Going over everything you need to do if your home is damaged while under contract, from reviewing your terms to assessing the damage.
In the wake of the LA wildfires, a lot of homebuyers and sellers have reached out with a serious question: “What happens to my home if it’s damaged during a natural disaster while I’m under contract?” No matter where you live, this is a real concern for many homeowners across the U.S. That’s why I want to take some time today and explore what steps you can take to make sure you’re protected financially in case of an emergency:
1. Look at the contract. When you’re under contract, whether you’re the buyer or the seller, your purchase agreement likely includes something called a ‘force majeure’ clause or a ‘casualty loss’ provision. This protects both parties in the event of unforeseen circumstances like natural disasters. For example, if a property is damaged or destroyed while under contract, most contracts will give the buyer and seller options for how to proceed, and it’s crucial to understand the specifics of your agreement. The buyer may have the option to terminate the contract and get their earnest money back, or they may have the right to negotiate repairs or a reduction in price if the property is still salvageable.
2. Assess the damage. If your home is damaged while under contract, the next thing you’ll need to do is assess the damage. If the home is still standing but has sustained significant damage—like from fire, flooding, or wind—it’s important to know that the seller is still responsible for making sure the home is in the same condition as when the contract was signed, unless the damage is so severe that it’s considered a total loss.
In cases of significant damage, the buyer might have the option to walk away or may be entitled to an adjustment to the purchase price, depending on the severity and the contract details. Buyers may also request that repairs be made before closing, or that a specific amount be taken off the purchase price to account for the damage.
3. Check with insurance. If the home is covered by homeowners insurance, the policy will help cover the cost of repairs or replacement. However, the seller may still need to take steps to file a claim and begin the repair process, and these things can delay the closing process.
“Your options depend on the details of the contract and the level of damage to the property.”
It’s also important for buyers to understand how insurance can affect their financing. Lenders usually require that the home be in good condition before they finalize the loan. If repairs are needed, the lender may delay closing until everything is resolved.
If you find yourself in this situation—whether you’re buying or selling—I can’t emphasize enough how important it is to communicate early and often with your real estate agent, your lender, and the other party involved. Together, we’ll navigate the next steps, whether that’s adjusting the contract terms, extending the closing date, or even negotiating new terms that make sense for everyone.
I know this is a stressful time, and you’re probably facing a lot of unknowns. But remember, there are options. You don’t have to go through this alone. Your real estate team is here to help guide you through these challenging decisions.
If you have questions or need guidance during this process, please don’t hesitate to reach out. I’m here to help. Let’s make sure that no matter the circumstances, you feel informed and supported through this journey. Stay safe, take care of each other, and remember that we’re all in this together.
