Dec. 30, 2005: The perils of pre- and post-possession for home buyers and sellers
How would you like to spend the rest of your life wrangling in courtrooms, emerging from the experience financially and emotionally wrecked?
You could always have a bad divorce, but with real estate there's an even better way: Pre-possession or post-possession.
Pre-possession is taking possession of a home before the sale has closed. You might be relocating or your lease might be up. Moving in a few days early could be a big convenience.
Post-possession is similar - you stay on after the closing. Sometimes this is a lengthy lease-back, but usually people just want to stay for a day or two to pack their stuff.
These are bad ideas.
Why? Because they create a de facto tenancy. It may be just a friendly agreement between buyer and seller, but when you occupy a home you do not own, you are a tenant. You should ratify the occupancy with a lease. But there is still potential for big trouble.
Suppose the house burns down. Who is liable? The owner, even though he is not occupying the home? Or the occupant, who is not the owner and probably just lost all of his personal property?
But that's what homeowner's insurance is for, right?
Maybe not. If the owner did not disclose the tenancy, the insurance company probably will not pay on the house. If the occupant had homeowner's insurance, not a tenant's policy, his underwriter also might refuse to pay for the lost personal property. There may be two aggrieved lenders, and both might call their notes due, even though the house is now destroyed.
But the worst is yet to come. Everyone involved gets to spend years in court fighting over who owes what to whom. The owner will be out the value of the house. The occupant will have lost all of his portable wealth, including the memories attached to those things. Everyone will emerge from this lengthy process bruised, begrudging and much, much poorer.
Here's a better answer: Take possession at the close of escrow, just as the purchase contract advises. Whatever convenience you might enjoy from pre- or post-possession, the risks are just too great.
Greg Swann is the designated broker for BloodhoundRealty.com, a full-service Metropolitan Phoenix real estate brokerage. This article originally appeared in the West Valley regional sections of the Arizona Republic.
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