Blown Over Tree Cancel Your Home Sale? Understanding Risk of Loss

We are currently experiencing a real estate market rebound and though it may seem unrelated a crazy storm weather pattern. With the summer storm season is upon us and sold signs appearing on homes throughout the Minneapolis/St Paul metro, there are bound to be homes that will sustain storm damage before closing.  

So what if the unthinkable happens and a few weeks prior to the closing, straight-line winds blow through town and damage your property. Maybe picturesque hundred year old oak trees that gave the home character have been uprooted. Or worse yet, what if one of the huge oaks fell onto your house severely damaging the roof. What happens now?

What you might not realize is that this situation has been addressed in the purchase agreement you have signed. Risk of Loss is one of those “boiler plate” clauses on page four of the purchase agreement used for almost every real estate transaction in the State of Minnesota. Being preprinted, some agents and/or their clients will gloss over this clause when dealing with closing dates and net prices but it is a very important concept to understand, as is every other line in the document you sign to buy or sell a home.

This paragraph clearly states that the risk of loss due to any reason whether an act of God or the acts of vandals will be the responsibility of the seller from the time the purchase agreement is signed until the date of closing. That means if there is a fire or accident the seller will be required to bring the home into the condition that it was in at the time the contract was written and signed.

So if that temperamental decade old washing machine goes on the fritz, the seller is required to replace it. If a neighbor backs over the mailbox at the end of your driveway, it must be repaired or replaced with a new one. Final walk-throughs of the property are essential to ascertain the condition of the home is acceptable to the buyer prior to signing the closing documents. 

But what happens if it is irreplaceable picturesque trees that have fallen on the roof?
 

Even if there is substantial time prior to a closing, for the seller to call their insurance company and have the home repaired, that may not be enough. But, Is it the same house? And more importantly does the buyer still have to buy the home? In a word, no.

The clause goes on to say that in the case where there is substantial damage to the home or property, it is the buyer’s option to cancel or continue with the purchase agreement. The situation outlined above is common situation where the landscaping is changed due to storm damage. Often this cannot be replaced. The damage to the home could also result in an insurance claim that would now be reflected in a CLUE insurance report. This could affect the cost to insure the home. Buyers can opt to cancel the contract in this situation with all earnest money refunded.

Risk of loss comes into play from time to time in residential real estate transactions. In most cases the repairs are made quickly to both the buyer’s and seller’s satisfaction and the contract will close on time. But when the property sustains significant damage as determined in the buyers' eyes, they have the option of continuing to closing or walking away from the deal. Boilerplate or not, risk of loss is an important clause to understand when buying or selling a home.

Copyright 2013 www.terieckholm.com

Purchase Agreement Cancelled—Understanding Risk of Loss during Minnesota’s Tornado Season

Minnesota’s summer storm season has started. The first big severe weather outbreak of the season walloped Minnesota yesterday. Hail pummeled roofs. Wind tore off siding and snapped trees like toothpicks. Lighting zapped houses causing a variety of damage. And tornados literally moved homes off foundations. From the time we are very young, Minnesotans are taught how extremely important it is to be weather alert during the summer.

Unfortunately, Mother Nature doesn’t care if a homeowner just accepted an offer from a buyer after having their home on the market for weeks on end. No doubt some of the homes damaged in yesterday’s storms will affect homebuyers and sellers with a contract in place.

Picture the following scenario: After months of scouring Anoka County for the perfect place to call home, you wrote an offer on a home in Lino Lakes that was accepted and is scheduled to close in 45 days.

A few weeks prior to the closing, severe storms with straight-line winds blow through Lino Lakes, Centerville and Hugo. Concerned, you drive up to your dream home and see that the picturesque oak trees that gave the home character have been uprooted. Worse yet, one of the huge trees crashed onto the house severely damaging the roof and eaves. You are devastated as this was no longer the home you pictured in your dreams. What happens now?

Risk of Loss is one of those “boiler plate” clauses on page four of the purchase agreement used most often in the State of Minnesota. Being preprinted, some agents and/or their clients will gloss over this clause but it is very important to understand, as is every other line in the document you sign to buy a home.
The highlighted section starting at line 150, clearly states that the risk of loss due to any reason whether an act of God or the acts of vandals will be the responsibility of the seller from the time the purchase agreement is signed until the date of closing. That means if there is a fire or accident the seller is required to bring the home into the condition that it was in at the time the contract was written and signed.

So if that temperamental decade-old dishwasher goes out, the seller is required to repair or replace it. If a deliveryman backs over the mailbox at the end of the driveway, it is the seller who must repair the post and replace with a new box. And if hail leaves dents in the aluminum siding, the seller must make the repair.

Final walkthroughs are essential to ascertain the condition of the home prior to signing the closing documents. But what happens to those irreplaceable picturesque trees that have fallen on the roof? Three weeks prior to a closing, there could be plenty of time for the seller to call their insurance company and have the home repaired. But is it the same house? And more importantly does the buyer still have to buy the home? In a word, no.

The clause goes on to say that in the case where there is substantial damage to the home or property, it is the buyer’s option to cancel or continue with the purchase agreement. In the fallen tree scenario outlined above, which was a real situation that occurred a few summers ago, the landscaping was significantly changed in the eyes of the buyers as the trees could not be replaced. The damage to the home caused an insurance claim that would now be reflected in a CLUE insurance report that could affect the ability to insure the home. The buyers opted to cancel the contract as was their option in the clause with all earnest money refunded.

Risk of loss comes into play quite often when buying and selling a home. In most cases the repairs are made quickly to both the buyer’s and seller’s satisfaction and the contract will close on time. But when the property sustains significant damage, the buyer has the option of continuing to closing or walking away from the deal. Boilerplate or not, Risk of Loss is an important clause to understand when buying or selling a home.


 Copyright 2010 Teri Eckholm  

It's Tornado Season! Understand the Risk of Loss Clause--Know WHEN a Contract be Cancelled!

Imagine for a moment the following scenario: After months of searching for the perfect place to call home, you wrote an offer on a picture perfect lakeshore rambler in Ham Lake, Minnesota. After a little negotiation, the offer was accepted and with the inspection over, you are on schedule to close in 60 days.

Three weeks prior to the closing, straight-line winds blow through Anoka County. Concerned, you drive up to your dream home and see that the picturesque oak trees that had given the home character have been uprooted. Worse yet, one of the huge trees fell onto the house severely damaging the roofline. You are devastated as this was no longer the dream home you wrote an offer on a few weeks ago. So, what happens now?
Risk of Loss is one of those "boiler plate" clauses on page four of the purchase agreement used most often in the State of Minnesota. Being preprinted, some agents and/or their clients will gloss over this clause but it is very important to understand, as is every other line in the document you sign to buy a home.


Line 147 clearly states that the risk of loss due to any reason whether an act of God or the acts of vandals will be the responsibility of the seller from the time the purchase agreement is signed until the date of closing. That means if there is a fire or accident the seller is required to bring the home into the condition that it was in at the time the contract was written and signed.

So if that temperamental decade old dishwasher goes out, the seller would replace it. If a neighbor backs over the mailbox at the end of your driveway, it is the seller who must repair the post and replace with a new one. Final walkthroughs are essential to ascertain the condition of the home prior to signing the closing documents. But what happens to those irreplaceable picturesque trees that have fallen on the roof?

Three weeks prior to a closing, there could be plenty of time for the seller to call their insurance company and have the home repaired. But is it the same house? And more importantly, does the buyer still have to buy the home? In a word, no.

The clause goes on to say that in the case where there is substantial damage to the home or property, it is the buyer's option to cancel or continue with the purchase agreement. In the situation outlined above, which was a real situation that occurred last summer, the landscaping was changed and could not be replaced. The damage to the home caused an insurance claim that would now be reflected in a CLUE insurance report that could affect the ability to insure the home. The buyers opted to cancel the contract as was their option in the clause with all earnest money refunded.

Risk of loss can come up when buying or selling a home during severe weather season in Minnesota. In most cases the repairs are made quickly to both the buyer's and seller's satisfaction and the contract will close on time. But when the property sustains significant damage, the buyer has the option of continuing to closing or walking away from the deal. Boilerplate or not, Risk of Loss is an important clause to understand when buying or selling a home.

Copyright 2009 Teri Eckholm http://www.terieckholm.com/

Severe Weather and Real Estate—Understanding Risk of Loss

Spring storms and a busier real estate market are making life very interesting for MN buyers, sellers and Realtors! Just over a week ago, 400-500 homes sustained damage as a severe storm that spawned two tornados and devastated the Twin Cities north metro. Yesterday another storm blew through Minnesota. This time homes in the south and west metro were affected by hail and damaging straight-line winds. 2008 is setting up to be a very active storm season in the Land of 10,000 Lakes as more severe weather is already in the forecast for later this week. Will this affect real estate transactions? You betcha!

Even in this changed, buyer-driven market, spring is a busy time for Minnesota real estate. Current statistics showed the deadlock between buyers and sellers loosened earlier this year with many homes going into pending sale status in April.

My curiosity as a Realtor got the best of me. I looked at the devastated Hugo neighborhood with a real estate eye. So many homes damaged and destroyed—Roofs gone. Windows shattered. Vinyl siding looking like Swiss cheese. Trees toppled onto homes. It is an entirely different neighborhood than it was a couple of weeks ago. In this hard hit neighborhood alone, there were 6 active homes on the market and 4 homes in pending at the time of the storm. With all of the damage and in some cases, total devastation, no doubt the risk of loss clause will come into play in some, if not all, of these real estate transactions.

What is the “Risk of Loss” clause? What does it mean to the average home buyer and seller?
Risk of Loss is a “boiler plate” clause on page four of the Minnesota purchase agreement. Line 147 clearly states that the risk of loss due to any reason whether an act of God or the acts of vandals will be the responsibility of the seller from the time the purchase agreement is signed until the date of closing.

I wrote a post last August, Contract Cancelled—Understanding Risk of Loss, that explains the risk of loss clause in detail and what it means to anyone with a signed purchase agreement on a home that sustains damage. After the past few stormy weekends, this topic deserves to be revisited as a reminder to all home Minnesota buyers and sellers as we persevere through this turbulent summer.

If you are buying, selling or relocating to Minnesota and need help from a professional Realtor, give me a call or visit my website for a FREE Relocation Packet. I specialize in acreage and lakeshore properties in the north and east Twin Cities metro area including Ham Lake, Lino Lakes and all communities in the Forest Lake School District! Serving Anoka, Chisago, Ramsey and Washington Counties in Minnesota.

Copyright 2008 terieckholm.com

Contract Cancelled—Understanding Risk of Loss

Picture the following scenario: After months of searching for the perfect place to call home, you wrote an offer that was accepted and will be closing in 60 days.

Three weeks prior to the closing, straight-line winds blow through town. Concerned, you drive up to your dream home and see that the picturesque oak trees that gave the home character have been uprooted. Worse yet, one of the huge trees fell onto the house severely damaging the roof. You are devastated as this was no longer the home you pictured in your dreams. What happens now?

Risk of Loss is one of those “boiler plate” clauses on page four of the purchase agreement used most often in the State of Minnesota. Being preprinted, some agents and/or their clients will gloss over this clause but it is very important to understand, as is every other line in the document you sign to buy a home.

Line 147 clearly states that the risk of loss due to any reason whether an act of God or the acts of vandals will be the responsibility of the seller from the time the purchase agreement is signed until the date of closing. That means if there is a fire or accident the seller is required to bring the home into the condition that it was in at the time the contract was written and signed.

So if that temperamental decade old dishwasher goes out, the seller would replace it. If a neighbor backs over the mailbox at the end of your driveway, it is the seller who must repair the post and replace with a new one. Final walkthroughs are essential to ascertain the condition of the home prior to signing the closing documents. But what happens to those irreplaceable picturesque trees that have fallen on the roof?

Three weeks prior to a closing, there could be plenty of time for the seller to call their insurance company and have the home repaired. But is it the same house? And more importantly does the buyer still have to buy the home? In a word, no.

The clause goes on to say that in the case where there is substantial damage to the home or property, it is the buyer’s option to cancel or continue with the purchase agreement. In the situation outlined above, which was a real situation that occurred this past summer, the landscaping was changed and could not be replaced. The damage to the home caused an insurance claim that would now be reflected in a CLUE insurance report that could affect the ability to insure the home. The buyers opted to cancel the contract as was their option in the clause with all earnest money refunded.

Risk of loss comes into play quite often when buying and selling a home. In most cases the repairs are made quickly to both the buyer’s and seller’s satisfaction and the contract will close on time. But when the property sustains significant damage, the buyer has the option of continuing to closing or walking away from the deal. Boilerplate or not, Risk of Loss is an important clause to understand when buying or selling a home.

If you are relocating to Minnesota, are looking for Homes for Sale in the north and east Twin Cities metro area and need help from a professional Realtor, give me a call or visit my website for a FREE Relocation Packet. I specialize in acreage properties! Serving Anoka, Chisago, Ramsey and Washington Counties in Minnesota.

Copyright 2007 www.terieckholm.com