At what point does the risk of loss pass to a home buyer in Delaware?

Purchasing a home is a lengthy and complex process, often spanning several months. Part of doing your due diligence is taking into consideration all possibilities that could have a negative effect on your investment. While highly unlikely, it may still be on your mind that a house might suffer a fire or other type of damage before you can complete the purchase process. At what point in the process does the financial responsibility for damage to the house pass to you?

Equitable vs legal title

Full ownership of a property is made up of two distinct parts – equitable title and legal title. Equitable title essentially means the right to obtain ownership of the property, while legal title is documented ownership of the property.

Once you sign a contract to purchase a house, equitable title of that house passes to you. However, the seller retains legal title until you both sign the deed. Once both types of title pass to you, you become the full owner of the property.

The risk of loss

Unfortunately for buyers, the risk of loss is part of equitable title. This means that the risk of loss of a house passes to you even before you have the right to move in and take possession of the house.

In the unlikely but possible event that a fire, vandalism, or other catastrophe were to occur to the house in the period between when you signed the contract and when you receive the deed, the responsibility for the damage is yours, not the seller’s.

A house is a huge purchase, and even a small incident can require costly repairs. Purchasing insurance as soon as you can to cover the costs of unforeseen accidents is a must in order to protect your financial investment and ensure that your family is taken care of should the unthinkable occur.

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