Here is a possible scenario: Your current home is sold and you must close on your existing home in order to close on a new one. You have to have all of your belongings out of the current home and nowhere to go but to keep them in a truck or in storage if you are moving from out of state. So what happens if the closing does NOT happen as originally planned on a Friday and now you have to wait until Monday to close. Oh boy…..you are now homeless! But you didn’t have to be!
What is the Difference Between Possession Date and Closing Date?
Possession Date is the date that you will have permission to occupy the property at a per day annum agreed upon in the contract. Usually this date is the same as the closing date in Iowa since the buyers receive the keys and may occupy the home after the closing papers are signed and the money is turned over at the closing company.
Closing Date is the day that you physically meet the agents and your lender at the closing office to sign all the paperwork for the mortgage and note for your new home. You will receive the keys once all the paperwork is signed and delivered to the lender.
So, back to the scenario above where the closing does not happen as anticipated…..what can we do to try to resolve this situation?
First of all, this situation is not unique. It seems to me that most transactions are interconnected. Meaning that all of the closings are dependent on the previous one closing on schedule. The only time that this is easier in some way is if it is a vacant home that someone is buying.
There is a document in Iowa called the Interim Occupancy Agreement. At the time of writing the offer, the buyers may elect the possession date to be several days or a week prior to the closing. When that option is elected, there is an addendum that must be made part of the contract called the Interim Occupancy Agreement. This document gives specifics about the terms of allowing the buyer to occupy the home prior to closing for a disclosed period of time.
Terms that are outlined in this agreement include but are not limited to:
The date that the keys will be given to the buyers as well as the date that the buyer has permission to occupy the premises.
The amount per day that the buyer will be charged and that it will be paid to the seller at the time of closing. This amount is calculated by using the purchase price and the new mortgage interest. It is still cheaper than a hotel or paying for storage!
The buyer must be able to release all financial contingencies as well as provide a release of all of THEIR buyers’ contingencies on their existing home. Your loan may be ready, but the buyers of your home might have an issue that will delay your closing further. All contingencies must be released by all relevant parties to this purchase.
The buyer must have their homeowner’s insurance on the home so that it will cover their personal belongings. The seller will still maintain the home owner’s insurance until the date of the closing, but it will not cover the buyer’s belongings.
The utilities, snow removal or lawn care, and all other repairs are the responsibility of the buyer. Meaning if the furnace goes out between the time that they move in and the closing date, it is THEIR responsibility, not the seller’s problem!
The buyers will sign the final inspection release prior to having possession of the home. Meaning if the furnace goes out between the time that they move in and the closing date, it is THEIR responsibility, not the seller’s problem!
The buyers cannot paint, remodel or make any changes to the property until after the closing.
This document is not meant to create a landlord/tenant relationship and it gives them a date the buyers must close on the property or else it will give them a date that they must vacate the property.
The interim occupancy agreement and its pros and cons is a whole other blog post in itself, but this gives you an overview of the options. I will be posting on the specifics of this agreement tomorrow. So tune in!
Moving twice, or moving everything in one day can be stressful. Since most of my buyers are relocating from somewhere else, they are counting on the closing date to happen when it is supposed to. That moving truck is coming from California and if you do not have the keys to let them in, it could be a lot more money and several days to pay them to wait for you to close. Clarifying this option at the time of the offer will alleviate the stress of the “what if” scenario above.
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