Expert: Jim Root - 9/8/2008

Question
I am scheduled to close on a commercial property in a week.  The property was flooded due to a clogged pipe in the city system and the floors and carpets were soaked and ruined.  This issue is not how it happened (this has been dealt with) but how the seller is dealing with it.

The contract states that if we take title, we are entitled to any insurance settlement that the seller receives.  Seller is claiming that her insurance will not pay unless they receive invoices for completed work.  Everyone I have talked to says that the insurance company just needs a good faith estimate from the recovery company (ServePro in this case) and they will cut a check for the damage.

Seller is also claiming that since I plan to renovate once I take ownership by saying things like "you were going to rip out the carpet anyway..."  and trying to get us to take the property partially complete.  The truth is that I will be doing some renovations but I feel it is really none of her business and I should not be forced to take ownership without compensation for the damage that remains to the carpet/floor regardless of what I was planning to do.

Seller was also adamant that we not contact our bank saying it would only make things more difficult for us.  I understand that this is wrong and I have contacted them.

I don't care what she does but I will only take ownership with one of the following: 1)her insurance settlement turned over to me at closing (per contract)   2) reduction in sale price equal to the total damage estimate  3) money back at closing equal to the amount of the damage estimate.

What typically happens in these cases?


Answer
MATT--

You have a Contract with the Seller--and I must assume that as most Real Estate Sales Contracts, it provides for transfer of title to you with the property in the condition it was in on the date of your signed-around Purchase/Sale Agreement!Any comments you might have made to anyone regarding things you might do to the property after it became yours shouldn't matter at all! Your Lender is processing a Loan to be secured by the property and expects it to be in  the condition it was in on  the date of the Appraisal done for the transaction.Your Title Search & Insurance Provider is interested in providing clear title on Closing.

All of you have specific interests in the matter at hand--it affects each of you involved! Satisfaction of the matter, I would assume. must be one that centers around all parties to the transaction fulfilling the obligations of the Contract.Any deviations from the original Contract must be acceptable to all, Buyer, Seller, Lender and Title Folks, I'd imagine!

Any of you 3 "Options" listed above would be OK by me were I in your shoes--but only if OK with all other parties! YOU NEED A LOCAL ATTORNEY TO GIVE YOU ADVICE & GUIDANCE ON THIS MATTER! Good Luck!

--JIM