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  

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

Lives Changed in 30 Seconds--Twin Cities North Metro Memorial Weekend Tornados

In under a minute, life changed for so many residents of the Twin Cities north metro this past Memorial Day weekend. Several of the communities I serve as a Realtor, from Coon Rapids though Blaine, Lino Lakes and Centerville, ending in Hugo, were hit out of the beautiful blue sky by a tornado. Minnesotans were on alert all week from local weather reporters that conditions were ripe for such an event. And the unthinkable happened; the tornado took with it not only dozens homes but the smile of a two-year-old little boy.

On Monday only residents were allowed into Hugo for security and safety reasons. There are many photos of the torn apart housing development online already. We did drive by this Centerville farm that was demolished; the property was hit just moments prior to crossing 35E into Hugo. The debris from the silos is still scattered on the shoulder of the freeway on the other side of the huge farm field today.

From the time we are children, we are taught in Minnesota what to do in severe weather. We participated in tornado drills at schools. We looked to the sky when the sirens are tested on the first Wednesday of the month. We knew intellectually that tornadoes could be devastating but we always thought we would be safe in our basements.

Not so anymore as families across Anoka County and Washington County learned this past weekend. A twister is not a movie or an exciting scene on television. It can be a real event and we cannot be complacent.

We heard the rumble of the storm outside our Ham Lake home before the sirens went off. I thought it was unusual to hear an airplane flying in this weather. I clicked on the TV and heard that the storm had just hit in Coon Rapids and was heading through Blaine with reports of damage near Hwy 65 and Bunker Lake Blvd. Sirens or not, we went to the basement as I was well aware that tornadoes typically move in a northeastern direction and we directly in its path.

The alarms sounded just as we were going down the steps in our usual lackadaisical way. We sat at the bottom of the staircase; in fact I was on the steps, ready to head back up as soon as the event was over. We were just mildly concerned as we watched the minute-by-minute storm report on the portable television. The storm had change direction from its northeastern track and was now headed due east. We were thankful that it was no longer heading toward our home.

Being from the north eastern part of the Twin Cities, growing up in North St. Paul and selling homes throughout this area, I made a mental note of who was now in the storm's path. A few relatives and friends came to mind. A close friend’s business. A cousin and his wife. A young couple who moved into a home I sold last fall.

The storm ripped a line of damage through Anoka and into Washington County and literally blew apart 27 homes in Hugo. From the accounts on the news, the tornado blew through Hugo in 30 seconds. Lives were forever changed in less than a minute.
Over the last couple days, we have found that several of our friends, family members and coworkers were affected by the storm. Most had minor damage. Some lost windows. Many have hail-damaged roofs and siding or fallen trees in their yards. And then there are those who lost everything.

As I hear the stories of where people were as the storm hit, many in the safety of their basement, I began to reassess our preparedness for this event. Something about the sound of the storm was different so this time I had grabbed all of our cell phones as I went down the steps. I won’t feel so foolish about this the next time. My husband and I discussed where we plan to sit in the cellar during the next storm (northeast corner ready to head under a sturdy worktable.) We are somewhat thankful that we don’t have that walkout basement that we always wanted as we have few windows to avoid. We will be safer and more vigilant during the next storm.

It was always someone else, somewhere else…This time the storm was too close and too real for my family to ever be complacent again.

View footage of the tornado and aftermath on YouTube by Clicking HERE.

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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