House in escrow – when can I sign rental lease?

[Tone]

As a long time lurker, I have heeded the advice of the Piggington community and sold my house in Lakewood CA (just outside Long Beach). My home is remodeled and I priced myself 10-15k below the other houses in my neighborhood and I actually had a bidding war on my house. Long story short, I’m in escrow with a closing date at the end of this month (May 31). I plan to rent after that.

The one thing worrying me is my buyer’s 100% financing. They have a FICO of about 695 but my realtor knows the loan officer and everyone assures me they will get the funds, but I’m not so sure. I had one offer on my house pulled because the potential buyer’s house fell out of escrow because the loan was denied.

My question is for those of you who have sold your house and plunged into the rental market. At which point during escrow is it reasonably safe to sign a yearly lease on a rental property? Everything is completed on my escrow (termite, inspection, etc) except final loan approval and funding (if I am saying those terms correctly). The loan approval is supposed to happen on Monday or Tuesday.

If the loan is approved, would I be reasonably safe to sign a lease? Or should I wait until the loan is funded? If I wait until then, I’m probably looking at storing the contents of my house and living in long term hotel or something.

Any advice? How did some of you former home owners handle the transition to being a renter?

[eccen in esc]

eccen in esc
I was up against the same problem when I sold in 8/06. I waited until loan contingency was signed off and was nervous about signing a year lease. My agent suggested I put a contingency on my lease agreement to the effect that lease is invalid if house doesn’t close escrow. You don’t want to have to move all your stuff twice. I waited till about a week before close. Good Luck.

[eccen in esc]

eccen in esc
I was up against the same problem when I sold in 8/06. I waited until loan contingency was signed off and was nervous about signing a year lease. My agent suggested I put a contingency on my lease agreement to the effect that lease is invalid if house doesn’t close escrow. You don’t want to have to move all your stuff twice. I waited till about a week before close. Good Luck.

[NotCranky]

After all contingencies are signed off you can sign the lease. Put an agreement into the lease covering what the damages are if you don’t perform. I would suggest the ammount be enticing enough that the landlord is motivated to sign with you but not more than 2 months rent.That should be somewhat close to or less than the earnest money that you get to keep if the buyer quits after contingency removal.There is no need for your move not to go smoothly. It is too late in your case but frequently the contract terms can be negotiated for the seller to maintain possession for a period of time after the close of escrow.
Good luck.

[NotCranky]

After all contingencies are signed off you can sign the lease. Put an agreement into the lease covering what the damages are if you don’t perform. I would suggest the ammount be enticing enough that the landlord is motivated to sign with you but not more than 2 months rent.That should be somewhat close to or less than the earnest money that you get to keep if the buyer quits after contingency removal.There is no need for your move not to go smoothly. It is too late in your case but frequently the contract terms can be negotiated for the seller to maintain possession for a period of time after the close of escrow.
Good luck.

[FormerOwner]

What I did was that I paid some of the buyer’s closing costs in exchange for staying in the house for 2 weeks after the close of escrow. I actually waited until the day escrow closed to sign the rental agreement for my new rental house. That way I had no risk of having to pay for 2 residences. It was well worth it to me to buy this little bit of “insurance” even though it was expensive.

[FormerOwner]

What I did was that I paid some of the buyer’s closing costs in exchange for staying in the house for 2 weeks after the close of escrow. I actually waited until the day escrow closed to sign the rental agreement for my new rental house. That way I had no risk of having to pay for 2 residences. It was well worth it to me to buy this little bit of “insurance” even though it was expensive.

[New_Renter]

Tone,
Rustico is right on with the advice, however, if you are less than 1-month away from closing your escrow you should be able to get the lease negotiated with a contingency such that if you fall out of escrow you only lose your deposit (or maybe even just part of your deposit) on the lease. The deposit is usually equivalent to 1-month rent. Just set the due date for the 1st months rent to be due 1-day after your close of escrow, and write your contingency appropriately. Ideally you would have negotiated at least a 1-week rent-back to avoid storage fees from your moving company, but failing that, all the major moving companies can easily store the contents of your house for a couple of days until your new lease begins at reasonable cost.
New_Renter

[New_Renter]

Tone,
Rustico is right on with the advice, however, if you are less than 1-month away from closing your escrow you should be able to get the lease negotiated with a contingency such that if you fall out of escrow you only lose your deposit (or maybe even just part of your deposit) on the lease. The deposit is usually equivalent to 1-month rent. Just set the due date for the 1st months rent to be due 1-day after your close of escrow, and write your contingency appropriately. Ideally you would have negotiated at least a 1-week rent-back to avoid storage fees from your moving company, but failing that, all the major moving companies can easily store the contents of your house for a couple of days until your new lease begins at reasonable cost.
New_Renter

[SD Realtor]

Tone, I am “hopefully” closing an escrow in Lemon Grove Monday that has been a nightmare. 100% financing and a FICO score in the high 600’s. I did not know the mortgage broker at all nor did I know the agent on the other side. Contingencies were removed on time. When it came time to get loan docs delivered we got a few different stories from the mortgage broker. We never found out what happened but it appears that the original lender punted on the loan. My gut feel was that the mortgage broker was a sheister and was overstating the buyers assets or the broker did not note that the lender may have had stricter standards then in the past. Somehow, someway he got the loan pushed through another lender. So here we are 2 weeks past the original COE and the loan docs were signed Friday and hopefully we will fund Tuesday. The buyers agent had to pay my sellers damages (PITI and furniture rental) because the buyer herself had no funds to pay them.

So yes while it is a high probability that once contingencies are released that things will close accordingly, it is not a slam dunk. In this case the buyer was hispanic and did not know english, the buyers agent was hispanic as was the mortgage broker. I am 100% sure that the two of them took heavy advantage of the unknowing buyer.

SD Realtor

[SD Realtor]

Tone, I am “hopefully” closing an escrow in Lemon Grove Monday that has been a nightmare. 100% financing and a FICO score in the high 600’s. I did not know the mortgage broker at all nor did I know the agent on the other side. Contingencies were removed on time. When it came time to get loan docs delivered we got a few different stories from the mortgage broker. We never found out what happened but it appears that the original lender punted on the loan. My gut feel was that the mortgage broker was a sheister and was overstating the buyers assets or the broker did not note that the lender may have had stricter standards then in the past. Somehow, someway he got the loan pushed through another lender. So here we are 2 weeks past the original COE and the loan docs were signed Friday and hopefully we will fund Tuesday. The buyers agent had to pay my sellers damages (PITI and furniture rental) because the buyer herself had no funds to pay them.

So yes while it is a high probability that once contingencies are released that things will close accordingly, it is not a slam dunk. In this case the buyer was hispanic and did not know english, the buyers agent was hispanic as was the mortgage broker. I am 100% sure that the two of them took heavy advantage of the unknowing buyer.

SD Realtor

[NotCranky]

SD R,
What do you suggest Tone do at the stage in the game that he/she is in? Something that a self respecting landlord would work with that gives the security Tone is looking for?
I like to see that the agent for the buyer in your case took proper responsibility for the error. It is amazing that a person who can’t pay a few weeks PITI and furniture rental for a house in lemon grove is getting a loan at all!
There is our proof that money isn’t that hard to come by still.I don’t envy your position.

[NotCranky]

SD R,
What do you suggest Tone do at the stage in the game that he/she is in? Something that a self respecting landlord would work with that gives the security Tone is looking for?
I like to see that the agent for the buyer in your case took proper responsibility for the error. It is amazing that a person who can’t pay a few weeks PITI and furniture rental for a house in lemon grove is getting a loan at all!
There is our proof that money isn’t that hard to come by still.I don’t envy your position.

[sdappraiser]

SD Realtor,

Off topic, maybe.. but was the buyer broker’s initials R.C. by any chance?

[sdappraiser]

SD Realtor,

Off topic, maybe.. but was the buyer broker’s initials R.C. by any chance?

[Author]

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