Can the Seller Back Out After a Closing Day Disaster

[globalgrl]

My question involves real estate located in the State of: Illinois

I'm selling a house and today was closing. I live out of state and house is vacant. Buyer's agent went for last walk thru and discovered the house had water everywhere, running from broken pipe. Ceiling had collapsed from upstairs and 2 inches standing water, icicles on blinds.
I live on west coast, house is in midwest and our real estate agent said last she knew the termite inspection was one week ago. So it happened in last week sometime, most likely furnace went out and pipe broke in the blizzard but not sure.
anyway, I assumed buyer would back out which was fine with us since we weren't happy with deal anyway but our agent says buyer wants to see what kind of deal out insurance gives us and still wants the house. Do we have any options? are they saying we have to give them our insurance money, will we need more money? can we back out on our own? I had to borrow money for the closing, took a great loss on house but wanted to honor the debt so I borrowed 10k. I cannot come up with any more cash, I am unemployed and broke. My preference is to let insurance pay for the damage and get out of the deal and try to sell house later.
Also knowing how bad the weather was and being a very old house shouldn't the realtor have been checking on it since I live out of state?
thanks,

[Mr. Knowitall]

Your options are defined by your contract for sale. I very much doubt that you have a contingency that allows you to cancel the contract because of this issue, but you should look and see. Regretting the sales price to which you agreed is not grounds for getting out of a sales contract.

Your insurance company will assess the damages and cost of repair. If the buyer says, "Good enough for us, we'll take the insurance check and fix the place," that stays within the agreed contract price - they're getting the house with sufficient insurance money to restore it to the condition in which it was supposed to have been sold. If the buyer says, "We want even more money," that should give you the way out that you desire. I expect that the buyer is waiting to see if the insurance amount is reasonable and, if not, will agree to abandon the contract.

Merely hiring a real estate agent to show your house doesn't create any inspection or maintenance duties on the part of the agent.

[KeyWestDan]

So, it seems you are saying there was no closing. If there was, the new owners are responsible.

If there was no closing, no actual signatures on the contract, the house is still yours. The insurance money is yours. You could well argue that after the insurance money is used to fix the house, the house is worth more money.

It could well be argued that the intervening disaster has changed the positions of the parties, and that the purchase agreement is no longer valid. If the closing is not done within the time specificied by the contract, then the contract is void. The disaster does not automatically give the buyer more time or any rights. It is still your house and it is your insurance, not theirs. There possibly is something in the contract about acts of god, or the like.

They do not get a dime of the insurance money from your policy. If they closed, they should have had their own insurance and if they didn't, they are just out of flipping lluck.

You should have hired a property management company to look after the house. I don't understand why you were heating it without being there. You should have had the pipes drained and the house weatherized and just let it sit. If you were heating it for purposes of the sale, you should have contracted with a responsible company to look after it during that period. Then you could be going against their insurance.

[globalgrl]

Hi Mr. Knowitall,

Thank you for your reply. I have calmed somewhat and realize you are correct in that I should not have agreed to the price in the first place and can blame no one but myself for that.

Some new developments now and I suppose I need to take this over to an insurance forum but my insurance company, American Family now called and said I am not covered. Very long story but they have some clause that says if house is vacant for 60 days no coverage. I explained that I had converted it from homeowners to business owners in 05 when I left the state and never missed a payment , thought I had done the right thing so this I will fight all the way.

Another thing I found out is that the buyers had someone in before closing to look at furnace. This house was under contract AS IS, no inspections asked for by buyers except termite which is state law so I don't think they had right to have someone in the house to look at anything and get estimates, especially without asking my permission. At least I am pretty sure about this because I have bought 3 houses and in each I wanted work done prior to moving in. I was always told I could not get estimates for work until I actually closed and took possession. So I find it odd that unbeknownst to me that they had someone come look at and give them estimate on new furnace then it breaks down and causes a pipe to burst. Sorry, I don't really believe in coincidences.
would like to hear comments on this, thanks!

[free9man]

You stated in your OP that you aren't sure what caused the problem but now you are asserting that a. it was a furnace failure and b. you believe the buyer's inspector is responsible. Which is it? Did your realtor allow them access? Was this done with your permission?

Does your business insurance policy cover unoccupied structures? Was your insurance company aware that you wished to insure a dwelling which would be effectively abandoned except for an occasional realtor visit? They really shouldn't have issued you coverage if they knew, based on you disclosing the full facts, that they would not cover it. But that's a battle for court I suppose.

[globalgrl]

Free9man,

At the time I wrote the original post I was not sure what caused the pipe to burst. Now I have been informed that yes furnace failed. No, I did not know that they had come in to the house to inspect the furnace until my realtor told us in passing. I do not know who let them in, will find out.

My Business Owners policy was in affect from 2005 when I moved from the state until now. Never missed a payment. Never late. The house was rented until this past summer and yes I informed my agent of this. She has now told me that even she was not aware of this clause that says if property is vacant for 60 days there is no payment for theft, vandalism and water damage. She said if she was aware she would have told me to go with another carrier.
yes, it sounds like a battle for the courts.

[aaron]

It's not part of a real estate agent's job to read and interpret your insurance contract, and warn you of every possible thing that could constitute a breach or create a lapse. Are there special facts that you believe create a greater duty for your insurance agent in your case?

What caused the furnace failure?

[globalgrl]

I found out from my real estate agent that it was the buyer's agent that allowed the furnace person in the house and my agent did not know about it either.

I lived in the house from 2000 to 2005 under a homeowners policy then moved out of state and rented the house. At that time my insurance agent told me to change over to a business owners policy. I did that and last summer my tenants moved out at which time I called her and told her that they moved and the house was vacant and I was putting it on the market. Yes, I do believe that she should have then told me that if it stayed vacant for 60 days I would not be covered. She also feels she should have told me and says she would have advised me to take my business else. Unfortunately, even she was not aware of this policy.
If you think it is up to me to have figured out all the small print and tricks then that is fine, we simply disagree.

[Mr. Knowitall]

Sorry, but it is up to you to read and understand the contracts you sign. It's not reasonable to enter into an insurance contract then, without even having your real estate agent review it, complain that she should have psychically known that you had caused your coverage to lapse and that the lapse has somehow become her fault. Nor is it reasonable to hire somebody to find a buyer for your home then complain that she wasn't periodically checking the condition of the home and making sure that the furnace was running. That's your job.

Again, what caused the furnace failure?

[globalgrl]

No one has said WHAT caused furnace failure, simply that it did fail.

Where are you getting that my policy lapsed? I never missed a payment and was never late.

I have bought and sold 4 houses and I do think that the circumstances were extenuating in the blizzard conditions and I do think the realtor should have checked on home due to this but I realize this is a matter of opinion.

Real estate and inurance agents go to school to learn their stuff and this is to guide and enlighten their clients. Their clients (like me) work in other fields that are better suited to our skills.
Again, a matter of opinion.