Property damage before closing

My LLC is buying a vancant SFH shortsale, (specifically in AS-IS condition), and one day before my bank’s appraisal a frozen pipe burst in a second floor bathroom and flooded several rooms of the house, causing at least a couple thousand dollars worth of damage. I’m not sure that I want to pull out of the deal completely, because its a great buy, so what other options do I have? Should I ask that the seller repair the damage, or give me some credit at closing, or what? And if I do decide to pull out, what costs can I recoup? (Seller and I didn’t have a separate written agreement for earnest money; his title company is currently holding it.) Any advice would be greatly appreciated. Thanks!

Get a seller credit. You won’t be able to recover any damages if you close with this new damage.

Why not have the seller file an insurance claim and then do the repairs before you settle?

I’d be surprised if the seller could afford (and actually paid for) vacant dwelling insurance.

Sorry for the stupid question. Consider it withdrawn

Absolutely not a stupid question, Dave. You are right and I thought the same thing until I noticed the OP said the house was abandoned. My thought then became go for the credit because there is little chance the seller is carrying insurance when he isn’t paying the mortgage.

As an aside regarding seller repairs, I don’t like them. The seller has every incentive to cheap out. I rather have the money and make sure the work is done properly.

BLL, I don’t have enough information to reach the same conclusion.

The OP said the house is vacant which I took to mean unoccupied. Yes the house is being sold ‘as-is’ but I assume that the seller has been keeping up with the maintenance and upkeep to maintain curb appeal until the property is sold. So, I never considered the possibility that the property is abandoned. It might be, but then again, there is not enough inforrmation in the original post to know for sure.

We don’t know how recently the seller vacated the property. Could be the seller just moved out recently, and his homeowner’s insurance is still in force.

Since the property is being sold as a short sale, there is still a mortgage in place. Whenever a borrower lets his insurance lapse, the lender usually orders insurance under a forced placement program. We don’t know if this has happened either.

We just don’t have enough information to know if the property is uninsured, nor whether the property is abandoned. Until we know for sure, there is nothing wrong with the assumption that there might be some form of hazard insurance in place.

Jake just asked for options. Exploring whether the damage is a covered claim under the seller’s insurance policy is an option that could be explored.

Another option that comes to mind is to renegotiate the purchase price. The house is no longer in the “as-is” condition that existed at the time the purchase offer was made. I suspect that Jake could get a better short sale deal from the bank over just accepting a repair credit.

At this point, the question may be moot. The seller could already be taking care of the problem. Jake will have to come back and give us an update.

Just to provide some more info-I’m buying the house from a wholesaler who is negotiating a shortsale with a bank. The original owner whose name is on the title is not in the picture, so collecting insurance proceeds is not an option. I believe that the seller will end up knocking down the sale price by the amount of the damage estimates, but it’s still up the air because he now has to go back to the bank and negotiate a lower short sale price on his end so he can still make a few bucks as the wholesaler. Thanks for everyones help.

You have an owner (seller), a bank, and a wholesaler in the picture. The owner still has title and is the one with the insurable interest in the property. It is the owner/seller who will have to work with his insurance company to effect any covered repairs and collect against his claim.

You and the wholesaler are not in the picture for this, but the seller still is as long as the title is still in his name.

With extensive water damage repairing the plumbing is not the end of the work. Flooring, ceiling, and drywall may need to be repaired or replaced in several rooms. Painting and mold abatement may have to also be done. And then, you don’t know what hidden damage will be discovered once work is started. Expect the job to cost more than just a couple $K.

If you accept a repair credit, you assume all the risk that the repair cost will exceed the credit you received.