Payson Roundup

The closing date of a property does not always fall on the most convenient date for the buyer or seller. Sometimes a buyer wants to take possession of a home prior to the close of escrow or a seller may want a few extra days after closing to pack up and move. From a real estate broker's standpoint, we generally frown on these arrangements because of the possible pitfalls with these situations.

As a matter of fact, Article 11 of the Arizona Administrative Code states, "A salesperson or broker shall recommend to a client that the client seek appropriate counsel from insurance, legal, tax and accounting professionals regarding the risks of pre-possession or post-possession of a property."

Sellers are at the biggest risk in pre-possession agreements. If a buyer takes possession of the property prior to the close of escrow and fails to close on the property, the sellers must deal with an unwanted tenant in their home. If the buyer is not cooperative in moving out of the home, the seller may have to go through a costly and time-consuming eviction process.

Another pitfall of allowing pre-possession to a buyer, is that the buyer, after occupying the home, may get "buyer's remorse" and choose not to close on the property.

In addition, the buyer while occupying the home may have an appliance or other apparatus in the home fail, and expect the seller to pay for the repair.

Insurance coverage is another area of concern for both the buyer and the seller. The parties should check with their insurance agents to assure that the property and their possessions are adequately covered. A seller's homeowner's policy may not be in force to cover the structure if they have moved out and in reality "rented" their property to a buyer through a pre-possession agreement. A buyer who moves in prior to the close of escrow needs to have the correct liability and contents coverage in the event of a catastrophic event.

Above are just a few examples of the challenges of these possession agreements. Needless to say, care should be exercised before agreeing to a pre- or post-possession agreement. It is imperative that parties to the transaction confer with insurance, legal, tax and accounting professionals to diminish the risks with these arrangements.

Ray Pugel is the designated broker for Coldwell Banker Bishop Realty. For more information, call (928) 474-2216.