You are under contract to purchase a beautiful home. You’ve gone through the inspection and appraisal, financing is secured, you’ve got movers booked and new furniture picked out. Closing is two weeks away. Suddenly, an unexpected winter storm hits Texas causing an unprecedented freeze. The roof on the home leaks and causes the ceiling to cave in. What happens now?

Your Contract and Your Rights

If you used a realtor to buy the home, you likely used the Texas Real Estate Commission (TREC) One to Four Family Residential Contract (Resale). Paragraph 14 of this TREC contract addresses casualty losses and protects the buyer in the event of damage to the property while it is under contract.

If any part of the property is damaged or destroyed by fire or other casualty loss, then the seller must restore the property to its previous condition as soon as reasonably possible. If the seller does not, then the buyer can:

1- Terminate the contract and have their earnest money returned to them.

2- Extend the time for performance up to 15 days and the Closing Date is extended, as necessary.

3- Accept the property in the damaged condition with an assignment of insurance proceeds (if allowed by the seller’s insurance carrier as well as buyer's lender) and receive credit from the seller at closing in the amount of the deductible.

What Is Casualty Loss?

Casualty loss is loss that happens from a sudden, unexpected, or unusual event. It is important to understand that the damage must be sudden and unexpected. This means a winter storm qualifies while slow leak causing water damage may not. This is the term that is usually argued over and in many case litigated about.

Accepting the Property In Its Damaged Condition

Many times, buyers do not want to terminate the contract nor extend the closing date because they are already in love with the home and prepared to move. In that case, buyers will need a carefully drafted limited power of attorney along with an Assignment of Benefits that allows the buyer to deal with the seller’s insurance company.

Get Advice

Before invoking Paragraph 14 of the TREC contract, we recommend consulting a real estate attorney. The definition of a “casualty loss” is the subject of a great deal of litigation and differing interpretations and we can help ensure you situation fits the definition. We can help ensure your rights are protected.