What you are working on are the what if's... yes you are trying to prepare yourself for the worst but make the calls now with those involved with your loan and representation to get the right answers. You can get advise from those of us that may have had a similar experience but you need to get the answers to your case NOW. CAll your mortgage lender and call the agent that is representing you. Make sure you are all on the same page and know what your plan of remedy is if there is one. FHA 203K loans are much more detailed and you have to be aware of what are the remedies in YOUR case. Check with your mortgage representative if you can even include burst pipes in your rehab. If you are not able to do that you may need to find another property.
When the estimates are given from the contractors as part of the renovation loan escrow money, they will likely take this into account and plan for the "fix" as part of your quote. Your lender should be able to guide you on this...
Keller Williams Realty