The buyer possession date explained

You made a winning offer, and you’re ready to jump into contract negotiations with the seller. But there’s one major question lingering on your mind: When can you finally move into your new dream home?

It’s a common question for buyers, and one that plays an important role in a real estate transaction. The possession date — or what you might refer to as your move-in date — must be agreed upon by both you and the seller. The last thing you want is to show up with your moving truck only to find the seller still cozying up in your new living room.

Possession dates can be a bit complicated, so it’s important to understand the ins and outs before finalizing your real estate contract.

What does possession date mean?

The possession date is the day a buyer is entitled to move into their new home. Usually, the buyer and seller agree on a possession date when they’re negotiating the real estate contract.

Note that your possession date may or may not be the same as closing day. Closing day (sometimes called the “completion date”) is the date when the buyer pays the seller for the home and the title transfers from the seller to the buyer.

There are a few common reasons a buyer may not be able to move in on closing day. Sometimes, there simply isn’t enough time to close the transaction, record the deed at your county clerk’s office, and take possession of the home all in one day. Further, many sellers request a possession date that’s after closing, so they have time to purchase or move into a new home.

Typical buyer possession dates

The possession date is typically set during negotiations and is included in the real estate contract, along with the closing date and any other important milestone dates or conditions the parties need to meet.

Some buyers may be able to negotiate an immediate possession date. This means as soon as the transaction is closed and the deed is recorded, the buyer can move in. A few other common buyer possession dates may be 15 days, 30 days, 60 days, or even 90 days after closing, depending on how much time the seller needs.

With later possession dates, or those that are 30 to 90 days after closing, the buyer may offer a lease-back agreement to the seller (also called a post-closing possession agreement). This means the buyer leases the home back to the seller for a certain period of time after closing at an agreed-upon price. That price may be the daily or monthly cost of the buyer’s new mortgage payment, or the equivalent of market rents in the area.

However, note that lease-backs longer than 60 days may cause the lender to view the home as an investment property, and charge the buyer a higher mortgage rate.

When the buyer allows the seller to stay in the home after closing, it can create complicated legal issues of tenancy. Consult your REALTOR® or an attorney to make sure you understand possible pitfalls.

Why are possession dates important?

The possession date can be a big point of negotiation for both parties. The buyer is often anxious to get into their new home while the seller may prefer some extra time to move out. Buying or selling a home is a huge life event with a lot of moving parts, so it’s no surprise that many buyers and sellers can see the possession date as make-or-break.

It’s vitally important that both parties are on the same page about expectations when it comes to the possession date. You can work with your REALTOR® to negotiate this piece of the contract and help ensure there are no miscommunications.

Ultimately, the possession date may hinge on how much negotiating power each party has in the transaction. Later possession dates and lease-back agreements are more common in seller’s markets where buyers often make concessions to beat out the competition. In buyer’s markets, the buyer tends to have more negotiating power to get an immediate move-in date.

For example, let’s say it’s a seller’s market and the seller has a job lined up in another state. The seller knows their job starts on September 1st, and that they’ll need to be moved into their new location by that time. They decide to put their house on the market in April to drum up interest.

Two buyers put in offers at the same price, $10,000 over asking. One buyer requests an immediate possession date. The other buyer offers a flexible possession date for up to 90 days after closing.

All other things being equal, the seller is likely going to pick the 90-day possession date because it meets their need for a more flexible moving timeline.

Delayed possession after closing

Real estate transactions don’t always go as planned. Occasionally, a possession date may be delayed after closing. There are several potential reasons for such a delay.

• Seller can’t move in time: Sometimes a seller can’t move out in time. In this case, the buyer may be within their right to enforce the possession date and ask the seller to be out by the agreed upon date.
• Deed recording delay: Ideally, the deed is recorded by the buyer’s title company the same day as closing. In reality, sometimes closing happens too late in the day to record the deed that same afternoon. This can delay the buyer’s ability to move into their new home, and the buyer may have to wait until the deed can be properly recorded. If closing happens on a Friday afternoon, that could mean waiting until the following week. Sometimes, recording the deed can take weeks.
• Closing on a holiday: Holidays can make closing more logistically challenging, since banks and county offices are often closed. Scheduling a closing near or on a holiday may result in delayed closing or possession.
• Delayed closing: Closing can be delayed for all sorts of reasons. Perhaps the mortgage company needed a last-minute form, or the closing attorney is experiencing delays thanks to a higher-than-average caseload. If closing is delayed, your real estate agent will likely work with the seller’s agent to amend the contract and accommodate the delay.
• Lease-back agreement: A buyer may agree to take delayed possession of the home in the form of a lease-back agreement. A lease-back agreement must be negotiated upfront by both parties during the creation of the contract. If the seller requests a lease-back agreement during or after closing, the buyer does not have to comply.
• Tenant needs to move out: If a buyer purchases a home that currently houses a tenant, they may need to wait longer for the possession date. In that case, the possession date will depend on state and local law, and the tenant’s lease term.

Wrapping up

The possession date is an important part of a real estate contract, and defines when you can legally move into your new home. Depending on the terms you negotiate with the seller, you may move in immediately after closing or after a certain period of time. Work with your agent to set a possession date that protects your interests while still meeting the sellers needs.