My Property is on FIRE and we are in Escrow now What?
Surely this question has come to your mind if your property is located in a fire hazard area, and more than once you have thought what would happen in the event I'm selling my property and during the escrow period a fire strikes my neighborhood therefore my house?
Well, here you will find some information about this event.
What are the general rules relating to who bears the risk of loss in a real estate transaction where a fire or other natural disaster, strikes the property?
If the purchase contract between the buyer and seller does not state who is to bear the risk of damage or loss to the premises during the time between the execution of the contract and the transfer of title, the liability of the parties is governed by the California Uniform Vendor and Purchaser Risk Act (Cal. Civ. Code § 1662). Under the provisions of this statute (assuming no fault on the part of the buyer), the risk of loss or damage to the premises is carried by the seller until the buyer receives either title or possession. (Note: C.A.R.'s Residential Purchase Agreement and Joint Escrow Instructions, Standard Form RPA-CA, revised 10/02, do not dictate how risk of loss is allocated between a buyer and a seller.)
If all or a material part of the premises are damaged before title or possession is given to the buyer, the buyer can cancel the contract and recover any portion of the purchase price paid. It is not clear whether the buyer can alternatively elect to enforce the contract with a reduction in the purchase price equal to the loss of value or cost of repair. (Cal. Civ. Code § 1662.)
After the buyer has taken possession or has received title, the buyer bears the risk of loss or damage to the premises (assuming no fault on the part of the seller). Therefore, if the premises are damaged, the buyer must still complete the contract and pay the balance of the purchase price. (Cal. Civ. Code § 1662.)
If the purchase contract does contain a risk of loss provision, that provision will govern to the extent it is different from or more specific than the Uniform Vendor and Purchaser Risk Act (Uniform Act) (Cal. Civ. Code § 1662).
We have a risk of loss clause in our standard buy/sell contracts. I always explain to the parties that "if it burns before you close on it, it's the seller's problem, if it burns after you close on it, it's the buyer's problem".
Hope nothing burns! Someone wants to sell and someone wants to buy, hope it gets done!
It's the same rule here in California. Until you record title, it's the seller's issue.