Hurricanes and home sale
Hurricane Dorian, Irma or another Natural Disaster just showed up and interrupted your home sale. Now what?!
What happens when treacherous Mother Nature makes a grand entrance to your neighborhood and you just happen to be under contract on your home you’re selling?
In Southeast Florida, that can be in the form of a hurricane, a tornado or a tropical storm with torrential rains and flooding. And, as so many just recently experienced with Hurricane Irma having visited our state just a few weeks back, home sale closings may be delayed.
The torrential rains with howling winds swirled around your home as you were hunkered down inside, tucked safe away from the hurricane outdoors seemingly knocking on your front door. Quickly moving to your interior Master Bedroom closet, which you determined was your safe zone when you were alerted of a tornado threatening your safety, you prayed that you and your family would be spared harm during the breaths you took. As you heard transformer after transformer being blown nearby, such an eerie sound when you now look back to those moments, you thank God that you and your family are okay.
You wondered if damage occurred to your home; the home you had put up for sale with a Buyer already contracted to buy your home. Now what happens if your home incurs damage? Will the home sale be cancelled? Will the Buyer want to cancel? So many questions and uncertainty. You waited until the storm passed to begin to get the answers to your questions.
Today’s discussion is about what happens when Mother Nature’s natural disaster shows up to your home sale. I answer questions as to a home Seller’s responsibility related to any damages to their home.
Here in southeast Florida where I sell homes from Boca Raton to Coral Springs and beyond, most Real Estate contracts used routinely are an “AS IS” contract. Currently, in the “AS IS” contract, the contract will reveal that the Seller is responsible for maintaining their home in the same condition as when a home Buyer and home Seller went under contract (a Real Estate purchase contract having been executed between the Seller and Buyer).
Selling a home – what steps can you expect when a Hurricane or other natural disaster is involved?
Survey the Damage
Once it is safe to do so, you’ll want to survey the damage to your home. From trees and landscaping down, to roof and exterior structural damage that may have penetrated your home’s interior. Are you fortunate to have only had trees down in your yard or is the damage more extensive?
Contact your Insurance Company to Discuss your Policy’s Coverage
Depending upon your hurricane deductible or deductible for other natural disaster, a high deductible that you chose in order to lessen your premiums may come around to cause some serious shock when you now realize meeting that deductible on your own proves to be difficult or it will put a serious dent in your bank account. Far too many often think they will not be affected by a natural disaster and keep their deductible high. We can see now, here in 2017, that hurricanes have impacted the lives of many homeowners.
An Insurance Adjuster would have to come out to inspect the damages and what would be covered under your policy if you indeed need to utilize your insurance coverage.
Advise the Buyer’s Agent of any Damage
You’ve surveyed the damage and now once you report to your Real Estate Agent, he/she will need to advise the Buyer’s Agent as to what, if any, damaged occurred. As you can imagine, while in the midst of going through the storm, the Buyer of your home is likely worried, wondering what has happened to the home they’re hoping to soon call their own. Nothing is better than being able to report no damage or limited damaged.
Unfortunately, if more damaged has occurred this too will need to be reported.
Remember that you cannot try to hide any damages that occur without advising the home Buyer. The same holds true when you originally list your home for sale. Secrets kept can almost always assure that you might be forced to endure the wrath of an Attorney, who won’t tread favorably on the side of your hidden secret once discovered by the Buyer.
It’s important to remember, that a home has to be maintained in it’s original condition from when a Real Estate purchase contract was executed. Any deviance from this will need to be addressed with plans for making the necessary repairs.
Obtain Repair Quotes to Fix the Damage
If it’s more than cleaning a yard up from fallen small twigs, leaves and branches, then you’d likely have to call on professionals who can provide a quote for repairing the damages to the home. If you’re well qualified to make the repairs yourself, then it’s that much easier for you. If not, get a repair quote from a professional.
If the hurricane or other natural disaster has affected a larger area, you can imagine the wait time may be increased to have a Roofer, Screen Repair, A/C technician, Fence Repair, Landscaper, Structural Engineer, Contractor, etc come out to view the damages.
Make Needed Repairs to Home
What needs to be repaired before your home’s closing or what can be completed after the closing will depend upon how the Buyer is paying for the home purchase; are they paying cash of financing?
Cash Sale – will be determined by what will be agreed upon between you and the Buyer, where no Mortgage Company is setting the requirements.
Financed Sale – will be determined by the type of financing and the Buyer’s Lender; whether it’s an FHA, VA or Conventional loan, with FHA and VA maintaining the most stringent requirements for health and safety.
When there is more extensive damage, such as that which comes with roof damages, resulting in leaks to your home’s roof, this will need to be addressed before closing to ensure that the roof is secure prior to the Buyer securing a loan on the home. The Buyer’s Lender will want to insure that the roof is in good condition BEFORE they offer any loan.
It’s pretty safe to assume (no pun intended) that any damages that reveal safety issues with the home from the storm’s damages will need to be made safe before you head to closing. An unsafe home will restrict one’s ability to secure financing and homeowner’s insurance.
Expect a Reinspection by the Home Buyer’s Lender when Financing
Once FEMA declares a state a natural disaster, a disaster date will be set and any home appraised/inspected prior to that date will need to be reinspected by the Appraiser to determine if any damage occurred from the natural disaster, such as with a hurricane.
If repairs are needed to be completed in order to secure financing as discussed above, the repairs will need to be made prior to the reinspection.
Understand your Real Estate Contract
What happens when an “AS IS” contract is affected by Force Majeure?
Force Majeure occurs in the way of hurricanes, floods, earthquakes, fire, extreme weather or other acts of God, unusual transportation delays, or wars, insurrections or acts of terrorism. When either party, whether the home Seller or home Buyer, is unable to perform their obligations according to the contract due to Force Majeure, they are allowed a reasonable amount of time up to 7 days after the Force Majeure in which to complete their obligations. If after 30 days the Force Majeure continues the inability to perform contractual obligation, then either the home Seller or home Buyer can terminate the contract where the home Buyer would be refunded their deposit and the home Seller and home Buyer would be released of having to be held to any further obligations.
If Mother Nature is the Force Majeure who invited herself to your home sale and she deals a damaging blow to your home, what do you do as a home Seller?
As a home Seller, the cost of restoration to your home is your obligation, not to exceed 1.5% of the purchase price. If the cost of restoration is less than 1.5%, then the home Seller will pay the actual costs. If the restoration is not complete by the day of closing, then 125% of the estimated costs will be held in escrow by the closing Agent. Any excess monies escrowed will be returned to Seller. In the event the damages exceed the Seller required 1.5% of purchase price responsibility, the Buyer can elect to take the home “AS IS” after Mother Nature reared her ugly head by accepting the Seller’s 1.5% and continuing with the purchase. Or the Buyer can elect to cancel the home purchase if the damages are greater than the Seller provided 1.5% obligation and receive a refund of their deposit money.
Any damages to trees are the home Seller’s responsibility either to prune or remove. Note, this does not include tree replacement.
Important: Know that these terms discussed for the “AS IS” contract is specific to a standard “AS IS” contract used here in southeast Florida. Contracts in your specific, local area may differ from these terms and you need to seek them out for obligations. Discuss your contractual obligations with your Real Estate Agent or Attorney.
This is not intended as legal advice.
Repairs Can be Negotiated
Even though the Real Estate purchase contract may include the above noted 1.5% Force Majeure provisions, differing negotiations can be obtained IF agreed to by the Buyer as ultimately the Seller is responsible for 1.5% of the purchase price. This new agreement will likely depend upon what has already occurred during the course of negotiations for the home purchase and what price and/or credits may have been already provided to the Buyer; how good of a deal do they think they’re getting or just how much do they really love the home that is perfect for them and their family?!
For example, in a recent hurricane for one of my home Sellers, hurricane Irma had knocked down a section of their fence along one side of the yard, where all other sections remained intact. The cost to replace the downed fence was going to cost more than the credit offered by home Seller, which was not 1.5% of purchase price. However, the home Buyer was fine with the credit offered by Seller. This will not always be the case, and it has to be taken on a case by case basis. Even though the contract clearly indicated that the Seller is responsible for a higher dollar amount, an amount was negotiated acceptable to Buyer.
Get Back on Track Towards Closing Deadline
Once the repairs have been made and your home has been reinspected with passing reinspection, your home sale can get back on track towards the final Real Estate closing from the point you were at before Mother Nature showed up. Read my article here about: “Buying a Home – What Happens at a Real Estate Closing”
Enduring the wrath of a hurricane or other natural disaster when you own a home can often be unnerving whether you’re selling a home or not. When selling a home, it can be a lot less stressful if you simply consider each step of the process after such a storm as explained here. Do not let the entire process wallow up, while overwhelming you with what needs to be done. Hopefully, you’ve chosen your Real Estate Agent well, as I discuss here in my popular Real Estate article; “5 Things to expect when you choose the wrong Realtor”, and you’ll be guided with expertise during the recovery period of a natural disaster, instead of having to deal with a natural disaster along with a disastrous Realtor.
Finding encouragement after the storm is often all that ever seems to be needed when you have family helping family, friends helping friends and neighbors helping neighbors. In these times of darkness is indeed times where human compassion shines brightest.
More helpful natural disaster homeowner resources:
“Finding Contractors after a Hurricane” by Realtor.com
“Saving hardwood floors from water damage” by The Flooring Girl, Debbie Gartner
“Selling a home after a hurricane” by Richard Witt
“FHA Loans and home repair problems for Sellers” by Bill Gassett
“Emergency preparedness for your home” by Dan Barcelon
“Should you sell or buy a home after a hurricane?” by Frederick Franks
Today’s Real Estate article “When Mother Nature Invites Herself to Your Home Sale” was written by Lynn Pineda. You’ll find Lynn selling homes in Southeast Florida in the cities of Boca Raton, Boynton Beach, Coral Springs, Delray Beach, Coconut Creek, Deerfield Beach, Margate, Parkland, Pompano Beach, Tamarac, Sunrise, Plantation and Ft Lauderdale areas within Broward and Palm Beach counties. Call Lynn at 954-464-1100 if you have questions regarding how a hurricane can impact your home sale.
Lynn Pineda, a licensed Southeast Florida Real Estate Agent serving Southeast Florida since 2005. Keller Williams Realty Coral Springs office. Real Estate Promises Delivered. You can speak with Lynn by calling/texting her at 954-464-1100 or you can email her at: LynnP@ImagineYourHouse.com if you need to buy or sell a Southeast Florida home. Your local, trusted professional when it’s time to buy or sell a home. Real Estate promises delivered.