Should Buyers Move In
Before Escrow Closes?

Question: I've signed a sales agreement for my old home and already moved into my new house. However, the buyers' financing was held up because of a credit-report error. My agent says the closing will be delayed by two weeks.  The buyers have to get out of their present rental and want to move in now. I feel sorry for them. Should I let them move in before the deal closes?

-- Gail, Boston

Gail: Remember the old maxim, "Possession is nine-tenths of the law"? In real estate, it's a very treacherous area.

You sound kind-hearted and sympathetic. You want to help the buyers out of their dilemma. However, by doing so, you don't want to create a problem for yourself.

If you let buyers move into your property before escrow closes, they technically have the rights of tenants. That means that if for some reason the deal never closes, you might have to evict them to get them out. Before "renting" to buyers, I would certainly go through the same process as for any tenant -- get an application and have them sign a strict rental agreement (your agent should be able to provide these for you), check their credit yourself, and get at least a month's rent and a hefty security deposit up front.

Keep in mind that if the deal collapses, you'll also lose time. You probably won't be able to show the property to other buyers while the "tenants" are in it. And, if they mess up the place during their tenure, you'll have the expense of a clean-up.

One last point, sometimes buyers will just want to move some of their furniture or boxes in before escrow closes. This is also a bad idea. If escrow doesn't close, you could have trouble getting rid of their possessions, if they refuse to voluntarily move them. Again, they might have tenant's rights.

And what if their possessions were damaged or stolen while in your property? Or they injured themselves moving it in? You could be liable and your insurance might not cover the situation.

As you may surmise, I generally don't like to let buyers or their possessions in before the close of escrow, unless I'm very sure the deal will close and I'm very sure of the buyers. Since you mention your buyers have a credit problem, which could affect their ability to get financing, your deal and your buyers might be shakier than you realize. Ask your agent some hard questions on this.

-- Mr. Irwin has more than 25 years' experience as a Los Angeles-area real-estate broker. He is the author of more than two dozen books about real estate and is recognized as one of the most knowledgeable writers in the real-estate field. Mr. Irwin's most recent books are "How to Get Started in Real Estate Investing" and "How to Buy a Home When You Can't Afford It" (McGraw-Hill, 2002).

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