"You've Caught the NET!"

Hey, folks - want your opinion on something, and would like to see if you use it.

Here in Chicago, I have found that negotiating a contract for sale, on behalf of my Listing Clients, with a few days to perhaps a month of post-close possession in their old house or condo often works wonders!

Sellers hesitant to list until they find new place see post-close possession as a way to ensure they will not have to move twice. 

Those who need the funds from their sale in order to unfreeze their equity to buy a new home (most sellers these days - yes?) no longer have to be forced to close on the SALE in the morning, pray it FUNDS IN TIME, and then running to the closing to their purchase, often in a different location - with all of their belongings in the back of a moving truck in the Title Company parking lot.

Using post-close possession, sellers can now return to their house, sale proceeds in hand, clean up, and move out on a more leisurely, sane basis.  Even if the closing for the sale and the closing for the purchase are scheduled on the same day - the furniture remains in the old house, not in the truck outside.  Much Stress Alleviated!

Here in Illinois, it is customary for the seller to have a "Possession Escrow" of between one and two percent of the purchase price of the home placed in escrow, held usually by the listing office, to ensure they will vacate the property in a timely manner, according to the post-close possession agreement. 

The seller would pay a per-diem equal to 1/30 of the buyer's actual mortgage amount, plus taxes, homeowner assessments, and insurance, for each day in post-close possession.  The total rent-back amount is usually written in the form of a personal check at closing - many lenders refuse to allow it shown on the HUD-1.

Until possession is actually tendered, the buyer pays for all utility payments on his old place.  He also retains homeowners insurance in case there is some casualty during the possession period (of course, the buyer also has their own homeowners insurance - which company actually pays in the unfortunate event of a casualty is a matter of discussion between the insurers).

The buyer does not have the right to enter their new home until after the possession period.  They also retain the right of a final "pre-possession" walk through, in addition to the usual pre-closing walk through, to make sure the exiting homeowner has not caused any damage to the property during the post-possession period.

Any drawbacks?  Sure, they are possible!

The seller can refuse to vacate on time.  In this case, Illinois practice calls for 1/15 of the Possession Escrow held to be given to the buyer per late day - as a penalty.  This penalty could be sizable - perhaps $500 per day, or more.  Strong monetary incentive to leave on time!

Or, the seller can damage something in their old place.  Again, the possession escrow, as well as language in the post-possession agreement which buyer and seller sign together at the closing table, cover this possibility.

Further, there can be some mechanical breakdown in the home, or an insurable loss.  Again, the post-possession agreement covers this eventuality well.

Here in Chicago, there are more than a few agents, and a small number of Real Estate Attorneys, that become quite resistant to this little Post Possession tool, out of concern about these risks.  They hesitate to agree - without considerable discussion.

However, Dean's Team Chicago handles over a dozen post-close possession agreements each year, for going on 15 years now.  Never had a problem!

What's your local practice and experience on post-possession agreements?  Please share - the good, the bad, and any ugly!

DEAN & DEAN'S TEAM CHICAGO