I entered into a purchase and sale agreement couple of weeks ago for a house that is now underwater, literally, from the last deluge. The bank that I have applied to for financing now says that they want to reevaluate the appraisal they got because of the flooding. Where do I stand?

The basic agreement in the purchase and sale contract is that the property on the date of closing must be in the same condition that it was in when you signed the agreement, or when you obtained your inspection, ordinary wear and tear excepted. If the house was damaged by the floodwaters, and it is not repaired prior to the closing date, you will have the right to terminate the purchase and sale agreement and receive a refund of your deposit. If your bank backs out of the deal because of the flooding, and you are beyond your financing contingency date, and the owner of the property is able to repair the property prior to the closing date, you could have a problem. You will need to replace your lender in order to be ready to close or otherwise you may lose your deposit. Normally the fact that someone gets a water in their basement is not a reason for you to terminate the contract unless you received a representation from the seller that they never did have water in the basement in the past. The problem with the last deluge is that in some areas it was in the 200 year to500 year flood plain which means that it is not expected to flood more than once every 200 to 500 years. A property is not generally included within the flood area maps, which entitles a homeowner to get flood insurance, unless the property is within the 100 year floodplain. We reached that level a few years ago and no one ever expected to see it come again so quickly. Government folks should be doing a lot of rethinking about to flood insurance availability in the next several years given the disastrous levels of flooding that we have seen this spring. The other alternative that may be available to you, if the repairs have not been made, is to close and take an assignment from the seller of his rights under his insurance policy for the damages to the property, if in fact his policy covers those damages.

 

If you have questions about this or any other legal matter, please contact Tom Bennett at (617) 531-6574 or tvb@barronstad.com.

Sign up to receive Tom Bennett's weekly real estate Q&A from the "Boston Courant" or follow him on