You Found Water Damage Right Before Closing – Now What Should You Do?

By: Diana Rodriguez-Zaba
Updated on: January 16, 2023

You’ve been looking at houses for months, and you’ve finally found one. Everything about it is perfect, and you can picture yourself living there.

Things are clipping along – the loan is approved, the seller is happy, and you have a closing date set. All of a sudden, though, your water damage inspection comes back, and there’s some seriously bad news: they’ve discovered water damage to the house before closing. While this isn’t a situation anyone wants to be in, it does happen.

If you’ve recently learned that your house flooded before closing, or the inspection revealed water damage you weren’t aware of, here’s what you need to do to remediate the situation.

What if Your House is Damaged Before Closing?

Most real estate transactions clip along smoothly. If a deal is terminated, issues discovered during the inspection are some of the primary culprits. Among these, water damage is one of the most serious.

In some cases, water damage is minimal and easy to navigate around. When this happens, a buyer and seller can sometimes come to an agreement quickly, and keep the sale on track. In other situations, though, an unexpected situation like a storm, broken pipe during warm weather, or other accident can create severe water damage, at which point the buyer may want to abandon the transaction or negotiate the sales price down.

To make matters more complex, real estate contracts don’t always contain explicit language about what to do in these situations. For reference, here are a few of the most common options for dealing with water damage to a house before closing:

  • The Buyer can Collect Insurance. In some cases, the real estate contract may allow for the buyer to collect some of the insurance proceeds and close on the transaction as usual.
  • The Buyer can Abandon the Sale. Most buy/sell agreements include language that allows the buyer to back out of the sale if the home inspection reveals information that damages the value or stability of the house. While this will vary from contract to contract, it’s always wise to review the language carefully. In these situations, a buyer will likely receive the full deposit of their earnest money back, and will not be liable for expenses incurred by the seller.
  • The Deal can Proceed. If the home has been damaged but not destroyed, it is possible to push forward with the sale. In cases like these, the seller and buyer will need to work together (with the possible help of attorneys) to come up with an agreement that suits the needs of all sides. This is a standard approach if the water damage amounts to less than 5% of the agreed-upon price. Keep in mind that some states may make that cap even higher, so it’s wise to evaluate your rules and regulations carefully.

Hire a Professional to Evaluate the Damage

Whenever you’re dealing with water damage right before closing, it’s smart to take additional steps to ensure you’re aware of all the issues. With water damage, specifically, it’s common for there to be further mold and wetness hiding out, and hiring a water damage restoration professional is one of the only ways to fully understand the scope of the damage.

Keep in mind that hiring a professional to evaluate the damage doesn’t take the place of an inspection. While the home inspection report will help you understand any pre-existing issues in the home, the water damage professional will be able to define the severity of the water damage and help you come up with a plan for moving forward.

If you plan to purchase the home despite the water damage, you’ll need to let your lender know about the damage, and the estimated costs to repair it.

Need an expert service company to help you evaluate or remediate water damage? Contact ServiceMaster by Zaba – your local restoration company in Chicago, IL. Our staff will answer any questions you may have or provide you with a quote for services.