Month: May 2018

Possession Prior To Close – Never A Good Idea | Mastroianni Consulting

From a risk management point of view, permitting a buyer to have possession prior to close is NEVER a good idea. Why? There is too much potential for something to go wrong.

Here are 10 scenarios to consider:

1. What happens if the buyer is unable to close?
2. What if they decide they don’t want to close OR move out?
3. What if the buyer makes a large purchase prior to closing and no longer qualifies for the loan?
4. Someone is injured – who would be liable?
5. What if the buyer damages the property?
6. What happens if the home burns down, or is significantly damaged?
7. What if the buyer didn’t start their insurance early and a claim needs to be made?
8. What happens if the insurance won’t cover damage to the property?
9. What if the buyer does repairs and then can’t close? Could the buyer file a mechanic’s lien against the property for work completed?
10. What if permits for the work completed were not pulled?
And the list goes no….

As agent, protect your client by never permitting a buyer to have early possession. Even in the most dire circumstances, there are options: they can stay in a hotel, lease back their existing property, stay with family etc.

In the event that you have absolutely no choice in the issue and you must deal with having the buyer take possession prior to closing, follow these steps:

• To properly protect all parties, you will need a separate lease agreement. A lease allows the seller to quickly evict a tenant. Removing a “buyer in possession” under just the purchase agreement is a much more difficult and costly task.
• You must treat both transactions as being separate. In other words, the buyer/lessee must put down both their down payment for the purchase plus a separate security deposit and the first month’s rent for the lease.
• Take pictures of both the interior and exterior of the property to document the condition at the time that the buyer takes possession. Have both parties sign off on the condition of the property prior to giving the buyer/lessee the keys.
• Purchase a home warranty protection plan. If there are problems with the home’s systems or appliances, a home warranty policy minimizes the seller/lessor’s potential cost and exposure.

There are many horror stories out there that expose the risk of early possession. My strong recommendation is that you not add to the list of tales of woe. Make it your cardinal rule to never, ever let a buyer have possession prior to closing.


Mastroianni Consulting is a consultancy firm serving the needs of Realtors and their clients. Dedicated to Excellence, they provide support services that assist real estate agents to grow their businesses. For more information and to learn how we can help you become more successful, please contact one of our Client Care Specialists.

You can reach us at (636) 220-7481 or

Other articles that may interest you:  Lead Based Paint And The Perils For Real Estate Agents | Mastroianni Consulting
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Lead Based Paint And The Perils For Real Estate Agents | Mastroianni Consulting

The Law

Approximately ¾ of the nation’s housing built prior to 1978 contains some lead-based paint. When properly maintained and managed, this paint poses little risk. However, more than 1.7 million children have blood-lead levels above safe limits, mostly due to lead-based paint hazards. Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems, and impaired memory. Lead poisoning also poses a particular risk to pregnant women.

To protect the public from exposure to lead from paint, dust, and soil, Congress passed the Residential Lead-Based Paint Hazard Reduction Act of 1992, also known as Title X. Section 1018 of this law directed HUD and EPA to require disclosure of information on lead-based paint and lead-based paint hazards before the sale or lease of housing built before 1978.

As real estate professionals, the EPA & HUD Real Estate Notification and Disclosure Rule states that we are responsible for ensuring sellers and landlords are made aware of their obligations to disclose all known lead-based paint and lead-based hazards in housing and that we are to provide any reports on lead in the housing.

This impacts us with the Lead-Based Paint Disclosure Form and the Lead-Based Paint Renovation, Repair and Painting Program (RRP). Both are enforced by the EPA.



To be in compliance with the Disclosure Rule it is our responsibility, as agents, to ensure that the Lead-Based Paint Disclosure is completed correctly and that all parties have signed prior to, but not later than the contract offer date. This is why the sales contract date is at the top left of the form. When the EPA conducts an audit of your office’s Lead-Based Paint Disclosures they are checking to see (among other things) that all of the dates beside the signatures occur no later than the contract date at the top of the page. They are also looking for the form to be correctly completed and that it contains all of the necessary initials.

Federal Law stipulates a purchaser’s or lessee’s right to be informed of the existence of lead-based paint prior to signing a contract or lease. They are then given 10 days to conduct an inspection at their own cost if they choose to.

Errors, incorrect signature dates, missing information or initials on the LBP can result in fines of $11,000 per instance. Further, a seller, lessor, or agent who fails to give the proper disclosure information can be sued for triple the amount of damages. In addition, they may be subject to civil and criminal penalties.  Click here for more information.

How do we protect ourselves, clients and broker/office?

Listing Agents, it all begins with you. Make sure that you have all of the disclosures, including the Lead-Based Paint completed by the Seller and uploaded to the MLS prior to making your listing Active. This will ensure that the Seller and Listing Agent’s signatures are dated prior to any offer. It also permits the Buyer Agent to have the Lead-Based Paint Disclosure signed prior to submitting an offer.

What if you are a Buyer Agent and the Disclosures have not been uploaded?

Prior to submitting an offer, reach out the Listing Agent for a copy of the disclosures including the Lead-Based Paint. This way you will be in compliance with the law. According to the National Association of Realtors, the EPA has sued or threatened to sue buyers’ agents who failed to comply with the disclosure requirements of the act. One recent EPA claim filed under the act involved a single-family residence and included both the salesperson and the broker.

It should be noted that as the EPA levies penalties or fines, these are often not covered by errors and omissions insurance.


RRP is a federal regulatory program affecting contractors, residential property owners/managers, and others who disturb painted surfaces. It applies to residential homes, apartments, and child-occupied facilities such as schools and day care centers built before 1978.

RRP is aimed at protecting against lead-based paint hazards associated with renovation, repair and painting activities. The rule requires workers to be trained to use lead-safe work practices and requires renovation firms to be EPA-certified. It also requires that the reduction measures taught are implemented at every job site.


As real estate professionals, we often represent investors and rehabbers or, in many cases, we are the rehabbers or flippers. RRP is something that we need to be cognizant about in our day to day interactions with buyers and sellers, and the contractors that they/we employ. Any activity that disturbs paint in pre-1978 housing and child-occupied facilities requires RRP certified contractors. These contractor activities include: remodeling, conducting repairs and/or maintenance, electrical work, plumbing, painting preparation, carpentry, and window replacement. Minor repair and maintenance activities that disturb less than 6 square feet of paint per room are excluded.

The EPA uses a variety of methods to determine whether individuals and businesses are complying, including inspecting work sites, reviewing records and reports, and responding to citizen tips and complaints. Non-compliance can result in fines of $37,500 per day. Click here to learn more.

Things to Consider

What if you have been working with a rehabber who isn’t RRP certified? What if several remodels have been completed and safe-lead practices were not employed? What if a young family moves in completely unaware that their children could be playing in a yard that could be lead contaminated?

Remember, ignorance is not an excuse. If you know of work that is being completed without the proper safeguards and you don’t correct, report or disclose it, then you too could be implicated in a legal case. The law is very clear.

Final Thoughts

As Agents, our responsibilities cannot be over-stated. The Real Estate Notification and Disclosure Rule specifically addresses our responsibilities by requiring us to ensure compliance with the provisions of the law. The penalties are harsh because compliance is critical.

Please spread the word.  Fines are a deterrent for those who disregard the law, but knowledge and lead exposure prevention has so much better an outcome for the children of our city.

Other articles that you may find interesting:
Ten Business Relationships Every Realtor Should Have | MASTROIANNI CONSULTING
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