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Ask Adam: Stay in the House Before Buying?

by ARLnow.com Sponsor October 21, 2014 at 2:00 pm 0

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. I saw one of those real estate TV shows the other day where the buyers were allowed to live in the house for several days before they completed the purchase. It was a great way to test drive the house if you will. Is it possible to arrange this on a purchase in the Arlington area?

A. Technically, it is possible to occupy a property before closing in Northern Virginia. In fact, there is even a standard form for such an event, called the Purchaser’s Pre-Settlement Occupancy Agreement. I can understand why a “test drive” sounds like a good idea to a purchaser, but pre-settlement occupancy is not for that purpose and it is rarely agreed to by sellers.

Sellers and listing agents recognize that it is standard practice for purchasers to request various inspections as part of the buying process. They have gotten used to the risk of pulling their listing from the active real estate market so purchasers can proceed with processing of their loan and inspections. But, it’s unlikely that they are going to agree to someone moving in before the sale is complete to make sure they still want the home.

Less than 1 percent of home purchase contracts in Northern Virginia include a pre-settlement occupancy agreement. The ones that do, usually entail a purchaser who was going to be homeless due to a delayed closing. It was not in place to further test the home. When I’ve represented a seller in these situations, we made sure that all contingencies had been removed and that we were holding a substantial deposit. We also had a level of comfort from the professional manner that the purchaser and her agent had conducted themselves throughout the transaction up to this point.

I truly don’t believe that most sellers are trying to hide anything. Many have been living happily in their respective homes for years without noticing any imperfections. I think the fear more stems from not knowing the buyer and what may trigger their nerves. Maybe there is a creak when the wind blows that makes the buyer afraid that the house is haunted. Next thing you know, they are lawyering up to get out of the contract instead of investigating what the actual issue is.

There are also a number of scams out there where a “purchaser” will occupy a property and then use legal roadblocks to stay in the property without paying for it. Obviously, this is a mess that every seller wants to avoid.

A few minor notes about the standard pre occupancy agreement:

  1. An “occupancy deposit” is often required in addition to the earnest money deposit.
  2. It does not provide the occupant with the ability to alter the property before closing. In other words, this is not your opportunity to get a jump start on painting or renovations.
  3. The purchaser usually pays a per-day rate to the seller for the time the property is occupied prior to closing.
  4. The purchaser is required to maintain adequate insurance covering personal property and liability during the occupancy period.
  5. The purchaser is required to transfer and pay for utilities during the occupancy period.

In summary… although pre settlement occupancy is possible, it will have to be a pretty special situation for most sellers to agree to it. I recommend that you take all the time you need deciding whether the home is right for you before entering a contract. Don’t be afraid to schedule multiple visits. You’ll also want to talk to your Realtor about the various inspections you should consider in lieu of a test drive.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

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