You did the inspection. You negotiated the repairs. You're two days from closing, mentally decorating a house you don't own yet — and then a pipe bursts, a tree comes through the roof, or a wildfire two counties over turns into a wildfire in your new backyard. The house you agreed to buy is not the house you're about to close on. Now what?

Short answer: in almost every real estate contract used today, the seller still owns the property and still carries the risk until closing (or, in some states, until you take possession) — which means their homeowners insurance is generally what responds, and you get to choose whether to wait for repairs, walk away, or close anyway with money held back for the fix. But "almost every contract" is doing some work in that sentence, because the underlying legal default varies by state, and the specifics of your contract are what actually control. Here's the full picture.

Who legally owns the risk between contract and closing

There are two competing legal frameworks at play, and which one governs depends on your state and, more practically, on what your purchase contract says.

The old-school default: equitable conversion. Under the traditional common-law doctrine still followed in a number of states, signing a purchase contract doesn't just create an obligation to buy — it's treated as transferring "equitable title" to the buyer immediately, even though the seller keeps legal title and possession until closing. The catch: courts historically treated risk of loss as traveling with equitable title. So if the house burned down the week before closing, the buyer could theoretically still be on the hook to close and pay full price for a pile of ash, because "their" equitable interest is what got destroyed. It's a genuinely brutal rule for a buyer who's never set foot inside as an owner, and it's the reason this whole topic exists as a legal doctrine in the first place (BDG Law Group; Pennsylvania Association of Realtors).

The modern fix: the Uniform Vendor and Purchaser Risk Act (UVPRA). Drafted in 1935 specifically to undo that outcome, the UVPRA flips the default: risk of loss stays with the seller until the buyer gets either legal title or possession, whichever comes first. States that have adopted a version of it include California (Civil Code §1662), New York (General Obligations Law §5-1311), Michigan (Act 53 of 1941), Wisconsin (Stat. §706.12), North Carolina (Chapter 39, Article 7), and Texas, which has its own version of the same rule (Property Code §5.007). That's not necessarily the complete list — state adoption of uniform acts changes and gets amended over time, so treat the exact roster as ****, and if your state isn't on it, that's exactly when you want a real estate attorney reading your contract, not a blog post.

The part that actually matters for you: your contract probably already overrides all of this. Whether or not your state follows equitable conversion or the UVPRA by default, that default only kicks in when the contract is silent. Virtually every standard-form residential purchase contract in wide use — state Realtor association forms, TREC's Texas contract, and most attorney-drafted agreements — includes its own casualty/risk-of-loss clause that explicitly puts the risk on the seller until closing, regardless of what the underlying state law would otherwise say (Farah Law Firm). So the practical answer for most buyers, most of the time, is: the seller's problem until you close — but read your actual contract's casualty clause to confirm, because "most of the time" isn't "always."

Whose insurance actually pays

This is where people get it backwards. Homeowners insurance follows ownership on the date of loss, not the pending sale. If the damage happens before closing, it's the seller's homeowners policy that's on the hook to respond — their coverage doesn't lapse just because there's a signed contract sitting in escrow (Farah Law Firm).

Your own homeowners insurance, meanwhile, almost certainly hasn't started yet. Most buyers bind a policy to take effect on closing day, not before — so don't assume you have any coverage on a house you don't own yet, even if you've already picked a carrier and gotten a quote. If anyone tells you "just file it on your policy," check that your policy is actually in force for that date before you believe them.

One workaround buyers increasingly use: instead of waiting for the seller to manage repairs, negotiate an assignment of insurance proceeds — the seller's carrier still pays out, but you (the buyer) get a limited power of attorney to manage the claim and direct the repairs to your own specifications, then close on schedule with the claim still in progress. It keeps the deal moving and gives you more control over how the repair actually gets done, rather than trusting a seller who's already mentally moved out to pick the contractor (Farah Law Firm).

What your contract's casualty clause probably says

Most standard contracts follow a similar shape, even though the exact wording and thresholds vary by state and by form:

  • Seller's obligation: restore the property to its pre-damage condition before closing, "as soon as reasonably possible." Texas's TREC contract (Paragraph 14) uses almost exactly that language (Texas REALTORS).
  • A materiality threshold: many forms distinguish between minor damage (a few missing shingles) and "material" or "substantial" damage (a burned kitchen, a collapsed section of roof), with different rules for each. Wisconsin's standard offer form, for example, uses a numeric threshold — damage estimated above roughly 5% of the purchase price counts as material and triggers termination rights (Lima Ohio / Legal-Ease).
  • A deadline to decide: contracts typically give a short window — often around 15 days — to either finish repairs, agree on a fix, or the deal automatically shifts to termination (Texas REALTORS).

Pennsylvania's standard association contract (Paragraph 21, "Maintenance & Risk of Loss") is typical of the genre: if the property is destroyed before settlement, the buyer isn't obligated to close at all — but can choose to proceed anyway if the seller assigns them the insurance proceeds (Pennsylvania Association of Realtors).

Your real options if it happens to you

If damage turns up between your inspection and your closing date, you generally have three moves, and which one makes sense depends on how bad it is and how much you still want the house:

  1. Delay closing until it's repaired. Cleanest option if the damage is fixable on a reasonable timeline and you're not racing a rate lock expiration. Downside: rate locks have expiration dates, and re-locking in a higher-rate environment can cost more than the repair did. Ask your lender, before you agree to any delay, exactly what a blown lock costs you.
  2. Terminate and get your earnest money back. Your right to do this — and how much damage triggers it — comes straight from your contract's casualty clause (see above). If the damage is genuinely substantial, this is often the buyer-favorable move, especially if you're not confident the seller will actually get repairs done to your standard before handing you the keys.
  3. Close anyway, with a credit, escrow holdback, or assigned insurance claim. If the damage is moderate and you still want the house, you can negotiate a price credit, have funds held in escrow until repairs are verified, or take an assignment of the seller's insurance claim and manage the repair yourself post-closing. This is common enough that real estate attorneys have a playbook for it — it doesn't have to blow up the deal.

None of these are automatic. They all depend on what your contract says and on you (or your agent, or ideally a real estate attorney) actually reading the casualty clause instead of assuming "the industry" has your back.

The lender wrinkle nobody mentions

Even if you and the seller work it out, your lender gets a vote too. Fannie Mae's guidelines require lenders to take "prudent and reasonable actions" to check whether a property's condition materially changed after the appraisal but before closing — especially in a FEMA-declared disaster area. Minor, insured damage can sometimes proceed with documented repair estimates and proof of funds to cover them; damage that's uninsured or affects the structure typically has to be fixed before the loan can close, full stop, no matter what you and the seller privately agreed to (Fannie Mae Selling Guide B2-3-05, as of September 2025). Translation: after any storm, wildfire, or flood event near your closing, expect your lender to want a fresh look at the property before they'll fund — even if you've already made peace with the seller.

This isn't hypothetical at scale. The January 2025 Los Angeles-area wildfires left thousands of pending transactions in limbo — some homes destroyed outright, others in escrow with smoke or ash damage that needed to be assessed before anyone's lender would move forward (Marketplace). Most of those buyers weren't dealing with an obscure legal doctrine in the abstract; they were on the phone with their lender, their insurer, and a real estate attorney within days of a fire because their contract's casualty clause suddenly mattered a lot.

This is exactly why the final walkthrough exists

Most last-minute damage doesn't announce itself with a wildfire — it's the water stain that wasn't there at inspection, the AC unit that stopped working after the movers' truck backed into it, the fence panel a storm took out last week. This is precisely the scenario your final walkthrough — typically scheduled within 24-48 hours of closing — is designed to catch, which is why skipping it to save an hour is one of the more expensive shortcuts in the whole process. We've covered how to actually run that walkthrough in a separate article on this site; the short version here is just: it's your last contractual checkpoint before the risk of loss question above stops mattering because you now own the problem.

Bottom line

If something happens to the house you're buying before you close: check your contract's casualty or risk-of-loss clause first, not your gut. In the overwhelming majority of contracts, the seller's insurance is what responds and you get real choices — delay, terminate, or close with a credit — but the exact rules, thresholds, and deadlines are set by your specific contract and your state's law, and both of those vary enough that "ask a real estate attorney" isn't a cop-out answer here, it's the actual answer.

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