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The property was damaged after it went under contract. Now what?

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One hand from left side of photo holding a paper cut out of a home and another hand from right side of the photo holding a paper cutout of an umbrella protecting the home on a green background

02/18/2016 | Author: Editorial Staff

Last year, Texans experienced severe weather events including flooding and tornadoes that caused damage to their properties. These and other perils can also affect real estate transactions that haven’t closed.

The Casualty Loss Paragraph (Paragraph 14 of the One to Four Family Residential Contract (Resale)) requires the seller to restore the property to its previous condition by closing. If the seller can’t, the buyer has three options:

  1. Terminate the contract and get her earnest money back.
  2. Extend the time for the seller to complete the repairs up to 15 days, with the closing date extended accordingly.
  3. Accept the property in its damaged state with an assignment of insurance proceeds, if permitted by the seller’s insurance carrier. The seller also credits the buyer the amount of the insurance deductible at closing.

However, the buyer cannot cancel the contract without giving the seller the opportunity to remedy the situation. If she attempts to do so, she would likely forfeit her earnest money and could be subject to the specific-performance provision of the contract.

The contract does not address situations in which the parties disagree whether the property has been restored to its prior condition. If a dispute arises, that determination could be made through mediation or in court.

Many of the sales contracts have a casualty loss paragraph, though the specific provisions contained in them may vary.

Categories: Legal
Tags: legal, forms, trec contracts

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Legal disclaimer

The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.

While the Texas Association of REALTORS® has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, the Texas Association of REALTORS® makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here or elsewhere on Any legal or other information found here, on, or at other sites to which we link, should be verified before it is relied upon.

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