What is Use and Occupancy?
In some cases, a seller could really benefit from an offer of use and occupancy from the buyer. For instance, maybe the seller needs the funds to purchase a new home and needs a little buffer time between closing on their house and buying their new home. Or, perhaps they would like a little extra time to paint before they move in. If a buyer has the flexibility and can offer a use and occupancy, this will alleviate some stress that the seller might have and prevent the seller from having to find temporary accommodations and storing belongings.
How long does a Use and Occupancy last?
If the buyer has a mortgage, the lender will only allow a use and occupancy for up to 90 days.
How is the Use and Occupancy structured?
Even though it is considered a “lease back”, the agreement and “rent” is different from a typical lease. First, the seller is charged a per diem for the number of days they are occupying the home past the closing. Taxes, the buyer’s mortgage interests and any other carrying costs (i.e HOA fees) are sometimes worked into the per diem but it is a cost that is negotiated between the buyer’s and seller’s attorneys, who will then draw up the agreement.
If you are a buyer who is up against competing offers, consider offering a use and occupancy to sweeten your offer package. The flexibility may be just what the seller needs.