What happpens if the house that I’m buying is damaged before I can get insurance on it?
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What happpens if the house that I’m buying is damaged before I can get insurance on it?
I am currently under real estate contract. The house is new construction and is pretty much ready and all the inspections have passed. I am supposed to close soon but I was unable to get home owners insurance right now from insurance companies due to inclement weather. Again, I haven’t closed yet. The loan is not a construction loan. If the property is damaged because of the storm, am I liable to pay for anything? Can I walk away from closing if there is significant damage/flooding?
Asked on October 27, 2012 under Real Estate Law, New Jersey
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 11 years ago | Contributor
Under the laws of all states in this country unless the agreement states to the contrary you are not required to go through with the purchase of the unit you are writing about if it gest damages before close of escrow. The risk of the unit's condition remains with the seller. If you are buying the unit over time, your lender will require insurance placed on it at the time of close of escrow.
If there are condition issues before close of escrow making you not want to buy the unit, you are entitled to walk away from it without recourse from the seller.
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 11 years ago | Contributor
If you haven't closed yet, the risk of loss should still be on the seller, unless the contract you signed shifted the risk to you already: normally, the risk becomes the buyer's when the sales closes and the home becomes his/hers, but that can be lawfully modified by contract, so check the contract to see if the risk shifted to you.
Similarly, normally, significant damage, if not repaired by the seller, prior to closing would allow you to terminate the contract without penalty (you, of course, could agree to give him time to fix it; or take a price reduction in exchange), but this, too, can be modified by the contract, so you again need to read the contract carefully.
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