It is common for sellers to retain possession of their home for a few days after closing, during which time, it is really no longer the seller's home, it is the buyer's home. What is not common, however, is for sellers to evaluate the risks they assume by retaining possession for those few days.

At closing, when the seller transfers title to the property to buyer, the seller's insurance terminates. Nevertheless, boiler plate language in the W.A.R., NWMLS and Spokane purchase agreements make seller liable for the condition of the property until buyer takes possession. If the house burns down (or even if something less catastrophic occurs), the seller's insurance will not compensate the buyer, yet the seller is still liable to the buyer for the condition of the property.

If seller is going to retain possession beyond closing, seller should be advised to consult their insurance agent as to whether coverage can be issued for those few days. If insurance coverage is not available, then seller should be advised to seek legal counsel as to whether it would be appropriate to add language shifting the liability for the condition of the property, in the event of catastrophic loss after closing, to buyer.

However, even if the post-closing liability for catastrophic losses was shifted from seller to buyer, the buyer's insurance company may not cover the loss. If the buyer did not advise their insurance company that the house would be occupied by someone other than the buyer for the first few days, then the buyer's insurance company can (and some have) take the position that the buyer's owner-occupied insurance policy will not cover the loss. Consequently, there would be no coverage for the loss.

If seller is going to retain possession beyond closing, buyers should advise their insurance carrier of that fact. The disclosure to the insurance company should be in writing as far in advance of closing as possible. Most insurance companies will have no concern over the issue at the time the binder is issued at closing and once they are on notice of the seller's delayed possession, it will be more difficult for them to deny coverage, on that basis, at a later date.

In addition, seller should be advised to consider insuring their personal property within the home during the time of retained possession. Even if buyer's insurance will cover losses to the real property improvements, it would not likely cover the seller's personal property located within the buyer's home. Accordingly, seller may need to have some form of a renter's policy during those few days. It is also possible that seller's personal property would be covered under another insurance policy that the seller has in place, so sellers should simply be advised to consider this issue and take whatever precautionary steps they deem appropriate.