The owner of the home is responsible for the damage to the house. The seller/tenant is responsible for their personal possessions. Hopefully the seller/tenant had renters insurance and the owner had adequate home owners insurance to cover the damage.

The new owners would have home owners, right? The lease back sellers are probably without coverage. Just a guess on my part.

Definitely an appropriate use of the word disaster...

This makes me so glad our sellers decided at the last moment that they would not lease back after a fast sale/closing. It would not have occurred to me that they needed renters insurance for just two weeks. (This summer we bought a 2-flat in NW Chicago from the couple who lived in one part and rented out the second apartment -- which remains occupied by tenants who DO have insurance.)

Homeowner's insurance will usually cover your residence and your belongings while in storage or transportation to a residence, excluding damage caused by moving itself. So if the sellers purchased another house or hadn't cancelled their policy it is likely that their insurance will pay for their belongings.

The tragedy aside, I think there's more sensationalism than substance in the concern.

Lenders require evidence of insurance before funding a loan. Meaning - it had to be adequately covered before close and change of ownership. Whether the bad luck event occurred the day after, the year after, or 10 years after it was purchased, if there was a loan outstanding and it was occupied by a renter, the structure was insured. Other than the disappointment of not being able to move in and having to deal with an unexpected catastrophe, financially each instance would have been the same. But less dramatic and less newsworthy.

There's a silver lining to the cloud - if it was an older house with the issues and compromises that any buyer needs to come to grips with and accept, they get to start from scratch and get new plumbing, new fittings, and new equipment, and leave any vestiges of old age or middle age behind.

Nope, a newer home, probably less that 10 years.

OK. But still an opportunity to choose and refresh fittings and equipment.

It will probably take 2 years, but yeah, a newer house.

What about the frustration and stress of trying to find a place to live while the house is being re-built? In the market where I live, rentals are few and far between.

That problem is facing lots of people in the Philly area, Flooding in Manayunk and Bridgeport and Conshohocken, tornado damage in Upper Dublin and Horsham. More damage in Bucks County and New Jersey, A good amount of lower-income housing, too. It's a challenge to get housing.

It sucks. My town and my immediate neighbors were hit with an EF4 tornado this last Spring. We are cleaning up very slowly but surely. While many in my community didn't have insurance, even the fully insured are experiencing significant delays and frustrations due to lack of adequate supplies and skilled labor.

The situation above is the reason why your insurance agent will tell you to not cancel your homeowners insurance until you have fully relocated and have either coverage at your new home or full renters insurance.

My guess is the buyer is already covered and in for a long journey. They should get renters compensation while rebuilding their really, really new to them home. The sellers contents should be covered unless they canceled their policy. They were probably going to give away or donate a bunch of the contents anyway. Now, they can get reimbursed for a lot of it.

Many home policies give you a choice between RCV (replacement cost value) or ACV (actual cash value). Some states (e.g. California) require insurance companies to offer both. Since enough states make it a requirement to offer both, many insurance companies just offer both everywhere.

So it is possible that the buyer will get all their money back and a short term rental as they look for a new home, rather than having to endure the process of rebuilding the home.

ETA: There is no good time to have your house destroyed but if you have to have your home destroyed, this is likely the best time for it to happen (assuming everyone is insured, which seems likely). The seller likely at least has a place to live and some compensation for their stuff and the seller has all their stuff and will likely be compensated for their loss.

@mxk3 z5b_MI said, As in -- they may be on the streets while they wait for it to be built. Just because they have the means to go to the Shore for some R&R doesn't mean they can just wave their checkbook and poof!

I will endeavor to explain ACV in more detail...

It is unlikely that the buyers are going to have to wait to have the house rebuilt. I have never had a non-ACV policy and I have owned more houses than most and in more states than most, nor have I ever seen a non-ACV policy. Most insurance companies will offer a cash payment instead of having to rebuild.

This payment is called an Actual Cash Value (ACV) rather than a Fair Cash Value because they typically don't have to refund the current value of the home. It is only your actual loss. Which is calculated as the money you paid plus fees you paid less any depreciation that has happened. When you have lived in a house 12 years the ACV may not be worth taking because you generally don't get the gains that have happened as your house appreciated, plus the depreciation is subtracted so you get less. However, for a brand new house that you haven't lived in, the gains are going to be zero and the depreciation is going to be zero. So your policy is going to refund you the entire amount you paid for the house, plus any acquisition fees, and you can look for a new house without having to wait for one to get built.

This, of course, assumes that you can find a new house and that prices haven't skyrocketed in the time it took to close, but it is a much better position to be in than someone who has lived in the house for a while. You, at least, have a reasonable choice to recover most of your loss... something that many people would fight you for.

Note: some states require an additional cash payment option in addition to ACV based on % of rebuild cost or the like.

ETA: Their insurance company will pay for temporary lodging why they search for a new home for some reasonable amount of time. The insurance company will also pay for residence while their house is getting built so they will not be on the street unless their builder breaches the contract.

ETA2: Not to mention the emotional devastation that occurs with something like this.

Do you suppose it would be less emotionally devastating if they lived in the house for 5 years and all their stuff was gone?

"There is no good time to have your house destroyed but if you have to have your home destroyed, this is likely the best time for it to happen"

I'm not sure what's intended but from several different perspectives, this is more broadly an awful time to have to rebuild a house.

There has been a lot of flood damage in this near-Philadelphia area and elsewhere up the coastal corridor and contractors and insurance claims adjusters are going to be very busy. If that weren't enough, the economic boom many urban areas are experiencing for folks with white collar jobs is also leading to a lot of construction, remodeling, and the like. Trying to find a contractor of most types in my area is impossible, as an example, but for the really lousy ones who always seem to have available time. People I know on the East Coast have reported such issues over the past year plus.

Which again, makes my point. Imagine if all those people out there looking for contractors could get a check for the full retail value of their home without having to look for a contractor... How many people in similar situations do you think would love to just get a check instead of the massive hassle?

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Your insurance company will give you a check for what you paid, less depreciation since you paid it. A week old home has no depreciation and likely has no gain. So that check is going to cover your entire loss. You, of course, have to now look for another house, but you don't have to go through the hassles mentioned above. You just get a check and start looking again.

be careful while saling/buying of a house because you can face violation of the contract when buying a house

"Which again, makes my point."

Huh? I hope your comment makes sense to you, I can't follow what you're trying to say.

homechef59 I agree with most of what you said, but frankly when I moved I didn't give away or discard much of value at all.

"I hope your comment makes sense to you, I can't follow what you're trying to say."

@Elmer J Fudd - It really isn't that hard to understand. Almost all U.S. homeowner's policies have a cash option for houses that are totally destroyed called an ACV. That cash option is the money you paid less depreciation.

Here I will break it down for you...

Homeowner 1 and Homeowner 2 are neighbors whose nearly identical houses are destroyed.

Homeowner 1 bought their house 5 days ago for $300,000, since it was only purchased 5 days ago the house is still only worth $300,000. Their insurance will give them a choice to accept a check for $300,000 and walk away or keep the lot and rebuild their home.

Homeowner 2 bought their house 5 years ago for $220,000, in the 5 years since the purchase the house has appreciated to about $300,000. Their insurance will give them a choice to accept a check for $200,000 (the $220,000 they paid minus $20,000 depreciation) and walk away or keep the lot and rebuild their home.

Even forgetting that homeowner 1 didn't have their stuff destroyed, they are in an objectively better position. They lost a $300,000 home and will be offered $300,000 in cash. Homeowner 2 had a $300,000 house destroyed but will only be offered $200,000 in cash. The option rebuild will exist for either.

So again, there is no good time to have a house destroyed. But right after you buy it and before you even have a chance to move into it is the best time. This doesn't mean I think it is good, so stop your pearl clutching. It does mean it is likely the least bad, bad news.

ETA: if you need to understand why its the best time for the seller also... imagine if homeowner 2 was closing on a sale the day after it was destroyed for $300,000 and see if you can figure out why it would have been better for their closing to be the day before the house was destroyed.

"ETA: Their insurance company will pay for temporary lodging why they search for a new home for some reasonable amount of time. The insurance company will also pay for residence while their house is getting built so they will not be on the street unless their builder breaches the contract."

The problem isn't the money. The problem is finding a physical place to live. Where I live, homes for rent have a lease on them before they are ever advertised. Houses for sale are sold before they show up on the real estate websites unless they are grossly overpriced or have a serious defect. Apartments are the same. I suspect the buyers have either closed on their former residcence or will do so shortly if they owned a house or have given notice to their former landlord that they are vacating the rental.

I was just correcting the erroneous assumption that the buyers will have to go through the trouble of rebuilding. THEY DON'T. They are in the one situation where rebuilding isn't financially necessary. They are better off than 99.9% of the people who have their home destroyed. That doesn't mean they are lucky and I never said that.

Can we all agree that the housing situation would be the same whether or not they have a check for the full value of their home?

Having an insured home destroyed by whatever occurrence is a personal tragedy much more than a financial one. There is no good time for it to happen. Is there a good time to have a car accident, to have a relative or friend have a heart attack, to have luggage lost by an airline?

The mechanics and details of insurance claims are hardly relevant and also not particularly interesting, I skipped over that. I thought your comment was silly and you've confirmed that with the prevaricating response.

"Lenders require evidence of insurance before funding a loan. Meaning - it had to be adequately covered before close and change of ownership. Whether the bad luck event occurred the day after, the year after, or 10 years after it was purchased, if there was a loan outstanding and it was occupied by a renter, the structure was insured. Other than the disappointment of not being able to move in and having to deal with an unexpected catastrophe, financially each instance would have been the same. But less dramatic and less newsworthy."

The homeowners' insurance was probably based on the buyers' representation of "owner-occupied". If the sellers were renting the property, even for just a few weeks, the policy may not be valid based on fraudulent representation.