What happens if a property's damage exceeds 10% of the purchase price before closing?

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If a property's damage exceeds 10% of the purchase price before closing, it creates a significant concern regarding the value and condition of the property. In most real estate contracts, a clause is included to address what happens in the case of substantial damage before the transaction is completed.

When damage exceeds a certain threshold—such as 10%—it typically allows both parties the option to reevaluate the situation. This means that either the buyer or the seller has the right to terminate the contract without penalty. The rationale is that considerable damage could impact the buyer's willingness to proceed with the purchase or could lead to negotiations for repairs or price adjustments.

This provision protects both parties by ensuring that they can opt-out if the property is not in the expected condition based on the purchase agreement. Therefore, giving either party the right to terminate the contract is the correct response to this scenario.

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