Never Release the Key to the Buyer Before the Home has Closed AND Funded

One of the best ways to find yourself in a lawsuit as a listing or buyer agent is releasing the key to the buyer before the home has officially closed AND funded. There's a big difference between the two.

A home can "close", which means all parties have signed off on the transaction, but that doesn't mean the property has funded. Funding occurs when the title company receives the proceeds from the buyer and sends it to the seller.

Many years ago I listed a home which closed, but the buyer had the rug pulled out from them at the last second by their lender. The lender changed the terms of their agreement and that meant the buyer couldn't close.

Unfortunately, the seller didn't listen to me, signed a lease on another home, and vacated their home allowing their buyer to move in. They became upset with me, but luckily I had saved my correspondence advising them not to do do any of those things. They were excited about the sale and just assumed it was going to go through. Fortunately, the home did fund a couple of weeks after the closing, but it was tense for awhile.

As the listing agent, never give permission to the buyer agent to remove the key from the lockbox and give it to their buyer unless you have express consent from your seller. If the buyer starts to move in prior to funding and funding never occurs, your seller might have a very difficult time getting them out.

Chances are, the buyer has nowhere else to go, so how motivated are they going to be to vacate the home immediately? The seller can't even show the home with their new, unwelcome tenant. In some states it can take months to remove unwanted occupants from a home so who do you think the seller is going to blame if you released the key to the buyer?

Just because everything has gone smoothly up to the day of closing and funding you should never assume the home is going to fund. If the buyer asks for permission to move their personal items into the home prior to closing and funding, talk with your seller, explain the dangers, and advise them not to allow it.

By the way, the buyer agent has no right to take the key out of the lockbox and give it to the buyer without permission from the seller or the listing agent either. If they do, and things go sideways, they're opening themselves up to potential litigation.