The Post-Settlement Occupancy Agreement is the first cousin to the Pre-Settlement Occupancy Agreement I wrote about in my previous post.

The big difference is in the name…Post-Settlement Occupancy. This is used when, for any number of reasons, the Seller either wants or needs to stay in the house after settlement.

Why?

There are lots of reasons a Seller may want a Post-Settlement Occupancy Agreement and there may be one or two reasons a Buyer may want to agree to it.  One of the most common reasons is that the Seller is moving into a new home somewhere and needs the money from the sale of their current home (or, at least, remove the debt) in order to complete the purchase of their next home. The Seller won’t actually have the money from the sale of their current home until Settlement.

Going from one settlement (on the sale) to the next settlement (on the purchase) is a tricky coordination job and it’s sometimes easier for the Seller just to have a few days to make the transition.  Obviously, they need a place to sleep so why not just stay in the house for another couple of days or week?

There may be some other reasons:

• One Realtor I know always writes in a Post-Settlement Occupancy of one day to cover moving day and to cover any possibility of a delay in the settlement.
• The Seller may not be ready to move out before a certain date but the Buyer needs an earlier settlement in order to lock in an attractive interest rate.

Are Post-Settlement Occupancy Agreements a Good Idea?

Although, Post-Settlement Occupancy Agreements are more common than it’s cousin, the Pre-Settlement Occupancy Agreement, they still aren’t that great an idea.

There are still all the pitfalls of the Pre-Settlement Occupancy Agreement. The house now legally belongs to the Buyer (new Owner) and the Seller becomes a tenant. So, what happens if there’s a fire or a break-in? What about damage from the Seller’s moving (typically covered by a security deposit but still…)? What if the reason the Seller needed the Post-Settlement Occupancy Agreement changes and they need to stay longer?

I have seen many Post-Settlement Occupancy Agreements work and I’ve seen this type of thing enter into the negotiations for the price of the house or closing costs.

Many times a Seller will be more than willing to offer the house at a lower price or be more generous with closing costs if the Buyer will agree to a short Post-Settlement Occupancy.  I’ve certainly seen the Post-Settlement Occupancy Agreement used in a real estate transaction more often (much more often) than the Pre-Settlement Occupancy Agreement.  After all, the Seller did put his house on the market. The Seller really does want to move out.

Still, it’s a much cleaner transition if neither the Pre-Settlement Occupancy Agreement nor the Post-Settlement Occupancy Agreement are used. They can both create more headaches than they’re worth.