You are under contract, the inspection is done, the loan is moving, and then a tree comes down in a storm or a pipe bursts while the house sits empty. Who pays, and can you walk away? In Florida, the answer depends on the contract you signed, but the standard Florida Realtors/Florida Bar forms follow a clear set of rules. This guide explains the “Risk of Loss” clause in plain language so you know what to expect before a problem happens.
Quick note: this article describes the standard Florida Realtors/Florida Bar residential contract forms, including the “AS IS” version. If your contract was written differently or has addenda, your terms control. Read your own contract and ask your closing agent or a Florida real estate attorney about your situation.
Who owns the risk between contract and closing?
Until closing, the seller still owns the home, and the standard contract keeps the seller responsible for its condition. The “Property Maintenance” paragraph requires the seller to keep the property, including lawn, shrubbery and pool, in the condition it was in on the Effective Date, apart from ordinary wear and tear and casualty loss. The “Risk of Loss” paragraph then covers what happens when the damage is a casualty, such as fire, wind or a falling tree.
The 1.5% rule in the standard Florida contract
If the home is damaged by fire or other casualty after the Effective Date and before closing, the contract compares the cost of restoration with 1.5% of the purchase price:
- Restoration costs 1.5% of the price or less: restoring the property is the seller’s obligation, and closing goes ahead under the contract terms. If the work is not finished by closing, an amount equal to 125% of the estimated cost to complete it (not more than 1.5% of the price) is held in escrow at closing. If the real cost runs higher, the seller pays the actual cost up to that 1.5% cap, and any unused escrow goes back to the seller.
- Restoration costs more than 1.5% of the price: the buyer chooses. The buyer can take the property “as is” together with the 1.5% amount, or take a refund of the deposit, which releases both sides from the contract.
Example: on a $400,000 contract, 1.5% is $6,000. A $4,500 repair after a storm is the seller’s to restore. A $40,000 roof and ceiling claim passes the line, so the buyer decides between closing with the $6,000 or getting the deposit back.
The cost of pruning or removing damaged trees counts toward restoration, but the seller’s only obligation for tree damage from casualty or other natural occurrence is the cost of pruning or removal. If a tree also damaged a fence or roof, that is a different conversation, so document everything.
What counts as a casualty, and what does not?
Fire, wind, hurricane damage and a storm-felled tree are classic casualty events. Ordinary wear and tear is not. An AC that quits or a water heater that dies between contract and closing is usually handled under the maintenance and walk-through language rather than the casualty clause, and the details of your contract matter here. If you are unsure which paragraph applies, ask before you close, not after.
Use the walk-through to catch problems
The standard AS IS contract lets the buyer, or the buyer’s representative, walk through the property on the day before closing or on closing day before closing. Its purpose is limited: confirm that the personal property included in the sale is still there, check that the seller kept up the maintenance requirement, and verify the seller met the other contract obligations. A follow-up walk-through is allowed if needed, and the seller must give reasonable access and keep utilities on for it.
After a storm, do not wait for the day before closing if the house may be damaged. Ask your agent to arrange access as soon as it is safe. Our inspection team lays out what to look at in its final walk-through checklist, and our post on the AS IS contract inspection period explains how that earlier cancellation right differs from the casualty clause.
What to do if you find damage before closing
- Do not sign closing documents yet, and do not assume it is fine. Tell your agent right away and confirm in writing.
- Photograph and date everything. Wide shots and close-ups, plus any receipts or estimates the seller shares.
- Notify your lender and closing agent. Lenders typically need the home in the condition they approved, and an insurance claim may affect what they require.
- Get a repair estimate. A licensed contractor’s estimate tells you which side of the 1.5% line you are on.
- Ask about timing. A short closing extension, or an escrow holdback for unfinished work, is something both sides may agree to in writing.
- Check your deposit rights before you decide. Our guide to earnest money in Florida covers when a deposit comes back.
Insurance: line it up early, especially in hurricane season
Your lender will require homeowners insurance at closing, and the seller’s policy does not transfer to you. During hurricane season, ask early about when coverage can be put in place, because insurers may limit new coverage when a named storm threatens. A conversation with an insurance agent about what buyers should line up before closing is worth having as soon as you are under contract. For the wider picture of buying in storm season, see buying a home in Central Florida during hurricane season.
Sellers: what this means for you
Keep your own homeowners policy active through closing and report storm damage to your insurer promptly. Tell your agent and the buyer about any damage right away. Honest, fast communication usually keeps a deal together, and the duties covered in our seller disclosure guide still apply to what you know.
If your buyer is financing, a major repair can also raise questions for the lender. Understanding the three-business-day closing disclosure rule helps both sides see why timelines can be tight.
Frequently asked questions
Can I cancel if the house is damaged after I sign?
Under the standard Florida contract, you can if the cost of restoration is more than 1.5% of the purchase price: you may take the deposit back instead of closing. At or below 1.5%, the seller restores the property and the contract continues.
Does the seller have to fix everything after a hurricane?
Only up to the contract’s limits. Restoration is the seller’s obligation up to 1.5% of the purchase price; above that, the buyer decides whether to close with the 1.5% or take the deposit back.
What if a tree falls on the house?
The seller’s sole obligation for tree damage is the cost of pruning or removal. Damage the tree causes to the structure falls under the casualty rules above.
When can I do my final walk-through?
The standard contract allows it on the day before closing, or on closing day before closing, with a follow-up if needed. After a storm, ask your agent for earlier access.
Can the closing be delayed because of damage?
Both sides can agree in writing to extend the closing date or hold funds in escrow for unfinished repairs. Neither is automatic, so talk to your agent and closing agent early.
Questions about your Central Florida purchase or sale?
We can help you read the clause in your own contract and plan the timeline before closing. Contact Quality Real Estate Services LLC at 407-476-6667, 336 Wilshire Blvd, Suite 274-229, Casselberry, FL 32707.
By Tariq AbouAdma, Real Estate Broker, License BK3375638, Quality Real Estate Services LLC. This article is general education, not legal advice. For questions about your specific contract, consult your closing agent or a Florida real estate attorney.