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I am a buyer being "jerked around" by a seller. what's new, you ask??? well, after they received my offer, they said they want a swift closing i.e. in 4 weeks & i must confirm that i will not be travelling during the summer, before we start negotiating. i had some not so firm travel plans which i put on hold & after sending back the contract, heard that the sellers want to change closing date to Oct 1 from Aug 1. When i pushed back, they said they'll go w/ closing date of Sept 1, with 30 days to extend i.e. i would still close on Oct 1, but they want to stay in the place until Nov 1. The place is a total gut job for me, so i'm not concerned about physical damages (although i will include all protections in the contract) but does anyone have experience in such "post-closing possession" scenarios? any horror stories? i really don't care about the feel good fairytales, because i want to be prepared for the worst. what are my risks? my lawyer has done such closings in the past & has not had issues. i just want some more info & insight from the SE community.
Going through a similar situation now. We are the buyers. Also a place that will be a complete gut for us. When we had an accepted offer with the seller, he started to try to negotiate staying in the property for a significant time past close. His reason was that it was an inherited home, he didn't have a large cash flow, was nervous about his ability to move out right away having been in the place for years. This made us nervous and we didn't want it to have any implications on when we could start our reno.
Long story short, I think the guy was just trying to see how flexible we would be. We agreed that he could stay a maximum of 30 days after closing. We are also holding a very large amount in money in escrow that will be used to charge him for overstaying, to pay for utility costs while he stays past close, any damages he might cause post close, to move his stuff if he doesn't, etc, etc. We feel very well protected in that case. We just signed a contract so we are very early in the process to let you know "how it went".
Note to seller...GTFO!
thanks mc33433 - did they pay all your carrying costs or how does that work??
falco - Agreed
sounds like more trouble / headache than its worth. What if seller takes your money and then refuses to leave and you have to go through eviction courts etc..that could take months.
Like I said, we are still in the early stages since we just signed the contract. But we were very detailed in the contigencies around him staying max 30 days. And yes, carrying costs in the sense of utilities will come out of the escrow amount we are holding. We are not charging him a rate per day to stay unless he stays over the 30 days. We were also careful not to refer/compare the situation to rent or tenancy because then that's another potential mess.
Charge them rent! The price should be agreed price minus amount equal to rent. That should be on top of the escrow mc's contract had in it.
^^ We already negotiated the sale price based on the fact that he would be staying the 30 days, so we are not charging him per day.
have them help paint
I did this as a seller. You can put as much in escrow as needed to hold onto as a security deposit. And if 30 days is the point you want him to leave, you can always increase the per day rent after 30 days to serve as a penalty to ensure he leaves. Our buyer wanted to close as his wife was due and we were not ready to get into our new place yet. I think we had up to 60 days, and we stayed 3 weeks. Worked out totally fine, but it depends on the 2 parties. Make sure your expenses on the new place are covered. Good luck
I did this in my contract, with extraordinarily punitive and escalating possession fees payable for any holdover, payable directly out of an escrow held by my (not the seller's) attorney. I think ours was a flat fee for the first two weeks (that was probably 2x the rental value), it doubled the two weeks after that, etc. The sellers gave me the keys at closing, put their stuff in storage and moved into a rental.
I did this as a seller b/c I needed the proceeds of my sale to buy the next place and my wife was due around the time of the projected closing. My broker screwed it up though by having us agree to a date we would have to be out rather than the number of days after closing b/c the buyer was worried that we would just adjourn the closing date to get more time to occupy post-close. But what we needed was to have a longer post-closing period rather than delay the closing. To make a long story short, the buyer was late in submitting her board package so we closed later than expected and got a shorter post-close occupancy than we wanted. Despite the fact that the buyer's delay ate into our post-closing, she refused to extend it even though that meant we had to move with a 3 week old baby.
We were negotiating a contract with a seller who wanted to do just this...our attorney basically said the second you agree to it and close, you become a landlord. Do you want to be a landlord? Didn't think so...they fought hard, we fought back...and backed out of the deal...They eventually sold 6 months later for $100k less. Whoops! Dodged a bullet there...
Sammy, if you really like the apt the post-closing should not stop you. As long as your atty gets you enough escrow and an onerous penalty if the sellers stay beyond the agreement you'll be fine. If the penalty is sufficient it will be cheaper for the seller to get a short term rental than to overstay. Post-closing occupancies are not unusual and you might be glad to have the seller covering essentially covering some of you closing costs.
You need to charge them 20% above market rent (say $4.5 per sq ft for an un-renovated apt) which increases 10% every month and a 3 month security deposit.
Just chiming in to echo the viewpoint of NYC10007. Our seller made the process as difficult as possible and also wanted to post-occupy. Our lawyer strongly advised against it, and by the time we finally closed, we were very, very glad to have listened to her.
As sellers, we once asked the buyers to rent back to us because there was a delay in getting possession of our rental. They hadn't yet put their place on the market, we rented for 2 weeks at market, significant amount put in escrow. We also bought them 2 new in-wall A/C units (after they moved in) - gesture of goodwill.
This doesn't have to be a nightmare, provided that you have good legal representation.
1) Ask for a good rent, maybe 20-30% above market.
2) Big amount in escrow - say 10% of total sales price.
With the terms laid out in our contract, we were joking that it wasn't even the worst thing if they stayed a little longer because of the $$$ we'd get!!
nyc 10023 - these are not the type of people who will show goodwill.
I did exactly the same with my previous apt.
You charge them 20% above rental market. It shouldn't matter too much to the seller as he is staying for 30days. You also want to hold this 1month rent + 1 month security in escrow.
so i have agreed that they can stay for the first 30 days but pay all carrying costs. If they stay beyond 30 days I charge them a penalty based on a very high rate. Do they still pay all carrying costs during the over-stay period?
You should have them pay rent (20-40% over market) from day one. If they decide to stay over 30 days, ask them to pay 100-200% over the market rent. Also keep some funds in the escrow.
Here's my prediction. If you have a good attorney they won't stay. Either they will close in Sept or Oct but they won't stay post closing. Just a prediction. On the other hand, if your lawyer is not so good they'll stay post closing.
Sammy: Absolutely. You may want to increase the costs dramatically if they overstay and you need a big amount in escrow.
Penalty in addition to carrying costs if they holdover and a healthy escrow and you'll be fine. Also, take a lesson from my experience as seller and try to get a date certain for them to leave instead of a number of days post-closing so they can't give themselves an extra 30 days by adjourning the closing.
Once you give a little you are doomed to the mercy of the slow seller. Only agree to the outside date you are comfortable with and then tell them they must be out. Escrow and rent can be manipulated, but possession is reality. See how they are about a decreasing purchase price linked to the number of days that they push the occupancy date into the future and make that an amendment to the agreement of sale. Sobers the seller quickly.
Ok. Yes or no answer: Has anyone asked seller in such a situation to pay the principal on the mortgage too, or just int, maint, utilities & insurance? what is the norm? my lawyer is telling me we can not ask for principal?
Don't know, but why get into detail with them about what the rent for that month covers?
As everybody has said, it's your house and you're renting it to them for the month. Just make sure the $x is enough to cover anything, and then some.
sammy300, no offense but do you have trouble comprehending?
ask for above MARKET RENT. This means X amount of dollar which covers your mortgage, CC, RE tax plus profit.
sammy300 says he has different values that most Americans.
ba294 & NWT-No offense but there should be no semblance of a landlord-tenant relationship. In the first 30 days, where i am actually "agreeing" to let them stay, I can only charge them for certain very specific things, along with holding funds in escrow. i am getting conflicting info about this 30 day period. Starting the 31st day, I can charge them a penalty per day which in this case is way higher than the highest mkt rent & ask for all kinds of other very egregious stuff. I am clear about the "penalty phase".
hburg-me not american nor a "he" - sure throw out some dumb female jokes...couldn't care less...me not that either. problem is, my question is very specific but people are confusing this with rent, which it clearly ain't...
sammy, you can charge whatever you want. You should not agree to let them stay at the cost to you. charge them at least double the amount of carrying cost. Now, double this amount after 30days making it 3-4times the carrying cost after their promised vacancy. You are just being a sucker if you agree to renting it out for cost during their first 30days.
My buyer has agreed to make me stay for 3 months after closing charging me standard rent for the 3 months at the closing . she also made me aware she needs me out by the end of third month- i'm working on making sure i'm out by the second month
>hburg-me not american nor a "he" - sure throw out some dumb female jokes...couldn't care less...me not that either. problem is, my question is very specific but people are confusing this with rent, which it clearly ain't...
You live in America, you are buying property here, for your family who is here, but you aren't American. Ok, continue to separate yourself from everyone else here. ... and everyone else is confused.
Sammy -- You need not think of this as "rent" and do not want to call it rent, nor tie the amount to any specific expense. I suggest that doing so will confuse the contract and create needless disputes later. Just add up the items you want to have covered (I would then substantially increase that number as well) to a sum certain, and have the contract say that if possession is not tendered at closing seller pays you that specified sum of $xx throught date dd/mm/yyyy, and pays $yy per day for every day after that. Make sure you are getting an indemnity from seller and an obligation to maintain insurance (but nevertheless buy your own insurance from the closing date).
sammy300, you may also want to closely review your loan commitment/documents, because there is typically a requirement for the residence to be occupied by YOU within a certain period of time...60 days is what I believe mine was.
Who cares what you use the money for. Whether it is to pay off your mortgage or blow in Vegas is not relevant to what you charge the seller. You come up at an agreed upon rate which has nothing to do with your maintenance payments or anything else. For all intensive purposes, despite what you think, you are renting the apartment to the seller even if you want to consider it "agreeing" to let him stay and as such you come up with the amount you want to charge your tenant.
ok thanks everyone!