Transfer of Possession

 

A property transfers ownership from sellers to buyers when the deed is recorded at the County Recording Office by the title company.  When does possession transfer?  Like most issues in real estate, this is negotiable and is spelled out in the real estate contract. 

 

Typically, possession transfers on the day of recording, which is also the day of closing. The deed is recorded in the morning by the County Recorder and the title company receives confirmation of recording sometime in the late morning to early afternoon and passes that information on the the agents. The buyers usually receive the keys and possession in late afternoon or early evening.

 

The advantage of this timing to the buyer is that they have immediate access to the property. Real estate loans begin to accrue interest the day they are funded, which is usually the day before close of escrow. So when the deed is recorded the buyers are already paying for the loan, and they prefer to have the use of what they paying for. 

 

The disadvantage to the sellers is that they must actually move out of the house before they have absolute certainty that the sale is completed. Theoretically you can move completely out on the day of close, but in practice most sellers move a few days before. Any last minute delays in closing (and they can happen) can make sellers very nervous.

 

Sellers who are not comfortable with moving before close can often negotiate a short period of time, usually 24-76 hours, after close of escrow to move out and transfer possession. This gives the sellers a little more flexibility and a higher level of comfort about not leaving their home until it is truly sold. 

 

The disadvantage of this arrangement for the buyers is that they don't have immediate possession of the home they are paying for, and they are potentially in a difficult position if the sellers don't leave on time as promised, or if some damage occurs during the move. 

 

Typically buyers give sellers the additional short period of time at no charge, but it is possible to specify that the sellers leave a modest deposit in escrow until they are out of the home, to cover any damage that might occur, and to specify a per diem cost, usually quite high, for any days the sellers stay past the agrreed on time. 

 

It is possible for sellers to arrange to rent back the property for a period of time after the close.  This often occurs when the sellers are waiting for the close of escrow on a replacement home, but may also occur around children finishing school, job transfers and other timing factors.  There is a special form that is used in California to spell out the details of such an arrangement.  You need to be careful to spell out issues of rent (usually the buyers' costs for mortgage, taxes and insurance), amount of security deposit, whose insurance will predominate, who will pay utilities, and procedures for collecting and releasing rent and security deposits.  Currently (April 2010)lenders will not allow rent backs of more than 30 days and prefer no longer than 30 days.