Sunday, January 13, 2008

query: house burns down before closing

I can't truly answer this query because I sell title insurance, not fire insurance, however, it reminds me of days gone by.

Back in the day, when real estate industry professionals weren't trying to hustle you through a transaction at lightening speed and make you sign fifteen million pages of disclosures that you never read or understand, the pros understood and cared about covering your bases.

Back in those days, the real estate agent knew and understood that the homebuyer should get a hazard insurance binder immediately, as soon as there was an accepted agreement of sale. Why? Well, to protect your equitable interest.

So, if the house burns down before you close, and you do not have a hazard insurance binder in place and you have suffered losses, consider having an attorney review the contract and advise you of any hopes of recovery.

As an afterthought, I must say that I shouldn't blame the lack of hazard insurance binders on the real estate sales community. For all I know, the insurance industry might have discontinued the practice. In any case, if binders are available, a prudent purchasers should consider the option.


Anonymous said...

This is one of the more bizarre rules of property and contract law, techically called "the doctrine of equitable conversion." Google that and you get a pretty explanation at or wikipedia.

In the event that you have a financing addendum to the purchase agreement/sales contract, you probably get out, however, because no lender will finance you.

Diane Cipa, The Closing Specialists® said...

Thanks, Anon. Scary stuff.