Q. We have sold our house in Virginia, and will be moving to another house shortly. Because of the busy real estate market, our buyer's lender has not yet been able to give a firm loan commitment. We feel confident that our buyers will get their loan soon. Our buyers would like to move in before settlement, and we are willing to accommodate them. However, we do not know the legal ramifications of such a transaction.

A. This has become a very common problem in today's market, because of the heavy loan application demand on mortgage lenders throughout the metropolitan area. This is especially true if the borrower is attempting to get a VA or FHA mortgage.

While I recognize that you would like to assist your buyers, permitting a buyer to move in before settlement, in my opinion, can be very dangerous. First, from the seller's point of view, this gives the buyer an opportunity to decide that all sorts of things may be wrong with the house, and the buyer may use these against you at settlement. Second, insurance considerations have to be considered, because you no longer will be in control of the property.

If a fire occurs during the occupancy of the purchaser, for example, whose responsibility is it?

If you are prepared to let your buyer move in before settlement, you should draw up a written agreement that contains at least the following points:The purchaser agrees to occupy the property and will pay an agreed-upon amount, usually based on a per-dayformula, for the reasonable rental of the property. The purchaser agrees to place the balance of the down payment with the title attorney or title company to show good faith. If for any reason, the purchaser does not actually complete the settlement, the agreement should spell out that all or part of the deposit will be forfeited at the option of the seller. The purchaser will have a preoccupancy inspection of the property, and will agree to accept the property in its present condition. Thus, at the settlement, the purchaser will not be permitted to raise questions as to the condition of the property. The purchaser is obligated to maintain the property as of the date of occupancy, subject only to reasonable wear and tear. The purchaser also is obliged to pay all utilities as of the date of occupancy. The seller will be permitted to inspect the property on a periodic basis until settlement, during reasonable hours and on reasonable notice. Finally, if at all possible, a date should be set for the actual settlement.

If you are working with a preoccupancy agreement, bear in mind that it is a legal document that spells out the terms and conditions for the buyer to move in before settlement.

Otherwise, the seller may find that the only way to get the buyer out, if settlement does not take place, is to go to the landlord-tenant court, which is expensive, time-consuming and uncertain as to the outcome.

I personally oppose allowing a purchaser to move in before settlement. However, there may be instances where it is in everyone's best interest to permit it.