposes everything hinges on the bank agreeing to the terms of the contract. This take take weeks and sometimes months to work through. The seller very well may have moved out of the home, and it could be tempting to move in and start getting this situated, but let’s take a step back and review what this can mean to all parties.
The Buyer – unless you plan to move more than once, early occupancy is not a good idea. When you enter into a real estate contract it is just that a contract to purchase. With a short sale you, the seller and the bank(s) have to all come to an agreement. The final approval generally takes some time to come, if you have moved in and the bank has not agreed to the terms of the contract they can first of all say no all together, ask for more money or just flat not respond. At that point you could be living in a home that the seller still owns making you a renter of someone that is not making a house payment generally and is likely to loose the home. Let’s say something breaks or needs repairs such as a hot water heater. Do you really think the seller is going to pay for repairs like a real landlord would? Most likely the seller does not have the funds to take care of the home, so these expenses would be yours and if you don’t close escrow you could have made these repairs for another buyer down the road.
The Seller – many times in today’s market your lender will be working with you to modify your loan or assist in the short sale. If you move this buyer in and the buyer’s loan goes south, you now have someone living in your home that can not qualify to purchase your home, and you are needing to sell or move back in yourself. You have become a landlord. The buyer now has almost more rights than you do. You could have to go through the legal process to get the buyer out of the home. You have no idea if the buyer is taking care of the property to keep the value while you are trying to close escrow. What if the buyer moves in and finds that they don’t like the neighbors, and don’t want to live there now? All of these things take you to a place you do not want to be in a short sale.
The horror stories of Real Estate, Short Sales and Early Occupancy can be heard every day. Early occupancy is never a good idea, especially when you are involved in a short sale.