Frequently it happens that sellers don't want to give up possession of their home until after escrow has closed. I am not referring here to situations where they will rent back for six months or a year. Rather, it is the situation where the seller doesn't want to move out until two or three days after closing.

There can be good reasons for this. More than a few transactions have fallen apart at the last minute, though this is not common. What is more ordinary – and happens too frequently – is that the closing may be delayed a few days, maybe even a week. Often this is not the buyer's fault, but that of some third party (such as an underwriter). The point is: knowing that closings might be delayed, many sellers don't want to schedule movers and packing etc. until they know for sure that the closing has happened. Moreover, it may simply be a question of money. They need to have the sale proceeds in hand in order to pay the movers.

I know, I know. There are those who will argue that closings ought never to take place until and unless the sellers are out. While there may be compelling arguments for this point of view, the fact remains that it doesn't always happen, and that it would probably be a mistake to let this issue be a deal-killer if everything else was satisfactory.

So, the seller is going to remain in possession for, say, three days after closing. How best to handle this? You want more protection for the buyer than simply to say "OK". On the other hand, the situation doesn't seem to warrant a lengthy special contract.

The California Association of Realtors® (CAR) sets forth an alternative in its standard form Purchase Addendum Agreement (PAA). While the PAA deals with other topics as well, one of the options it lays out is "Seller to Remain in Possession After Close of Escrow." This option contains ten pre-printed sub sections plus a couple of blank lines for "other terms". It takes up about 2/3 of a page and might be described as a "rental agreement lite."

One of the main virtues of the CAR treatment is that it recognizes and makes clear that the seller – the former owner – is now a renter, even if only for a few days. So, for example, the PAA option includes a section wherein both a daily rental rate and a security deposit amount can be specified.

Sometimes, this comes as a shock to the seller – it may even be perceived as an insult. "I'm not going to pay rent to stay in my house!" "Who needs a security deposit? Do they think I'm going to trash my own home?!" It can be a little testy, but this is a conversation that needs to take place. It really isn't their property anymore; and they, just like anyone else, might accidentally spill something on the carpet or gouge a hole in the wall when moving furniture.

The PAA seller-in-possession section defaults to the position that the seller will continue to pay for the utilities while they remain, but it allows for this to be treated differently. It also reminds the sellers that their personal property won't be covered by the new owner's insurance. They need to get their own.

There is no "right" way to structure the brief rental agreement between sellers and the new owners. Indeed, it is common for the buyer not to charge any rent. The important thing, though, is that there needs to be some clear agreement specifying what the relationship is and who is responsible for what.

Published: April 26, 2011

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Bob Hunt is a former director of the National Association of Realtors and is author of the recently published book, "Real Estate the Ethical Way." A graduate of Princeton with a master's degree from UCLA in philosophy, Hunt has served as a U.S. Marine, Realtor association president in South Orange County, and director of the California Association of Realtors, and is an award-winning Realtor. Contact Bob at .