Negotiating Possession Date: Should You Give a Seller Time After Closing to Move Out? Well, like most complex decisions in real estate and negotiations, it depends. This can depend of many factors, including the following:
- Time of year (especially as it relates to seasonal rentals)
- The seller’s circumstances
- Lender requirements (unless you’re purchasing the property with cash)
- What your living situation is (are you renting? If so, at what cost)
Real Estate Buy/Sell Agreement Contract Language?
In Aspire North Realtors, formerly known as TAAR (Traverse Area Association of Realtors), we all use the same purchase agreement (with a few exceptions). In that common purchase agreement, there’s a paragraph dedicated to Possession. Here’s a screenshot of that paragraph:
Thus, the “Date of Possession” essentially becomes part of the negotiation process. To some sellers, it’s VERY important to have at least some time after closing to ease their anxiety about moving all of their stuff out prior to closing while thinking in the back of their mind, “What if the deal doesn’t go through?” (This is where your Earnest Money Deposit plays a role). In fact, it has been my experience that some sellers will sacrifice on price in an amount out of proportion to the going rate in the area for rent. In other words, for an extra month to move out after closing, they will sacrifice sometimes two to five times the average cost of rent in the area. This can be a powerful negotiation tool for you as a buyer. As a negotiator, you’re always looking for opportunities in a negotiation where something means an awful lot to the other party and doesn’t mean that much to you. These are opportunities for you to get something in return of great value to you in exchange for something that’s of little value to you.
Side Note: Real Estate Negotiation is dynamic, complex, and very important: make sure your Agent is up to the task. One way to ensure that they are is to make sure they are a RENE, like me.
Here Are Some Things to Consider When Negotiating
Is the Seller Willing to Pay Rent?
You can consider charging the seller rent for the time they need after closing to move out. If you are paying rent or will need to continue making mortgage payments on another house while you wait to occupy this one, it may be wise to ask for some rent. For investors purchasing a home they plan to rent on a short-term basis using airbnb or vrbo, then the time of year of the purchase can play a significant role in this part of the negotiation. For example, if you’re closing in February, then it will cost the investing buyer little if anything in lost rent to give the seller time after close to move out. If, however, you’re closing in July, then it can cost the investing buyer a great deal. These types of considerations are a part of negotiating rent and the overall purchase price when thinking about a Date of Possession after closing.
Can You Store the Seller’s Items Temporarily?
Sometimes sellers have a place to go and reside but just need more time to move all their “stuff.” If you as a buyer want to paint or update flooring, etc. after closing, you can negotiate with the seller to allow them the use of the garage, for example, to store personal property while the painting or flooring is being done. This is an example of something that will mean a great deal to the seller and won’t cost you much as a buyer. So, make sure you get something of value to you in return!
Lender Requirements
If you are purchasing the property to occupy as your primary residence, your lender will likely have a requirement that you occupy the home within 30 days and no longer than 60 days. Lenders who are lending money for the purposes of an owner-occupied dwelling do not like to see the owner not occupying the residence:)
Conclusion
Negotiating the Possession Date on a contract should not be done in isolation. It’s one part of the overall negotiation process. Make sure you’re working with an agent who can leverage this part, and every part, of the negotiation process to your advantage while at the same time keeping the deal together. After all, you do want to buy the house, right?
