Categories Evictions and Crazy Stories Real Estate
May 22, 2024 Mark Ferguson
Post-occupancy agreements can be risky. In this article, I'll go into more detail about post-occupancy agreements and pre-occupancy agreements. I'll also detail a particularly challenging real estate transaction I personally had. The ordeal brought a lot of attention to my YouTube channel, but it also highlighted many of the pitfalls associated with these agreements.
We will also touch on pre-occupancy agreements and the evolving real estate and tenancy laws that are making these situations increasingly complicated.
Video: Post-occupancy risks – Horror stories
My personal post-move-in contract nightmare
A year ago, I bought a property with a move-in contract, which allowed the seller to continue living in the home for 15 days after signing. If I stayed beyond that period, I was liable to pay $250 per day minus a $5,000 overstay penalty. Despite these precautions, the experience was a nightmare.
The sellers further complicated the situation by repeatedly promising to move out “tomorrow” and extending their stay. I eventually obtained possession, but spent nearly the entire $5,000 contingency fee to extend the number of days they stayed. The title company held the disputed amount for a year before finally releasing it to me, bringing an end to a stressful and drawn-out process.
Why are post-occupancy contracts risky?
For the typical home buyer and seller, post-occupancy contracts can have disastrous consequences. If the seller refuses to evict, the buyer must follow state eviction guidelines, which can take months or even years depending on the state. This delay can cause a huge financial burden, especially if the buyer needs to move in immediately or housing costs double.
It is important to understand that no matter how friendly and trustworthy the seller may seem, risks remain. Some sellers are adept at taking advantage of these situations and know how to manipulate the system to their advantage. Always negotiate to deduct a significant amount, at least $10,000 or more depending on the value of the property, to encourage the seller to move out quickly.
How evictions work and how you can avoid them as a landlord
Pre-Occupancy Agreements: An Equally Thorny Issue
Pre-occupancy agreements, where a buyer moves in before the sale is finalized, can be problematic as well. If the sale does not close, a buyer who is already in the property may refuse to move out, creating similar eviction issues. Even simply allowing a buyer to store items in the garage gives the buyer ownership rights, complicating the eviction process.
As a real estate agent and broker with over 20 years of experience, I always advise my clients to avoid both pre-occupancy and post-occupancy agreements whenever possible. The convenience these agreements provide is not worth the potential legal and financial issues.
Real World Results
In my case, a post-occupancy agreement allowed me to use the situation to my advantage on social media, but the average home buyer or seller doesn't have that luxury. Evictions are time-consuming and expensive, with legal fees, potential property damage, and lost rental income. The emotional and financial toll can be immense.
Practical advice for home buyers and sellers
If you have to enter into a post-occupancy agreement, make sure the contract is written in your favor.
Withhold a substantial amount of money to encourage the seller to move out. If the seller overstays their welcome period, impose stiff penalties on a daily basis, and make sure the penalties are substantial. Consult with an attorney to fully understand your rights and obligations.
Avoid pre-occupancy agreements if possible, and if they are necessary, make sure they have clear terms in place, such as a sufficient deposit and a written contract outlining the consequences if the deal doesn't go through.
In my “Master the Deal” course, I also cover a variety of other ways to find great deals.
Conclusion
As an experienced investor, I continue to approach post-occupancy agreements, but I do so carefully and with a clear strategy to mitigate risk. For most home buyers and sellers, the best advice is to avoid these agreements to prevent a potential nightmare.
Looking for the best ways to invest in real estate? Check out my complete real estate investing guide.
If you have any questions or would like to share your experience, feel free to leave a comment below.