Having said that, I can suggest several questions which you might raise when you speak to your attorney. First, while I haven't seen the contract in your transaction, the contract form we use provides that the Seller is responsible for all damage which occurs up until closing, and that if the cost to cure the damage exceeds 25% of the purchase price the Buyer has the right to walk away. Your attorney can tell you exactly what your specific contract provides.
Second, will the home be put back exactly as it was when you agreed to buy it? If there will be material changes in the home as rebuilt, that may (or may not, I'm not a lawyer) give you grounds for voiding the contract.
Third, you mentioned that the home flooded. Was it in a known flood hazard area when you agreed to buy it? If not, can you find out if FEMA intends to expand the flood hazard zones to encompass this area? An area which was not a flood zone being ruled a flood zone would be a material change in condition, and your attorney can tell you if that would be grounds to void the contract.
Fourth, on the assumption that this was not to be an all-cash transaction, have you spoken to your mortgage lender to see what their reaction to these events is? If they are going to require flood insurance, that is again a material change. They may not renew your commitment when it expires, which it may well do before the seller is ready to close. They may also decide to require a new appraisal, which if your feelings on values in the area are correct may no longer support the loan amount. Your attorney can advise you on the impact of any of these potential changes on your contract.
Finally, there is simply the question of timing. You are already about 6 weeks or so past the originally scheduled closing date. Depending on the extent of damage, you are probably looking at another 60 days at a minimum before the seller can close. This delay alone may be grounds to void the contract.
Have a conversation with your attorney and go over these issues, and the others which I am sure he will raise. Have an idea in mind of where you want to come out. Do you just want to forget this deal, or do you want a lower price to compensate for the delay, etc.
One business, not legal, point that I would insist on if I were in the buyer's position here. If the damage is extensive, particularly if it involves structural elements of the house, you should have your own architect or engineer (not home inspector) periodically inspect the work being performed to make sure it is being done properly.
You can have the home appraised again, if it appraises for less than the sales price you will have every right to cancel the sale. Your contract should have an appraisal contingency.
Another option is if the home appraises less than sales price you can lower you offer price to be in line with the revised appraised value.
Best of luck to you,
Kawain Payne, Realtor
Lesley Harris, Realtor