Your heart is set on purchasing your dream home or condo in Michigan. You’ve earnestly begun negotiations with the sellers – haggling over price, working with your realtor to outline seller and buyer responsibilities to be completed before closing, targeting a date for closing, and – frequently these days – agreeing how long the sellers may remain in the home after the closing.

While delays where sellers remain in a home after closing are common and purchase agreements typically stipulate the seller is required to pay for any repairs or replacement necessitated by misuse, abuse, or neglect of the property one valid concern most purchase agreements fail to address is what happens if there is an insurance-related loss while the seller is still living in the home?

An insurance claim for damages to a home or other structures on the property that occurs after the closing date customarily is the responsibility of the home buyer and their insurance company.

What this means is if an unforeseen claim occurs – say a pipe bursts in a wall – during the period of time following closing while a seller is still living in the home they no longer own the claim goes to the home buyers insurance company and the new homeowner is also responsible for paying, out-of-pocket, their insurance deductible.

While accidents happen, as you can well imagine, most new homeowners are understandably none too pleased to file a claim against their new insurance policy and pay their deductible (typically $500 – $1,000) for a loss the occurs before they’ve even taken possession of their new home.

Since you own your new home once the closing is completed there isn’t really any effective way for a home buyer to avoid being stuck with a claim if an insurance loss occurs before they’ve taken possession of their new home. There is, however, a simple solution to minimize risk and expense for a homebuyer in this situation.

A clause can be added to the purchase agreement stipulating the seller would be responsible for the buyers’ deductible if an insurance-related loss occurs after closing while the seller remains in the home. For a buyer whose new home insurance policy has a $1,000 deductible a clause similar to the following would provide a remedy to this potential issue:

“Seller to be responsible for the first $1,000 of any insurance related loss if the loss occurs while the sellers continue to occupy the property after close.”

This is a simple and reasonable solution. Unexpected losses can – and do – happen: that’s the purpose of insurance. It’s also reasonable to expect a seller, who requests time to remain in a home after closing, should bear some financial responsibility if any damages occur while they continue to occupy the home.

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