Back out of deal? I don't know what to do

[Taylor Robertson]

Background: (Kansas) My first deal was going to be a house hack on a duplex. We were set to close on 2/24. However, hours before we closed, the house caught on fire due to the fireplace being used by the tenants. There was no structural damage because the fire was contained to the outer edge of the house in one small area-mainly drywall and flooring needs replaced. Tenants and current owner were both aware that the fireplace needed service due to inspection report, yet continued to use fireplace without servicing it. Closing was obviously pushed back.

Fast forward to today. My agent said that my lender is now requiring that a structural engineer come out for a re inspection of the house is structurally safe after seller's insurance finishes up repairs. Additionally, they are saying that the house will need reappraised, I must disclose what happened to my insurance (which could mean my premiums go up), and that I will need to sign a hold harmless agreement at closing. Closing was pushed back to 3/16, which is the day my interest rate lock ends. The repairs will not be done by then.

What can be done to resolve this situation? Should the seller buy back down the interest rate because it was gone up substantially since the lock? Can purchase price be renegotiated? According to my agent, the seller is desperate to sell because she needs the money. I too want it because there is no other duplexes available in my local market. Do you see a way to leverage the situation?