Question: We sold our home a few weeks ago and are now doing a rent back for a couple of months when our new home will be ready. Our Realtor had us sign a "standard" Post Settlement Occupancy Agreement, which I think as the seller and now renter, has really hurt us.

It states that "all electrical, heating, air conditioning, plumbing and any other mechanical systems and related equipment appliances and smoke detectors included in this contract shall be in working condition." Since the date of settlement, the garage door opener broke and the hot water heater developed a slow water leak. We bought a brand new garage door opener and had it installed and have gone to Home Depot to have a new water heater installed, which now requires a new flue, at a cost of $250, and new doors for proper ventilation as well as installation and permits. Very expensive.

Based on your interpretation of this language, are we responsible for all of those costs? Is this really "standard" language for this area as my Realtor has told us?

Answer: When it comes to interpreting contracts and legal agreements, please consult with an attorney. However, when it comes to real estate agreements, the contract says what the contract says – or in this case, the Post Settlement Occupancy Agreement says what it says.

Before you sign anything, read it. I know that sounds pretty basic, but read it and then go over it with your Realtor or attorney. When the form says, “all electrical, heating, air conditioning, plumbing and any other mechanical systems,” are to be in working order the day the buyer walks in as the new owner, you can pretty much count on the buyer expecting all that to be working on move-in day.

With most contracts and forms, you don’t have to really ask the question, as our dearly departed President Clinton asked, “What is, ‘is’?” It means what it says and rest assured, the buyer or his attorney/Realtor, will enforce it to the nth degree of the law.

When you look at signing this type agreement, conduct a mental inventory – if not actually written down – of the condition of your house. How’s the plumbing? Now before you answer, “Oh, it’s fine,” remember that plumbing includes the commode, the faucets, the traps, etc. If you have to jiggle the handle on the tank for the water to quit filling the toilet, then that is NOT working. It needs to be fixed.

If those items are working now, what about appliances on their last leg? In your case, the garage door opener apparently had seen better days. If you’ve been having service problems on an air conditioner, refrigerator, ceiling fan, etc., then you may want to write an exclusion for those items and insist on an “as is” phrase in the occupancy agreement. Keep in mind, though, not many buyers will go for that unless they find themselves in a horrific seller’s market where houses with defects are scurried after as much as those that are in pristine condition.

In essence, you are no longer the owner of your property, however, the intent of your staying there is not for an investment, such as a landlord-tenant situation. In such a case, the investor-owner would expect to absorb the costs of the new water heater and garage door opener. However, the new owner is doing a rent back to help you with the timing of your move. He or she wants to enter a home that is in move-in condition. On the other hand, imagine what they would be saying at this point if they had moved in right after settlement and all these appliances started breaking down. Can you say small claims court?

I would guess you would want the same liability requirement if the tables were turned. In the future, you may want to consider a home warranty (which, if you have one in place, the items you've mentioned are usually covered).

Most homeowners are under the assumption that home warranties are only for those in the midst of a home-buying/selling situation. Actually, most home warranties can be purchased at any time you own the property. The basic requirement is that your house is in good shape and that all the items covered by the warranty are in working order.

Warranties carry a deductible for each incident and the policies require you to call the warranty company first before making arrangements to have the system or appliance fixed. Usually, the policy underwriter has a list of vendors to use. For more information on home warranties, click by any of the sites listed below:

• 2-10 Home Buyers Warranty
• American Home Shield
• Best Home Warranty Company
• Fidelity National Home Warranty
• HMS Warranty
• Home Warranty of America

Published: September 27, 2002

Use of this article without permission is a violation of federal copyright laws.

Mr. Carr has covered real estate since 1989. He is the author of Real Estate Investing Made Simple. Got a personal real estate issue? Post your questions and comments at Anthony’s blog: commonsenserealestate.blogspot.com.