Which common law principle affects the risk borne by buyers in real estate?

The principle of equitable conversion plays a key role in determining the risk borne by buyers in real estate transactions. Under this doctrine, once a real estate purchase agreement is executed, the buyer is considered the equitable owner of the property, even if the legal title has not yet transferred. This means that the buyer assumes the risk of loss or damage to the property during the time between the acceptance of the purchase agreement and the actual closing of the sale.

For instance, if the property were to suffer damage or destruction before closing, the buyer may be held responsible, despite not having taken formal ownership. This principle reflects how equity operates in enforceable contracts, impacting the buyer’s risk profile and stress on the importance of due diligence and insurance during that interim period.

In this context, contractual obligations, while essential to the transaction, do not specifically delineate how risk is allocated concerning property ownership. Statutory regulations typically govern the broader legal framework of property transactions but do not address the nuances of party risk in pending sales. Marketability assessments focus on the property's value and potential barriers to sale, rather than the risk allocation under common law principles like equitable conversion. Thus, equitable conversion distinctly clarifies the responsibilities and risks involved for buyers in real estate transactions, making it the