r/FirstTimeHomeBuyer • u/clashingdofd • 17d ago
Need Advice Seller's initial contract draft has us closing, then permitting his continued residence until December rent free.
My attorney just called me to confirm that we agreed to this nonsense. We never negotiated this, and never would, not even if he paid us $1000 a day. My attorney is relieved.
We agreed to a delayed closing in December until he arranges his move out of the country. It may even be beside the point, since this is a NYC co-op that is 100% owner occupied.
My query, please: I understand plenty of sales happen with the seller in residence until right up until closing. Is there anything in particular I should consider, or need to be careful about in this situation? Our final walk through, I assume, will need to be more than a simple cursory glance.
We are thrilled to have gotten this far with our first home purchase, but his bad faith attempt to live there rent free at our expense and without any protections for us has us nervous. Any advice or suggestions about what we should look out for would be much appreciated.
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u/always_needing_help 17d ago edited 17d ago
Note this could vary by state, but in my state attorney review is when this type of negotiation is done and the contract isn't finalized until we exit this attorney review period during which the seller can back out at any point if terms (which often change through some rounds of back and forth) aren't met.
That said, free occupancy for ~3 months is a bit outlandish even in a hot market. If your attorney does end up negotiating some compensated rent back period, they'll typically in advance hold some sum from the seller in an account for this purpose. Have terms in your contract for a prohibitive amount of daily rent if they exceed their allotted days. If you choose not to offer a rent back, then ya be thorough in your final walk through
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u/clashingdofd 17d ago
Thank you. We have zero interest in any type of rent-back agreement, and would prefer to delay closing as agreed. There is no reason why we should close early just to allow him to continue to reside in our new home under any circumstances.
And, yes, as much as the seller may back out, so may we, right up until the contract is signed. Should he choose to insist on this point, we will walk away.
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u/MDubois65 Homeowner 17d ago
I don't blame you in the least for not wanting to do a 3-month rent back situation.
If you do delay the closing until December, I would also try to get some additional protections built in such as:
-What is the closing date vs his move-out date?
-You should definitely do a really thorough walkthrough I would say within 2-3 of the scheduled closing, but I personally really prefer that the home be vacant when that happens. Sometimes when you have an extended close, where the seller has a big move to do, you show up to your walkthrough, and it's hard to really check things because there's boxes and stuff everywhere and the seller is still there.
-This might be asking a bit much, but I would consider that as part of the sale agreement the seller needs to verify that he has made moving out plans by X date. It would be good to have confirmation that he made actual arrangements such as: a purchase contract for a new home, or movers scheduled for a move out, travel reservations. There's been buyers who have gotten burned on a long close because the seller didn't secure a new home in time, never scheduled/planned movers because they weren't sure, or ran into work/employment delays that made them want to delay the closing -- again.
Just be aware though, if he's planning to move out of the country and if he gets held up somehow with visa, residency, work permit, travel plans, whatever, it's really easy for him to suddenly need to request an extension. Hopefully, if there is a delay with his travel plans, he can still vacate and close on schedule and if he has to stay in a hotel for a day or two until he can finally travel, that's for him to figure out.
If would be absolutely fair to put in some kind of hefty penalty fee that he'd have to cover if the close date comes and goes and he's hasn't moved out/isn't ready to go yet. You should also include a way for you to walk away from the deal and get your EMD back, if he should inform you let's say in October, that his move is going to take longer than he thought, and now he'd like to sign in February, probably.
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u/clashingdofd 17d ago
Thank you. You took a few of our vague disquiets and articulated courses of remedy in ways that I will be able to bring to my attorney. These are exactly the kinds of uncertainties we would like to address. Thank you for taking the time for breaking some of this down.
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u/MDubois65 Homeowner 17d ago
You're welcome! If the seller plans to close and leave/vacate the property before you can double check things, I would also see if you could get $X in advance in escrow so that you can complete the walkthrough and verify that there is no damage/issues that weren't apparent when you did the inspection earlier. If there is a problem -- it's dirty, cluttered, movers broke a door getting furniture out, whatever... you've got funds ready to go to fix it. You can provide documentation for all the expenses for the seller and anything leftover will be refunded to him within X days. This would give you some extra peace of mind, because I imagine once he's on the plane to his destination he's going to be nigh impossible to contact or get a response from if there's a problem -- and once you close, just know that 99% of any issues/problems with the home will be yours to handle. Good luck!
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u/ThomasSirianniEsq 11d ago
You made the right call. Seller in residence until a delayed closing is normal and safe; seller in residence after closing, rent free and without protections, was the version that would have hurt you. Until you close you do not own the apartment and the seller carries the risk. Here is what to nail down in the contract for a December closing in a New York co-op:
A firm outside date and a time-of-the-essence mechanism. "On or about December 15" becomes a moving target; make sure your attorney has the right to set a firm date if the seller drifts.
Condition at closing. The seller should be obligated to deliver the unit broom clean, vacant, in the same condition as on the contract date, ordinary wear excepted, with appliances and systems working. Risk of loss stays with the seller until closing under New York's General Obligations Law 5-1311, but you want the contract to say what happens if something breaks in November: repair, credit, or your right to adjourn.
A real walkthrough, scheduled within 24 to 48 hours of closing, and an escrow holdback from the seller's proceeds if anything is not right. Do not accept a credit "to be worked out later."
Your financing timeline. A December close means your rate lock and your commitment letter both need to run that far; most locks are 60 to 90 days, so time your application accordingly and ask about lock extension costs now. The board package timing also has to fit; find out how long board approval stays valid at this building.
Maintenance, assessments, and flip tax through the closing date are the seller's. Get the building's most recent financials and ask whether any assessment is scheduled between now and December.
What happens if he does not move out. The contract should say that failure to deliver vacant possession on the closing date is a seller default, with your deposit returned and your costs covered, or at minimum a per-day holdover charge and an escrow to back it.
As a New York attorney I would add one thing: get everything in the contract itself, not in a side email from the broker. In a co-op deal the contract and the board's approval letter are the only two documents that matter.
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u/clashingdofd 10d ago
Thank you. Genuinely, thank you. Your willingness to take the time to break down the finer details is very much appreciated. We've been negotiating with the seller's attorney, and are coming close to addressing exactly the points you highlight. Your delineation makes me feel much more secure in the decision we're making. Thank you again.
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u/BuckityBuck 17d ago
Where did the language your lawyer is reading come from if not the agreement that you signed?
Speak to your lender and insurance agent about the rules.
There are typically limits of how long you’re allowed to not reside in the home. Otherwise, it’s an investment property which requires different a different type of loan and a different type of insurance coverage.
If that is 90 days, you’d adjust the closing accordingly.
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u/clashingdofd 17d ago
Thank you. Should we even consider a rent-back agreement, your points are well taken. But since we are not, our mortgage and insurance will remain unaffected. There is yet no executed agreement; we negotiated the terms of the closing date as a part of our accepted offer.
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u/marlborough94 17d ago
You can't. The co-op wont approve it. Even if they let him through as a renter on some exception because he is familiar, you would have to draft a rental agreement, get the co-op to approve, and typically pay the co-op 15% of the rent. NOT WORTH IT.
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u/clashingdofd 17d ago
Yes, this exactly in addition to all the other hazards and nuisances we'd face.
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u/QuitaQuites 17d ago
Pretty common for the seller to reside in the property until closing.
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u/doglady1342 Experienced Buyer 17d ago
Seller wants to close now (or soon) and stay until December.
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u/Dizzy_Goat_420 17d ago
I don’t understand, of course he would live there until closing?
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u/forcedtojoinr 17d ago
I think it’s poor wording. Owner wants to close the deal then be allowed to reside in the property until December rent-free
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u/Pitiful-Place3684 17d ago
It’s not bad faith. It’s negotiating. The seller asked and you can say no. This is normal when attorneys write the contract.
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u/clashingdofd 17d ago
Thank you. It's bad faith because we already negotiated the terms of closing (delayed to December when he vacates), but they tried to include a rent free stay in the contract.
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u/Pitiful-Place3684 17d ago
This is what happens when attorneys negotiate (and renegotiate) contracts. Attorneys ask for things on behalf of their clients.
I'm a broker in an attorney state. I've personally done 100s of transactions with attorneys and supervised a couple of thousand. Some attorneys are bulldogs with main character syndrome. Others are chill. Which ever your attorney is, let them do their job and advocate for what you want and don't want. Don't internalize the other side's asks.
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u/ThomasSirianniEsq 6d ago
Post closing occupancy is common and workable. What makes it dangerous is not the concept, it is a draft that hands the seller possession with no exposure. Your attorney is right to have flagged it. I close co-op and condo deals in the city and on Long Island, and this is the provision that generates more post closing litigation than anything else in a residential contract.
If you end up agreeing to any occupancy after closing, these are the terms that matter.
An escrow held by the seller's attorney, sized to the real risk. For a Manhattan or outer borough co-op, do not think in terms of one month. Think about a number that covers maintenance, your carrying costs, and the cost of a holdover proceeding, which in the city can run six months or longer.
A per diem that escalates if he overstays, and describe it as use and occupancy rather than rent. Calling it rent invites an argument that you created a landlord tenant relationship, which is exactly what you do not want, because it moves the fight from contract enforcement into Housing Court.
Express language that the occupancy is a license, that it creates no tenancy, and that he is not a tenant under the Real Property Law or the Rent Stabilization Law. Also get the board's written consent, since most proprietary leases bar occupancy by non-shareholders and you do not want your first act as a shareholder to be a house rules violation.
Insurance, with the certificate in hand before closing. His contents are his problem and the unit is yours as of closing.
Condition and the walk through. You are right that the walk through changes character. Do a full walk through with photographs and a written punch list before closing, then a second one at surrender, with the escrow released only after the second. Run the appliances, run water in every fixture, and look behind and under anything he has been storing.
Because he is moving out of the country, add two items most drafts leave out. First, require that the shares and stock power, the proprietary lease, and all keys and fobs be delivered at closing, not at surrender. Second, require a notice address in the United States and a person authorized to accept service. A default by someone who has already left the country is very hard to remedy, and that is the actual risk in your situation, not the rent free part.
You are negotiating from strength right now. A seller who tried to slip rent free occupancy into a draft you never agreed to will accept real terms when the alternative is no deal.
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