Pre Occupancy: Scares me, but what choice do I have?

I finally have an offer on my home. 200k vs the 260k that I owe Fannie. I think it's a good offer based on comps ranging from 190-210k. My KW realtor and NRELG negotiators don't anticipate any problems with getting the deal done. The buyer is closing on their out of state home in August and do not want to move twice. We've agreed to entertain a pre-occupancy agreement.

 

I've been asked what kind of terms I would be agreeable to. I can think of a million things that could go wrong. I'm not a realtor or real estate attorney and I am afraid of not properly protecting myself.

 

Based on what I know, I need to address:

Security deposit

Rent agreement

Insurance

Property damages

The buyer sign-off on final inspection before occupancy

Timing of settlement

 

What else?

 

Are there any great pre occupancy agreements out there?

 

How do I handle rents? It seems strange for me to collect rent while not making mortgage payments. Should I report this as income? Should I hold it in escrow to apply towards the deficit? How much rent should I ask for? I'm more concerned with keeping the buyer happy while we wait on the bank than collecting rent money.

 

Is there an alternative to a lease agreement that would enable me to avoid eviction procedures?

 

Thankfully the buyers will be buying our house with cash from the proceeds of their August 18th closing. I feel okay with them moving into the house. They really want it. I just want to protect myself as much as possible. 

 

Bah, what a mess! Lord willing our bank will move quickly and this will all go smoothly. A smooth short sale will truly be a miracle based on the stories I've read on this great forum.

 

Thanks!

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Replies to This Discussion

Permalink Reply by Jeff Payne on July 12, 2011 at 9:44am
If you are currently not making mortgage payments, what do you plan to do once you start collecting rent?  What is NRELG negotiator?
Permalink Reply by Samson_is_Furry on July 12, 2011 at 10:36am

Hi, Jeff. I still won't be able to make mortgage payments. Rents in my area are half of my mortgage payment. Also, I'm nearly three months behind. I may very well need the rent money in order to rent another place when I move out.

NRELG is affiliated with the CHRE designation. My understanding is that they have partnered with some KW realtors and funtion as short sale negotiators.

Permalink Reply by Jeff Payne on July 12, 2011 at 10:50am

I dont know anything about either of those designations.  I have been involved with KW and their short sale mastery tour and have never heard of NRELG and dont know what CHRE is, sorry .  I assume that you have a 3 rd party negotiator working on your file and your listing agent is not working the short sale?

I wish I knew what to tell you, if your home was already vacant it may not be a big deal.  if you move out without first having some sort of approval for your short sale already in place, what happens if the short sale does not go thru?  You are out of your home and now have a tenant to evict.

Permalink Reply by Samson_is_Furry on July 12, 2011 at 11:04am

CHRE is a Certified Home Rescue Expert, which is a designation awarded through the Home Rescue Institute. My understanding is that Keller Williams has partnered with the Home Rescue Institute. The National Real Estate Law Group is the affiliated third party entity that handles the actual negotiations of short sales. I'm just an underwater home owner, so I could be wrong about all of that.

I agree with you that the situation is far from ideal. I'm hoping that someone on here has some experience with pre occupancy. 

Thank you for your help Jeff!

Permalink Reply by Smitty on July 13, 2011 at 1:40am

Depending on your lender you MAY be violating an arms length transaction as many affidavits state there are no "side agreements" between the buyer and seller of this current transaction.

 

That was my first thought.  I also would HIGHLY caution you to allow this to happen.  I would consult an attorney before doing this and have your purchase contract and rental contract fine tooth combed.

Permalink Reply by Samson_is_Furry on July 13, 2011 at 1:54am

I'll check into the arms length transaction. The last thing I want to do is give the bank a reason to withhold mercy.

It looks like this is the type of agreement that we will be working from: http://www.virginiamls.com/Forms1/PurchasersPreSettlementOccupancyA...

I'm a little comforted that it clearly states that this is not a rental agreement. 

Thank you, Smitty.

Permalink Reply by Jeff Payne on July 13, 2011 at 3:07am

That designation is a new one on me, I have been very involved with the KW Short Sale systems with KW International and I have not heard of this partnership.

At any rate, listen to Smitty, that is great advice.  Your lender may frown upon this. 

Samson_is_Furry said:

CHRE is a Certified Home Rescue Expert, which is a designation awarded through the Home Rescue Institute. My understanding is that Keller Williams has partnered with the Home Rescue Institute. The National Real Estate Law Group is the affiliated third party entity that handles the actual negotiations of short sales. I'm just an underwater home owner, so I could be wrong about all of that.

I agree with you that the situation is far from ideal. I'm hoping that someone on here has some experience with pre occupancy. 

Thank you for your help Jeff!

Permalink Reply by Elizabeth Meyer on July 13, 2011 at 11:43am

I was the selling agent for a home and we did allow the buyer to move in after signing a pre-posession agreement.  The main concern is what happens if the Buyer moves in and then the bank denies the short sale...the Buyer has to move yet again...what a pain?  So, we added verbiage for the Buyer to sign acknowledging that the bank had yet to approve the short sale and that if for whatever reason it was not approved, the Buyer would be required to move again and neither the Seller nor Brokers would have any liability for any costs or damages associated with this additional move.

 

In the end, we did get the deal approved and the Buyer is happily living in the home now.

 

 

Permalink Reply by Kimberley Kelly on July 14, 2011 at 2:20am

Oh boy..I like your answer Elizabeth, but I still would not allow a Buyer to move in ahead of a Short Sale Close here in California.  No way.  Sorry.  Short Sales are what they are..they take time, the Lenders set the COE, and the Investors can change their minds all the way up to approval.  What if they want a cash payout, Seller cannot contribute, and Buyer refuses??  Realtor commission cut coming down the pike..

 

I guess I'm just a little old fashioned here.  The Arms Length Transaction Addendums are becoming more numerous, more formal etc., which translates to me that the Lenders are trying to avoid scams and situations such as this..I wouldn't go there. 

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