Seller wants to stay in house for 3 months after closing, rent free...

I thought I had heard it all, but it seems I have not: we are trying to show a house to a buyer, and in the comments the MLS listing indicates that unless the buyer agrees to allow the seller to live in the house for 3 months after closing, they wont be allowed to see the house. Now you all may correct me if I am wrong, but this means that the buyer would have to go with investment property lending, as they would not be able to call the house "owner Occupied" when applying for the loan. Most likely the lender would not grant the buyer this concession. Also, because of this, the buyer would forgo the $8K tax credit, if they are first time buyers. After all, it would not be an owner occupied house.

Note that this house is listed at market value, without a discount for the rent!

Of course, we have seen deals go through that allowed the seller to stay, at a low rent, until such time as they found a place to move to, say, a month after closing. But again, all of the above applies, and at least in those cases the seller was willing to pay rent.

This seller wants to live rent free for three months AFTER Closing... not 3 months from today, but so much after the closing, rent free.

Other than a very generous investor, who is paying cash for the house, the house becomes essentially unsellable with these conditions.

Question: Have you seen such conditions on a sale? Should this house be permitted into MLS, since the conditions are prohibitive? What would you say to such a condition? Would you list such a house? Would you advise a buyer to take the deal?