What Happens if Your Home Is Damaged While Under Contract?

By Joshua Holt

Meet Joshua, a licensed real estate professional and accomplished broker. As the forward-thinking leader of the Holt Real Estate Team, he has forged a strategic alliance with Keller Williams and PLACE to deliver on Our Promise.

In the wake of events like the LA wildfires, many homebuyers and sellers are asking an important question: “What happens if my home is damaged during a natural disaster while under contract?” No matter where you live, this is a valid concern. Here’s a closer look at what you can do to protect yourself financially and handle this difficult situation:

1. Check your contract. When you’re under contract, your purchase agreement likely includes a clause that protects both buyers and sellers in the event of a natural disaster. This is usually called a “force majeure” clause or a “casualty loss” provision. If a property is damaged or destroyed while under contract, the agreement typically gives both parties options. For example, buyers may have the right to terminate the contract and get their earnest money back, or, if the property is salvageable, buyers and sellers can negotiate repairs or adjust the purchase price. The specifics depend on your contract, so work with your Realtor to review it closely and understand your rights and obligations.

2. Assess the damage. You won’t fully know how to move forward after a natural disaster until after you assess the damage. In most cases, the seller is responsible for ensuring the home is in the same condition as when the contract was signed, unless the damage is so severe that the property is considered a total loss. Depending on the situation, buyers may request that repairs be completed before closing, negotiate a price reduction to account for the damage, or walk away from the deal entirely if the damage is bad enough. These decisions will hinge on the details of the contract and the level of damage to the property.

3. Check your insurance. If the home is covered by homeowners insurance, the policy will generally help cover repair or replacement costs. However, sellers still need to file claims and start the repair process, which can delay closing. Buyers should also be aware of how the home’s condition impacts financing. Most lenders require the property to be in good condition before finalizing the loan. If repairs are needed, the lender may delay closing until the home is restored.

If you find your home was damaged in a disaster while under contract, early and consistent communication is critical. Work closely with your real estate agent, your lender, and the other party to navigate the next steps. If you have questions or need support, don’t hesitate to reach out. Together, we can ensure that no matter the circumstances, you feel informed and supported every step of the way.