Under the doctrine of equitable conversion, when does the risk of loss attach?

• A. When the contract is capable of specific performance
• B. At closing
• C. On the date of the deed
• D. When financing is obtained

Answer: (A)

Under equitable conversion, once a contract for the sale of real property becomes capable of specific performance—that is, when it is a binding, enforceable contract—the buyer is treated as the owner in equity for purposes of risk of loss. This means the risk of loss attaches to the buyer from that moment, even though the seller may still hold the legal title and delivery of the deed hasn’t occurred yet. If the property is damaged after that point, the buyer must bear the loss and still be obligated to complete the purchase (subject to any contract remedies or insurance). The timing is tied to the enforceability of the contract, not to closing, the deed, or financing events.