photo courtest of dvs
The roof, the roof, the roof is on fire. *
You and your agent have your offer accepted, you've done your inspections and the title company and lender are doing their work to get your home closed in a few short days. You're about as excited as you can be and can't wait. By this time next week you'll be putting the keys into the front door of your new home at 123 Fake Street. Life is good. In anticipation of your new address, you decide to swing by the house and take a look at the front yard to plan out your new flower beds under the windows. As you pull up at the curb, your jaw drops in horror.
Your new home is engulfed in flames.
Your dream of home ownership is now a nightmare. As the firetrucks scream to the home a million things go through your head, but one thing is louder than everything else and helps drown out the noise of the fire engines. What do I do now?
Welcome to Realtor® Speak 102.
This scenario is horrifying and wouldn't be a lot of fun to live through, but it does happen. I've never had it happen to any of my clients and I hope to keep it that way, but in case it ever does, I'm prepared to deal with the consequences. Thanks to the Texas Real Estate Commission's One To Four Family Residential Contract (Resale), we have a plan of action and a way to deal with this scenario when buying or selling a home. It's called Casualty Loss and it's in Paragraph 14.
With this one simple paragraph, your problems are solved. Casualty Loss gives you a few remedies in a situation where your new home is damaged, destroyed, or decimated before you close. Here's a basic look at your options:
- Have the seller restore the home to its previous condition by the closing date. You made an offer on the home in it's previous condition, so it must be restored to that state.
- If the seller fails to return it to its previous condition due to factors beyond their control, you (the buyer) may:
- Terminate the contract and keep your earnest money
- Allow the seller up to 15 extra days to fix the problem (and the closing date automatically is extended with it).
- Accept the property in its damaged state and have the seller assign to you any of the proceeds from their insurance claim (and they would pay their deductible at closing via a credit to you).
No one wants this to happen to them, but it's nice to know the "what if" of the situation and that there are remedies for you and your family if this does ever occur. I hope to never have to invoke this paragraph in one of my transactions, but I know that if I'm your San Antonio real estate agent, I've got you covered thanks to our promulgated forms.
* Hope those of you out there that just read that line and started singing along enjoyed the reference.
This is a post in a series on real estate education to help define some of the finer points of contracts and the process of buying and selling real estate in San Antonio, Texas (it's Texas real estate, so if you live outside of Texas, these articles may not apply to you). You can read the previous posts; "Realtor® Speak 102: What are all these charges on my HUD-1 Settlement Statement?," "Realtor® Speak 102: What do I need to bring to closing?," "Realtor® Speak 102: Who's paying for the survey?," and "Realtor® Speak 102: Does that come with the house?" or check out my ongoing series Realtor® Speak 101 at RErockstar.com.
All content ©2008-2010 by Matt Stigliano unless otherwise noted.
Matt Stigliano, Realtor® Becker Properties | (210) 646-HOME | www.RErockstar.com
"Your all access pass to San Antonio real estate."
My clients frequently ask me what would happen if the house they have under contract is damaged prior to closing. This is a great post.
Hi Matt... I get that question a lot too. I am always surprised that people think to ask that. Lots of drama in that picture!
Sharon - Interesting, because I've never had someone ask it. Of course, I always cover this when we go through the offer so that they know it. It's one of the parapgraphs that people seem really interested in once they hear it though.
Steve - I think I'd be surprised as well if someone asked me about it in advance. I guess it never crossed my mind when I was buying a house. Now that I know though, I think about it much more often.
It is good to know there are options out there available to cover anything that happens in the process of a sale. I hope it never happens to one of my customers.
Pat - Definitely never would wish it on anyone, but like you said, it's good to know that your bases are covered just in case.
Look on the good side. The buyer is going to get a new condition home. New elec., new frame, roof, drywall, appliances, systems, etc. The problem would be timing. Since the terms for acceptance are pegged to the closing date in the contract, the buyer would have to take the assignment and take temporary housing until the work was finished, which could be months.
Lenn - Good point about the "time" factor. By the way, the new photo is great!
Great post. Then there is the oops seller forgot to disclose there was a fire... ~Rita
Burn %@#*&% BURN!!! I started laughing as soon as I saw it! Hey, I also wanted to drop by and wish you a belated happy birthday. Turns out that many of my favorite people (including my beloved wife) are born in August
Rita - People "forgetting" to disclose things is one of my fears. Please everyone - don't forget to disclose things - to the buyers and to your agent!
Russell - I couldn't resist using it. Thanks for the birthday wishes, it was great. It does seem a lot of people were born in August. I guess it ties in with the festive Christmas season.
Matt,
Good information to ease a buyers mind. I wonder how many contracts were terminated because of hurricane Ike?
We don't need no water let the... <--Brings back some good memories.
I came very close to having to deal with this recently. The garage next door burnt to the ground and the fire melted the siding on my client's home while it was under contract. Fortunately, the buyer had asked for an extended closing period as she didn't want to break her lease and we had time to have the siding replaced. After ~60 days, the neighbor had just gotten her insurance check and started to rebuild.
Matt,
I am not an attorney; however I don't think TREC would wish to take on the issue of Force Majeure; therefore they probably would never specifically address hurricanes, then what about tornadoes, etc.