Post-Closing Possession Agreements: What You Need to Know

It’s a seller’s market in the Chicago area, and that means multiple offers. When sellers receive competing offers from multiple buyers they will sometimes offer a post-closing possession agreement to sweeten the deal.

What is a post-closing possession agreement?

It’s a clause in which the buyer rents the home back to the seller, allowing them to continue living in the home (for a specific time period) after closing.

There are several pitfalls to consider on both sides. David talks about them in these video clips.

First up: Buyers

Sellers:

Why Sellers might want a post-closing possession agreement:

• Haven’t found a new home yet.
• Their new home is still under construction and need extra time.
• They are attempting to buy and sell in a short time frame.
• They need to remain at the address to finish the school year or finish a job before moving to a new area.

Why buyers may agree to one:

• They want their offer to stand out against competing bids. Let’s be honest, we are in a major sellers’ market with not much inventory.
• The timing works better for them too, (i.e. Their lease isn’t up by closing day).

There are serious risks for the buyer if the seller doesn’t leave, has an accident, or otherwise damages the property. There are also legal implications-many mortgages require the lender to take posssession within 60 days. Sellers could also be charged with fraud if the lender finds out they’ve overstayed their welcome. Angry or petty buyers may hold the seller’s possession escrow hostage for minor issues.

What do you do if you need a post-closing possession period or the seller requests one?

We can help. As a buyer, we will draft our own post-closing possession agreement to best protect you. For our sellers, we also make you aware of potential risks. Additionally, we encourage you to work with both the lender and insurance agent to help avoid any costly pitfalls of post closing possessions.