By Richard Montgomery

Reader Question: We need advice convincing the seller to let us move in before the closing. The seller’s agent has advised them against it. There was an unexpected appraisal problem. The problem was resolved, but chewed up weeks and put us in a bind with our current landlord.  How can we change the seller’s mind?

Monty’s Answer: Your question is timely because recent regulatory lending changes, while well intended, have helped your situation become all too common. Unfortunately, the risks in allowing a buyer to take occupancy of a home before they pay for it can be significant. The advice the seller received is a standard reaction from a real estate agent.

Let’s examine the situation

The seller’s agent is concerned about their client blaming them if the sale failed to close. The agent may also see the potential of extra paperwork and lost income if there is no closing.

The seller is concerned about property damage and added expense, like real estate taxes and insurance, for holding the property longer. If conflicts arise, the cost of removing you may also cross their mind. The seller is afraid this decision is going to cost them money. Ultimately, assuming there is a no-contingency contract, the seller has nothing to gain and much to lose if you occupy and the closing fails.

What could stop the closing?

Every one of the following events has caused the cessation of escrow. The list below is not all-inclusive, there are more, but demonstrates the reasons real estate agents do not recommend occupancy before closing.

1. Discovery of significant defects upon occupancy.
2. Changes in buyer’s financial position (buying a new car can hurt).
3. New information about a neighbor or the neighborhood.
4. Change, or a discovery, with your health.
5. A family relationship issue.
6. The death of the buyer or immediate family member.
7. A fire or a natural disaster, like a sinkhole or a flood.

Understanding the seller’s position may help you to appreciate why the potential solution below may be one where both parties benefit.

Here is an approach to consider

First, project the costs of an extra move. If the seller turns you down, you will have to store your furniture in a warehouse, then move it out again into your new home after closing. You must learn the price of temporary housing. You can estimate lost time, meals out, and other costs associated with your circumstances. For example, assume these costs to move, the extra time and short term living amount to $6,000.

The pitch is to incentivize the seller let you move in now. You want to reassure them you are in good health. The home inspector did a great job. You have friends in the neighborhood. You want a letter from your lender stating that the loan will close assuming your financial situation remains the same. Some of the fears on the list are out of your control, so you want to remind them the odds of one of these events occurring within the timeframe you seek are negligible.

Then, incentivize them with this offer. “ Will you allow us to move in for $4,000? ” You just saved $2,000 and only move once if they accept. The seller picks up $4,000 they would not have received otherwise. You could also ask, “ What would you charge us to move in early? ” They may offer a lesser amount. It may be your landlord would charge even less.

Tidy up

This arrangement must include a rental agreement. The lease should state you cannot paint, remodel or start new landscaping projects. The rent price should be market value rent for similar properties, or you may offer to pay an extremely high rent and skip the cash offer. You may save money with this option if you can close sooner.

If the transaction does crater, include a pre-agreed move-out date that states a penalty if you miss the deadline. There should be a damage deposit and a Move-in, Move-out report as a part of the rental agreement. Take photos of the condition of the house for proof, and all the precautions a landlord normally takes to protect their property should be in place. Your attorney will have the proper language to include in the lease (make sure you have renter insurance).

If the risks of a failed closing are small, this tactic may provide a solution. Your chances increase if the home is vacant.

“Richard Montgomery gives no nonsense real estate advice to readers most pressing questions. He is a real estate industry veteran who has championed industry reform for over a quarter century. Send him questions at DearMonty.com.”