Storm Damage & Pending Home Sales: Buyer’s Call

“Force Majeure” Clauses

[Editor’s Note:  The views expressed here are solely those of Ross Kaplan, and do not represent Edina Realty, Berkshire Hathaway, or any other entity referenced.  If you need legal advice, please consult an attorney.]

RISK OF LOSS:  If there is any loss or damage to the Property between the Final Acceptance Date and the date of closing for any reason, including fire, vandalism, flood, earthquake or act of God, the risk of loss shall be on Seller.  If the property is destroyed or substantially damaged before the closing date, this Purchase Agreement is canceled, at Buyer’s option, by written notice to Seller or licensee representing or assisting Seller.  If Buyer cancels this Purchase Agreement, Buyer and Seller shall immediately sign a Cancellation of Purchase Agreement confirming said cancellation and directing all earnest money paid here to be refunded to Buyer.

–Minnesota Purchase Agreement, lines 168. – 173.

In the wake of severe weather in the Twin Cities and elsewhere this Spring, it’s a good bet that many home Buyers and Sellers — and their Realtors — are familiarizing themselves with heretofore obscure clauses like the one above.

Also known as a “force majeure” clause, it governs what happens when a tornado or other natural disaster destroys or heavily damages a home that’s under contract, but hasn’t yet closed (called a “Pending Sale” in Minnesota).

The bottom line?

It’s the Buyer’s call.

One counter-intuitive reason to stay in the deal:  once insurance has replaced the roof, windows, and any other storm-related damage, the home the Buyer is taking title to may actually be in better condition than the one they originally contracted to buy.

P.S.: As far as I know, no Minnesota home Buyer has ever invoked “earthquake” as a reason to cancel their Purchase Agreement.



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