Early occupancy agreements: How to handle this real estate curveball


Recently my family found itself in the not uncommon position of having the house we were selling close before we would be able to purchase a new house.

In order to avoid being homeless, we negotiated an early occupancy agreement into the deal when we made an offer on our new house. 

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What is an early occupancy agreement?

An early occupancy agreement is basically an agreement to rent the home you are going to buy before you actually close on the purchase. You agree to pay an extra amount of money per day to the sellers for the right to live in your new home before you legally own it.

An early occupancy agreement normally comes with several conditions. First of all, the inspection period must come to an end and the buyer and seller must have a written agreement on what items will be fixed before the buyer moves in. By moving in, you are accepting possession of the house and accepting that the condition of the house is satisfactory.

When you move into the house you must put all the utilities in your name. After all, it wouldn’t be fair to have the seller pay for your electricity and water!

Finally, early occupancy agreements often mean the buyer pays a larger amount of earnest money—similar to a deposit—when the contract to sell the house is signed.  There are risks associated with early occupancy agreements for the seller, so this works a lot like a landlord asking a renter for a security deposit.

Although the conditions described above are often found in early occupancy agreements, the contract you sign may be quite different, so I recommend consulting with your real estate agent.

Advantages of an early occupancy agreement

If you find yourself in a position with nowhere to stay before you can close on your new home there are several advantages to an early occupancy agreement.

Having to find a temporary place to stay can be expensive and involve a ton of extra work. You would have to pay a premium for a short term lease, pay to rent moving trucks twice, pay people to help you move twice and likely rent a storage facility. Not to mention the fact that moving is no fun, so nobody wants to do it twice in a row!


Negotiating an early occupancy agreement

Even though early occupancy agreements are great for the buyer, they come with risks for the seller. In addition to all the risks a normal landlord would have, there is the additional risk of something going wrong with the buyer’s mortgage and the buyer not being able to actually buy the house. If that happens, the seller has to worry about getting the old buyer out of the house at the same time that they are trying to sell it again.

If you are interested in an early occupancy agreement, it should be part of the offer you make to the seller when you make an offer to buy the house. By making an early occupancy agreement a condition of the purchase, you are putting pressure on the seller to accept the agreement or else they may not be able to sell their house to you.  Sellers who have already moved out of their house are more likely to be agreeable to an early occupancy agreement so looking for a house with no furniture will tell you that your chances are higher.

Your offer should include how much you are going to pay for the right to move in early, what date you would like to move in and how much extra earnest money you are going to put down—along with all the normal items you would find in an offer to buy the house.

The bottom line

Consider an early occupancy agreement if you have nowhere to live until your new home purchase closes

For my family, an early occupancy agreement worked out great.  We didn’t have to move twice, we didn’t have to pay for a hotel or storage space while waiting to close on our home, and we got to get a head start on the next phase of our lives in our new home. 

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