When Can I Move In? Understanding the Issue of Occupancy

Purchasing a home can be a lengthy and complicated process, and when you get towards that finish line all you want to know is, “When can I move in?”

But the truth is that occupancy can be a sticking point for many buyers and sellers, and while it’s one of the last things to happen in a real estate transaction, it should always be one of the first issues discussed with your REALTOR^®.

What is occupancy?

Sometimes buyers and sellers get confused when trying to differentiate between their closing date and occupancy, or possession. The closing date refers to the official transfer of ownership from the seller to the buyer. Once the sale is recorded with the local municipality and the funds have been received by the seller, ownership is transferred and the home officially belongs to the buyer.

The possession date is the date when the buyer has permission to occupy the property. While this often coincides with the closing date, there are exceptions.

How is the occupancy date determined?

A buyer’s purchase offer will specify not only a proposed closing date, but also a desired occupancy date. As mentioned, many buyers take occupancy on the day of closing — meaning they are officially handed the keys and can move in. But, there may be cases where the sellers need more time to finalize the purchase of their next home or, in rare circumstances, the buyers may request to take possession before closing.

REALTOR^® Doug Stratz with Keller Williams Realty says when it comes to the issue of occupancy, it’s important for both buyers and sellers to be well-informed, and that starts with well-informed REALTORS^®.

“Buyers’ agents should be asking their clients about their expectations and needs, and listing agents should be talking to sellers about their plans...where are they moving, how much time do they need?” he said. “And the listing agreement should state when the seller will allow the buyer to have occupancy, so potential buyers know upfront exactly what the sellers expect.”

However, Stratz says one thing sellers need to understand is that the purchase agreement overrides the listing agreement.

“If a buyer asks for immediate occupancy in their offer, but the seller’s listing agreement says they need an extra 30 days, that issue needs to be addressed before moving forward,” he said. “Verbal communication from the onset of the purchase agreement is imperative. Buyer and seller agents can discuss what will work for both parties and then put it in writing so everyone is on the same page well before closing.”

What factors influence occupancy?

Market conditions often play a role in setting the date of possession. In a buyer’s market, buyers will typically insist upon immediate occupancy at closing. Some buyers may even ask for early possession.

In a seller’s market, it’s not uncommon for buyers to give sellers several days to move or even offer them a leaseback. In a leaseback, sellers are allowed to stay in the home for a set amount of time after closing while paying rent to the buyers. In a competitive market, buyers may offer a leaseback at no cost in order to sweeten their offer and help them stand out from other buyers. .

“It’s important to keep in mind that many lenders require buyers to have occupancy within 30 days of closing to avoid fraud from the lender’s standpoint,” said Stratz. “Even if the buyers don’t take occupancy on the day of closing, it is still their home. They’re financially responsible and need to have homeowner’s insurance in place, while the sellers will need renter’s insurance to cover their possessions.”

The occupancy date can also be affected by financing. We all know that in the world of real estate anything can happen. Even if the purchase agreement lists a possession date, the transaction may not close on time.

How can I avoid problems with occupancy?

While the date of possession can be a point of contention in some transactions, issues can be avoided if there is clear communication. Buyers and sellers need to ensure that expectations are set and both parties need to fully understand the contract.

“Purchasing a home is not like going to the store and buying a loaf of bread,” said Stratz. “It’s a large financial transaction — probably the biggest one most of us will experience. Having professional REALTOR^® representation is the best way to ensure everything goes as smoothly as possible.”

For a list of local REALTORS® and lenders, visit www.lansing-realestate.com.