What You Need to Know About Buying or Selling a Home During Hurricane Season

In light of the devastation caused by Hurricanes Harvey, Irma and Maria during the last couple of months, homebuyers and sellers should be aware of how natural disasters can affect real estate. It’s important to keep apprised of the weather because the Atlantic hurricane season lasts for half the year, from June 1 through November 30, and tropical activity can throw a wrench into the best-laid plans. Here are some things you should know when buying or selling a home during hurricane season.

What Happens If the Seller’s Home Is Damaged by a Hurricane?

As a hurricane approaches, the seller is responsible for mitigating the damage that could occur by boarding up windows and shutting off electricity. In addition, both wind and rain damage need to be documented and reported.

After the storm, the seller should survey the damage to his/her home and property. If FEMA has declared a state of natural disaster, any home that was appraised or inspected prior to the storm will have to be re-inspected. Once that is done, the seller’s agent has to report the damage to the buyer’s agent.

In addition, lenders mandate that homes backed by a mortgage need to be inspected to ensure that there’s no major damage. If there is damage, many real estate agents will not list the property until repairs are made. The property has to be restored to its original state.

As per the FAR/BAR As-Is Residential Contract for Sale and Purchase, the standard contract used by many Florida real estate agents, potential closing delays are covered under force majeure or unforeseeable circumstances that prevent someone from fulfilling a contract. Consequently, there will be an established timeframe of 7 days to ensure “services essential for Closing to be unavailable.”

If after 30 days force majeure prevents the obligations of the contract from being carried out, the buyer or seller is permitted to terminate the contract, and the buyer’s deposit will be refunded.

How Does a Hurricane Affect Homeowner’s Insurance?

The seller needs to be familiar with their homeowner’s insurance policy.

What does hurricane coverage include?

What’s their deductible?

Do they have replacement cost coverage?

Likewise, the buyer needs to be familiar with their insurance company’s policies and restrictions regarding binding their home purchase. If there is a named storm that develops and the area is within the “cone of uncertainty”; that is, the area that is threatened by the storm, an insurer will not write a policy during that threat. This is called “being in the box” and the buyer won’t be able to obtain hazard or title insurance during this time either.

If the buyer is financing the home purchase, their lender typically won’t grant a loan commitment without homeowner’s insurance. So once the storm passes and the buyer obtains homeowner’s insurance, it’s important to know how long it will take to get a loan commitment from their lender.

How Does a Hurricane Affect Title Insurance?

The buyer’s real estate agent will keep their title company in the loop regarding any agreed upon changes to the contract, but the buyer and seller should not be shy about asking questions if anything is unclear. The title company has to be notified via signed documentation about any changes to the contract, especially if the closing date changes. This is imperative because it’s the title company’s responsibility to ensure that the prepaid closing costs are allocated accurately on the settlement statement. Modifying the closing date alters the prepaid costs and prorations.

If the seller’s home is damaged during a hurricane, there’s no direct impact on the title, other than the sale and closing date being delayed or possibly cancelled. After all, a title insurance policy certifies the rightful owner of the property. It does not insure the worth of the seller’s home like homeowner’s or hazard insurance.

The seller should also make sure that they keep their home’s deed and title policy documents in a safe and secure place, such as a portable safe or better yet a safe deposit box. It’s also important to work with a title company that uses digital records, so it’s easy to access documents at any time.

At Bay National Title Company our first priority is accommodating our clients during difficult times. If you have any questions about how the recent hurricanes could affect your plan to buy a home, feel free to give us a call.

Other storm-related articles:

5 Questions to Ask Your Realtor Before Buying a Home in a Flood Zone/a>

What Impact Can Hurricanes Have On Home Mortgages?

How Do Disasters and Floods Affect Title Insurance and Closing?