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Dear Forms Committee: What if a buyer is unable to obtain homeowners insurance on a property they are purchasing?

The Insurance section of OREF Sale Agreements (for example, Section 9 of OREF 001 – Residential Sale Agreement) recommends that buyers promptly verify insurance availability and costs. Best practices for a buyer’s agent would be to remind buyers early on to secure insurance, and for a seller’s agent to confirm with the buyer’s agent that this has been addressed.


In cases where the transaction is financed, failure to obtain insurance might allow the buyer to terminate under the “Financing Contingencies,” but it might not if the failure is “due to the fault of the buyer.”


For cash purchases, the OREF Sale Agreements don’t include an insurance contingency: one would have to be added to ensure that the buyer is entitled to a return of the earnest money.


Regardless of who gets the earnest money, if the sale fails, it is a disappointment for both parties. Early discussion of insurance helps prevent frustration near closing.


Whenever insurance coverage is a concern, it would be a good idea to negotiate an insurance contingency in Additional Provisions (or a counteroffer).



All comments and responses from OREF or its staff, managers, and volunteers are non-legal opinions made for general purposes. Each Forms subscriber must rely solely upon their Principal broker or personal legal counsel for specific advice and instruction. You and your client should independently confirm that the Form(s) you use are legally suitable for the purposes intended and that they are current with respect to all laws and regulations.