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Moving in before you own a house can pose legal dangers

Talia Freedman

Q: I’m getting ready to close on my new house, and I asked my broker if I could get the keys early. The seller said “no” and is making me wait until the loan “funds,” but that’s going to push us into the next week. I really wanted to move over the weekend. The seller doesn’t even live there. Why won’t they give me the keys?

A: Like most buyers, you want to get into the house you’re buying as soon as possible. But if the house hasn’t been recorded into your name yet, there is risk to both you and the seller by having you “take possession” early.

Is something likely to happen? No. People move into their new houses early all the time and nothing goes wrong. But if something does occur, it can have huge financial and personal implications for both you and the seller.

Let’s say you move in to the house on Saturday morning. All your stuff is there, and you’re getting it put away. You go out for dinner, and something catches fire and the house burns down while you’re gone. The first thing you do is call your insurance person. Even though the insurance was paid as of the day you signed the papers, the ownership has not transferred yet. Do you think the insurance company is going cover your claim when you weren’t even the owner yet? In all likelihood, they will say they are not responsible, and you’ll have to get the seller to make the claim. (There is a provision in your contract about “risk of loss” to the house, but we’ll discuss that another time).

Unfortunately for you, the seller’s insurance isn’t going to cover your belongings. After all, the seller lives someplace else and covers their belongings in the insurance on their primary residence, not on the empty house they’re trying to sell. The insurance company knows this house is empty or at least not occupied by the seller. So, while the house may be covered, all of your belongings are a loss since neither insurance company is willing to cover them.

So, even though it’s an inconvenience now, and even though it’s highly unlikely anything could go wrong, don’t you think it’s better to wait the couple of days and move in once you know the house is really yours? In the long run, you’ll get to be in your house and the inconvenience of a couple of days will be a distant memory. Congratulations on the new house and on what I’m sure is a great interest rate on your mortgage!

Talia Freedman is the owner of Talia Freedman and Co.