You can move in prior to closing if the Seller is ok therewith (and of course if they will agree to miss payments or take the necessary steps to avoid missing payments).
I would suggest taking occupancy prior to close and offer some type of monthly "rent" payment if necessary.
We have done this in the past with great success.
Sounds like this is a FHA-PFS short sale. HUD requires Borrower to be delinquent at least 31 days at closing. However, there is more to the story. Please see clarification on this requirement provided by the HUD Director of the National Servicing Center.
1. Servicer has the discretion to decide whether or not a Borrower who is not deliquent will be considered for a PFS short sale.
2. If Servicer decides to accept Borrower for review AND the ATP issued, the Servicer MUSt accept an offer for review.
3. If Servicer decides to accept Borrower for review AND ATP issued AND offer is reviewed and meets all requirements for short sale approval, Servicer HAS DISCRETION whether or not to issue final apporval letter untill Borrower is at least 31 daysd deliquent.
As I said, this comes direct from the head of the HUD National Servicing Center. Thought you may be interested. I have debated this issue with Wells Fargo regarding their position that the 31 day requirement would begin at the Servicer's discretion.Good luck!!