Realtor® Speak 102: What if the house burns down?

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.