On occasion, we have had buyers who want to occupy a home they are purchasing prior to the close of escrow or sellers who want to remain in the home past the close of escrow. Either of these scenarios is ill advised. In fact, there are so many pitfalls that can happen that as real estate agents we are required by the Arizona Department of Real Estate to advise the parties to seek legal consul prior to consenting to pre or post possession.
Post Possession – As described above, post possession is allowing the sellers to remain in the home once escrow is closed and the buyer now owns the home. Who is liable for damages if the home catches fire or there is other damage after escrow has closed? The buyer or the seller? In fact, the seller has now become a tenant. If property insurance is not written correctly, the insurance company may decline coverage. Another problem may arise if the seller refuses to move out of the property. There is the possibility that there will now be a legal battle on the hands of the buyer to get the seller removed from the property.
Pre Possession – Many times a home is already vacant when it is put on the market and a buyer is anxious to move into the home prior to the close of escrow. What harm can occur? Just like the post possession example, trouble can ensue. For example, the seller now has a tenant and once again it is important that insurance be in place with the correct coverage. However, the foremost factor is… What if the buyers fail to close escrow? Now the seller has an unwanted tenant who has moved their belongings into the home. Sticky situation?
One other request we have seen is that buyers may ask to store some of their “things” in the garage prior to the close of escrow. This brings into question as to who has the liability for the belongings in the event that the something unexpected happens to the “things.”
The best scenario is that possession takes place at the close of escrow just as the purchase contract delineates. Ultimately, this will alleviate any challenges for the buyer and seller.