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Buying a home is a significant financial and emotional investment. From the moment your offer on a property is accepted to the day you take possession, there are a multitude of details to manage. One important consideration is property damage that may occur between offer acceptance and closing. Who is responsible for addressing such issues, and how can you protect yourself as a buyer? Let’s delve into these important questions.

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Seller’s Responsibility Until Closing

Until the closing contract is completed, the seller remains responsible for the property. This includes the cost of any damage to the property, or the items included in the sale. Whether it’s a major hailstorm that damages the roof, water damage or any other unexpected incident, the onus is on the seller to maintain the property’s condition as it was when the offer was accepted.

Even if the property sits vacant for some time before closing, the seller must still maintain home insurance on the property. It’s a safeguard against unforeseen events and damages.

As the buyer, it’s crucial to arrange for your own home insurance to begin on the day of possession. Even if you don’t plan to move in immediately, insuring the property is your responsibility once you take possession.

Handling Damage Between Acceptance and Possession

If property damage occurs during the period between offer acceptance and possession day, you should take specific steps to address the situation:

  1. Communication: Have your real estate agent communicate with the seller’s agent to confirm that the seller is aware of and addressing the damage. Clarity in communication is essential in these situations.
  2. Addendum: If the seller agrees to repair the damage before possession day, consider adding an addendum to your accepted offer. This document should outline the seller’s responsibility to replace or repair the damaged property, ensuring there are no ambiguities.
  3. Holdback Agreement: If there is resistance from the seller or concerns about the repair timeline, you might propose a holdback agreement. This agreement allows you to withhold a portion of the purchase funds until the agreed-upon repairs are completed to your satisfaction. Ensure that any agreements made between you and the seller are documented in writing.

Seek Legal Advice When Needed

If there is any reluctance on the part of the seller to address the damage, whether in terms of repairs or documenting agreements, it’s advisable to consult with a lawyer for legal advice. It’s recommended to contact a legal professional that can guide you on your rights and potential courses of action.

In cases where either party wishes to terminate the transaction due to property damage or if the seller refuses to make repairs before possession, legal advice becomes even more critical.

That’s where we can help!

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Three Ways to Protect Your Buyer Client

As a buyer’s representative, it’s your duty to protect your client’s interests. Here are three proactive steps you can take to safeguard your buyer from property damage-related issues:

  1. Insert Protective Clauses: In the offer, include protective clauses that address the state of the property and its contents on the completion date. These clauses can require the seller to restore the property to its original condition or compensate the buyer for necessary repairs in the event of substantial changes or damage.

Additionally, consider adding a clause that grants your client a pre-closing visit close to the actual closing day. This visit allows the buyer to confirm that the property remains in the same condition as when they first viewed it and that any agreed-upon

  1. Document Property Contents: Take photographs and document the model and serial numbers of appliances and other items included in the sale. This documentation serves as evidence in case the seller attempts to replace these items with different models.
  2. Negotiate a Holdback: Work with your client’s lawyer to negotiate a holdback agreement with the seller’s lawyer. This holdback, typically ranging from $500 to $1,000, is only released to the seller after closing, once the buyer confirms the property’s condition is satisfactory. This can be particularly valuable if there are concerns that the property won’t be delivered in the agreed-upon condition.

Conclusion

Property damage between offer acceptance and closing can create unexpected challenges for both buyers and sellers. By being proactive, inserting protective clauses, documenting property contents, and considering holdback agreements, you can enhance your professionalism as a real estate agent and ensure your client’s satisfaction throughout the buying process. Buying a home is a significant milestone, and your guidance can make all the difference.

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FAQ’S

1. Is the seller responsible for any repairs after closing?
In a real estate transaction, once the closing is finalized, the seller is generally not responsible for repairs unless specified in the purchase and sale agreement. Any damage discovered after closing typically falls to the buyer. This is why conducting a thorough final walkthrough of the property prior to closing is crucial to ensure any substantial damage is addressed before the sale is complete.

2. What happens if property damage is discovered before closing?
If damage is discovered before closing, it must be reported immediately. In many cases, the purchase and sale agreement will outline whether the seller is obligated to cover the repairs or adjust the purchase price. It’s essential to have any home repairs completed and documented before the final paperwork is signed.

3. Can the closing be delayed due to property damage?
Yes, closing can be delayed if substantial damage is found prior to closing. Depending on the situation, both parties may agree to postpone until the repairs are completed or negotiate a new purchase price. Consulting with your real estate agent or attorney to determine the best course of action is advised.

4. How can a buyer protect themselves from unexpected damage after closing?
To avoid surprises with damage after the transaction is complete, buyers should always conduct a final walk through of the property prior to closing. Ensure that any issues or substantial damage are either resolved or accounted for in the purchase price. This is your last chance to ensure the property is in satisfactory condition before completing the real estate transaction.

5. What should be done if property damage occurs during the moving process?
If damage occurs during the move, whether before or after the purchase and sale is completed, the responsible party may be determined by the terms of the insurance policies in place. Reviewing your homeowners’ insurance or the moving company’s policy is the best course of action to determine responsibility and coverage for the repairs.

6. What are the seller’s obligations for property condition under the agreement of purchase and sale?
The agreement of purchase typically requires the seller to take reasonable steps to ensure the property is maintained in the same condition as when the buyer made the offer. If damage occurs between the signing of the agreement of purchase and sale and the closing date, the seller may be responsible for repairs, or the two parties may negotiate adjustments to the purchase price or repair responsibilities.

7. What if your home inspection finds damage during the closing process?

If your home inspection finds damage during the closing process, here’s what you can do:

  1. Review the Agreement of Purchase and Sale: The agreement of purchase and sale typically outlines the seller’s obligations for repairs. If the damage is substantial, you may have the right to request repairs or negotiate a lower purchase price to cover the cost of fixing the issue.
  2. Negotiate with the Seller: If damage is found, the two parties (buyer and seller) can negotiate the next steps. This may include the seller making the necessary repairs, offering a credit at closing, or adjusting the sale price.
  3. Take Reasonable Steps: As a buyer, it’s important to take reasonable steps to ensure the damage is properly addressed before closing. You may want to ask for documentation that shows the repairs were completed or schedule a follow-up inspection.
  4. Delay or Renegotiate the Closing: In cases of significant damage, you may choose to delay the closing until repairs are made. Both parties can agree to extend the closing date to ensure everything is in order.
  5. Consider Walking Away: If the damage is too extensive and you cannot reach an agreement with the seller, the agreement of purchase and sale may allow you to walk away from the deal without penalty, depending on the terms. Always consult with your real estate agent or attorney to determine the best course of action.