The house is vacant. Closing delays have the seller, the buyers, the buyer’s agent and now you, the listing agent, stressed to the max. Meanwhile, the buyers are begging for you not to leave them homeless because of a few delays. Why not just let the buyers move in early? How much harm could it cause?
A lot. It doesn’t matter whether you are representing the buyer or the seller — a real estate agent should never allow a buyer to move in early. And if you absolutely must break this rule, be sure to get an attorney involved.
Letting anyone move into a home prior to closing leaves you and them standing on shaky ground. If you’re not yet convinced, here are six nightmare scenarios that’ll have you blurting, “no!” before they can finish asking.
Scenario 1: ‘Can I just store a few things?’
The buyers just want to store a few things in the empty garage. Sounds harmless at first, but the “few” things turn into an entire house full of stuff. Still, it’s only the garage and the house is empty.
A hurricane comes and rips off the garage door, destroying everything in the garage. The seller’s insurance company will cover the house but not someone else’s contents. (This is why we tell renters to get renters insurance.)
The financial hardship for the buyers is significant. Of course the buyers feel the seller should pay for their damages.
Who is right?
Someone is going to lose (and that someone is going to be the buyer), and the chances of this property making it to the closing table are slim.
Scenario 2: ‘Can we just make a few repairs?’
The buyers just wanted to make a few repairs before closing, so they hired what they thought was a licensed and insured company. One of the workers fell and was seriously injured. The accident victim had no insurance for his injuries and went after the seller and the seller’s insurance company.
The case ended up in court and took years to settle. The buyer lost money on repairs to a home that they never purchased. The seller could not sell for years due to a lawsuit.
Scenario 3: ‘Oops, we thought we were approved.’
The buyer has been pre-approved for a mortgage. The buyer’s husband works for the bank where they are getting their loan. It is a sure thing. The buyers move in early. The wife goes out and buys furniture.
The buyers no longer qualify for the loan, they beg the sellers to rent to them. The sellers say no because they want to sell. The buyers refuse to move, forcing the sellers to go through an eviction.
After the eviction, the sellers gets the house back, but these angry buyers have done considerable damage, and there is not enough money to cover all of the damages.
Scenario 4: ‘We found defects and don’t want this house anymore.’
The buyers move in early. Within a few days of moving in, the air conditioner breaks. Then in this same week, the microwave turns on by itself when no one is near it, and it needs to be replaced.
The buyers no longer want this house — they feel that the seller hid defects and did not disclose issues. (The buyers had their own independent home inspection, but these issues were not found.)
The seller feels that the buyers are tampering with their appliances to get out of the sale.
Scenario 5: ‘We are victims of wire fraud!’
There’s a problem with the funds coming from out of state. The moving truck is sitting in the front yard. The buyers show proof that they ordered the wire, and they even let the sellers talk to the investment company who sent the wired funds. It’s a cash sale. It’s after 4 p.m. and the funds should be at the closing in the morning.
The buyers move in. The next day, the $350,000 wire still has not arrived. At this point, it is discovered that there has been wire fraud. The $350,000 is missing, and the FBI is involved. The funds may be permanently gone.
A week later, the FBI recovered the $350,000 so this scenario turned out OK. Would you want to be the agent who had to talk to the buyer or even the seller during this week-long ordeal?
Scenario 6: ‘We repaired a foreclosed property that is insured — and lost our money!’
The buyers know that a foreclosure is empty so they start working on it figuring no one will know. They replace vanities, flooring and spend a considerable amount of money on a home that they do not own.
Unbeknownst to these buyers, the foreclosure company is covered by mortgage insurance. In fine print on the REO (real estate owned aka foreclosure) addendum, it says that should the mortgage company disapprove the sale, the seller is released from the contract with these buyers.
The mortgage insurance inspector goes to the house prior to closing to approve the sale. The inspector feels the house sold too low, which of course it did based on the upgraded condition. The inspector advises the mortgage company not to approve the sale but instead take back this home.
The buyers get their escrow money back, but they lost all the money they spent on the upgrades.
Would you want to be an agent on either end of these six scenarios? I bet that after each one, you probably thought to yourself “I’m glad I’m not that agent.”
Fortunately, I have not had to live through all of these scenarios, but I hear of things like this happening every single day. My recommendation, regardless of whether you represent the buyer or the seller, is just don’t let anyone move in early.
It sounds so simple — until it isn’t.