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When Disaster Hits During a Home Sale

Natural disasters do not check your calendar, and they do not care that you are mid-transaction. When something big happens, both buyers and sellers have to move fast and follow the contract and insurance playbook.

Insurance Timing Is Critical

Do not cancel your homeowner’s insurance until the sale is closed and recorded. Even if you have moved out, you still own the risk until the deed transfers.
If a fire, flood, or storm hits before closing, you are on the hook. Without coverage, repairs can run into five figures or more.

Bottom line: wait for written confirmation that the sale has closed and the deed is recorded. Then cancel.

Disaster Clauses 101

Most contracts include a “risk of loss” or disaster clause that covers damage between signing and closing. When there is substantial damage, buyers typically have three choices:

1. Proceed with the purchase as written.

2. Renegotiate the price or terms.

3. Cancel and get their earnest money back.

“Substantial” is defined in the contract. Many use a percentage of the purchase price. Read your form carefully.

Who Is Responsible, When

General rule: the owner at the moment of loss is responsible.

• Before closing: the seller owns the risk.

• After closing: the buyer owns the risk.

This is why both sides need proper insurance lined up through the entire process.

Force Majeure

Some contracts allow delays or termination when events beyond anyone’s control make performance impossible. Recent hurricanes, wildfires, and pandemics have put this language in the spotlight. If your contract is silent, state law fills the gaps. Ask your agent or attorney how your form handles it.

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If Disaster Strikes Mid-Transaction

Expect a few extra steps:

• Fresh inspections to document damage

• Seller files insurance claims

• Possible price or repair negotiations

• Closing date may shift

• Extra documentation to prove claims were handled

Buyers often ask for proof that claims were filed and resolved before moving forward.

Practical Protection Strategies

For Sellers

• Keep full insurance until you have written confirmation of recording

• Report damage fast to your insurer and notify the buyer and your agent

• Document everything with dated photos and receipts

• If helpful, schedule the policy cancellation for the day after closing

For Buyers

• Bind your own policy effective on closing day

• Do a final walk-through as close to closing as possible

• Consider riders for known local risks, such as flood or wind

• Read the disaster clause before you sign

Temporary Housing

If the property is not livable, sellers may need a short-term place to stay. Check your policy for “loss of use” coverage. It may cover lodging and related costs.

State-Specific Rules

Some states add extra requirements, such as wildfire or hurricane disclosures, or specific remedies after a declared disaster. Local law and your contract control. Check with your agent or attorney about your state’s rules.

The Bottom Line

The period between signing and recording is a vulnerability window. Insurance and clear contract language are your safety net. Do not cancel coverage early. Do not assume anything until the deed is recorded.

Questions about a specific scenario? Hit reply and share the details. We will cover real cases and answers in a future issue.