Florida Real Estate Sales Associate Examination Content OutlineReal Estate Contracts and AgencyHard
A buyer and seller have a valid contract for sale. Before closing, the property suffers significant damage due to a fire, making it uninhabitable. The contract does not specify who bears the risk of loss in such an event. Under the Uniform Vendor and Purchaser Risk Act (UVPRA), which party typically bears the risk of loss in this situation?
- AThe insurance company of the party who last held the policy.
- BThe buyer, as they are the equitable owner.
- CThe seller, as legal title has not yet transferred.
- DBoth parties equally share the loss.
Show answer & explanationAnswer & explanation
Correct answer: C. The seller, as legal title has not yet transferred.
Under the Uniform Vendor and Purchaser Risk Act (UVPRA), if a significant portion of the property is destroyed without fault of the purchaser before legal title or possession transfers, the seller bears the risk of loss. The purchaser is then entitled to recover any portion of the price paid.
Why the other options are wrong
- A. While insurance would cover the financial loss, the UVPRA determines who *bears* the risk and thus who is entitled to the insurance proceeds or who must refund the buyer.
- B. While the buyer may have equitable title, UVPRA shifts the risk to the seller until legal title or possession transfers.
- D. The UVPRA assigns the risk to one party, not equally shared, unless specified otherwise in the contract.
Uniform Vendor and Purchaser Risk Act (UVPRA)
A law adopted in some states that specifies who bears the risk of loss for damage to real property between the time a contract is signed and the closing, if the contract does not explicitly state otherwise.
- Seller bears risk until legal title or possession transfers
- Buyer can rescind contract if substantial damage occurs
- Applies when no fault of buyer or seller
Memory trick: Before Title, Seller's Trouble; After Title or Possession, Buyer's Burden.