Renting home to buyers when closing is delayed can be risky

Sellers get frustrated when a transaction goes beyond its scheduled closing date, but letting the buyers move in before title formally transfers is fraught with potential problems.

Q. We are selling our home to a young couple, but closing has been delayed by a few weeks because the appraiser and lender have been backlogged with work. The couple would like to move in even though the sale hasn't been officially completed, and is willing to pay us a modest amount of rent until the title to the property finally changes hands. This would be fine with us, because the new house we are buying has already been transferred to our names, and we are now looking at the possibility of making payments on two mortgages until the sale of our old home closes. What do you think of this plan?A. Not much. I certainly understand why you are anxious to avoid making payments on two mortgages instead of one, but the "modest" amount of rent that you say the buyers are willing to pay could pale when compared to the problems that may occur if you allow them to move into your old house before the sale is finalized.First, allowing the pair to move in now will provide them with a number of weeks to "test drive" the home. If they soon become stricken with buyer's remorse, they may want you to slash the agreed-upon sale price or even try to cancel the deal.Renting the home out on a short-term basis raises important insurance issues, too. You could be held financially liable if the young couple or a visitor gets hurt on the property before the title changes hands to theirs, especially if the company that provides your homeowners insurance was not properly notified about the rental arrangement.And, God forbid, you might even run into the same problem that hit one of my good-hearted neighbors who signed a brief rental deal with his buyers last December because the home sale couldn't be completed by its scheduled date. Just 24 hours before the long-delayed deal was expected to finally close, the bank canceled its approval of the buyers' loan after discovering that they had filed for bankruptcy a few weeks earlier.The prospective buyers refused to move out of my neighbor's house. They never paid him any rent, and he had to spend thousands of dollars in legal fees to evict them, plus thousands more to get the home back into shape so it could be marketed again.The "for sale" sign is still in his front yard, despite two reductions in the price that the couple originally agreed to pay nearly six months ago.You certainly could help your own buyers to look for an apartment or hotel that accepts short-term tenants, but allowing them to move into your old house before the transaction is finalized would simply be too risky.Q. My wife and I have outstanding credit and earn plenty of money. We recently applied to rent an apartment, and our application got the landlord's preliminary approval, but then he decided to cancel the proposed lease after finding out that both my wife and I are smokers and his apartment building has a no-smoking policy. Since smoking is a legal activity, can we file a complaint or even a lawsuit under federal fair-housing laws?A. You can file a complaint or lawsuit, but it won't do you any good. Property owners are free to institute no-smoking policies at their buildings, in part because it protects the health of other tenants by eliminating the hazards of breathing secondhand smoke.The federal Fair Housing Act prohibits discrimination based solely on a person's race, color, religion, sex, handicap, familial status or national origin. But the law does not protect a tenant's personal activities, like smoking or drinking, so landlords are free to place restrictions on such acts or ban them altogether.Q. I belong to a book club, and one of the members at our recent monthly meeting said the house that was the subject of The Amityville Horror novel and movie was recently put up for sale. Do you have any details?A. Sure. The recently renovated, five-bedroom home on New York's Long Island was listed for sale a few weeks ago for $1.15 million. That's up from the $310,000 that the current owners paid for the property in 1997, and a whole lot more than the mere $55,000 it fetched not long after Ronald DeFeo Jr. shot six sleeping family members to death there in 1974.The book and subsequent movie (plus its remake) chronicled the horrors and hauntings allegedly endured by the first family to purchase the house after the grisly murders. They included tales of walls that would inexplicably ooze with slime, furniture that would slide across the room and even a terrifying visit from a demonic pig.Subsequent owners have reported no paranormal events, although one changed the actual street number of the home to discourage lookie-loos from constantly driving by. You can see online photos of the home by visiting Long Island's Multiple Listing Service, www.mlsli.com/unisearch.cfm, and typing in its property listing ID number - 2294176 - in the box on the top right-hand corner of the page.bull; For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960.#169; 2010, Cowles Syndicate Inc.