Early possession or occupancy is a request made by a homebuyer to move into a property before the closing date. While this request may seem convenient, it can pose significant risks to the seller. However, there are also benefits that come with allowing early possession.
In this blog, we will discuss the risks and benefits of early possession in real estate transactions.
Risks of Early Possession
Allowing a new buyer to move in early exposes the seller to some significant risks. For example, there can be delays in the underwriting process or last-minute mortgage denials. Unexpected title issues or the home not appraising as expected can also arise. Additionally, a buyer may start making changes to the property without seller consent. This could be problematic if the sale doesn’t go through. The seller may be burdened with unexpected repairs or renovations and be required to spend a large amount of money to remedy the situation. Moreover, these additional repairs are particularly upsetting to the seller because the transaction has most likely gone through the entire inspection and repair process.
Benefits of Early Possession
Early possession can benefit the buyer by allowing them to move into the property before the closing date. This is beneficial if the buyer needs to move out of their current residence before the closing date and has nowhere else to go. It can also provide them with a sense of security and stability.
Additionally, early possession can lead to a faster closing process, as the buyer can take possession before closing. This can be advantageous if the seller is under a time crunch to sell the property quickly.
If the seller agrees to allow the buyer to move in early, they can earn rental income during the early possession period. This can help to offset some of the costs associated with owning the property and can be a good source of passive income for the seller.
Conclusion
Early possession or occupancy can be a risky proposition for sellers, as it exposes them to various potential problems. With clear guidelines and a well-structured written agreement, early possession can be a win-win situation for both buyers and sellers. To minimize risks and protect their investment, sellers should obtain a written agreement which outlines the terms of the early possession period. This agreement should specify the obligations of both parties and cover details such as rent, repairs, and contingencies.
If you are interested in learning more about the process, reach out to Danilson Law today!
