What is possession?
In a real estate transaction, possession occurs when the buyer takes ownership of a property after signing closing documents. After the sale is recorded with the local government and the purchase funds have been received by the seller, ownership of the property is transferred to the buyer.
Deeper definition
Possession is the final step in a real estate transaction. First the buyer and seller draw up a purchase agreement for the property. Items on the agreement that are subject to negotiation include the purchase price, possible seller assistance with closing costs, the closing date, and what items come with the home.
When submitting the offer, the buyer also includes a deposit known as earnest money. Earnest money will eventually go towards any closing costs for the home. If the buyer backs out of the deal, the seller may get to keep the earnest money. Once the buyer and seller agree on the terms of the deal, the home enters escrow.
Between the escrow date and the closing date, the buyer must complete a list of items to prove to the lender that the home is suitable for purchase. These items often include:
- Home appraisal
- Home inspection
- Pest inspection
- Environmental inspection
If the home rates poorly on any of these items, the buyer may lose his funding. To save the deal, the buyer and seller may be able to renegotiate the terms. Prior to the closing date, the buyer must purchase hazard insurance for the home. When the closing date arrives, the buyer should bring a certified check for any money that he initially owes on the home, such as the down payment or closing costs.
Possession example
An individual who purchases a home takes possession of the keys upon completion of the home-buying process. A buyer and seller agree to a sale price of $200,000 and a closing date 60 days from the offer date. During the home inspection, the inspector finds that there’s a problem with the roof. The seller agrees to repair the roof to keep the deal intact, and the buyer takes possession of the keys as scheduled.
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