Hurricanes are a fact of life in South Florida, and they don’t stop just because you are under contract to buy your home. As Hurricane Irma threatens all of Florida and the Caribbean, there are thousands of home buyers stuck waiting and wondering what is going to happen with their purchase.
I am often asked what people need to know and what they need to do if they are under contract to buy a home, condo, or townhouse. Here’s the general items to be aware of.
1. Your contract allows for this.
First and foremost, don’t panic – your contract to purchase allows and even makes accommodations for this very scenario (so long as you used the standard contracts). You should have a closing delay clause in your contract that allows you to close on the transaction up to a “reasonable” amount of time after a hurricane has dissipated – “reasonable” is generally considered to be about seven days.
If you’re unsure what your delay clause allows for, ask your Realtor or attorney to review your contract and walk you through it.
2. Bind your insurance policies now.
It is your responsibility to bind your homeowners, wind, and flood insurance (if required) prior to closing. That means you can pretty much do it any time. We would say NOW, as in today, is a good time to do it. That’s because insurers won’t bind policies once a hurricane gets close enough, but they will bind them right up to that point.
If there’s no reason to think you wouldn’t be buying this home otherwise, go ahead and get all your insurance policies paid and in place now.
3. Does the property have storm shutters? Get them up.
Storm shutters are pretty common in South Florida, so find out from the seller’s agent if storm shutters are available, and make sure that they are installed. Storm shutters convey with the personal property of the home on a standard contract (that is, the seller cannot keep the storm shutters.) So if you are not closing prior to the hurricane’s arrival, make sure the house is buttoned up by the seller with the shutters.
If there are missing or too few shutters, make sure the other windows and doors are protected with plywood.
4. Know your risk of loss.
Know your risk of loss up front. A standard purchase contract stipulates that if the home is damaged by a hurricane prior to closing, it is the seller’s responsibility to fix the damage up to 1.5% of the purchase price. If the cost to replace exceeds 1.5% of the purchase price, then it is your decision – you could accept the home as-is and take a 1.5% credit at closing, or elect to cancel your contract and get your deposit back.
5. You’ll need to get a new appraisal.
Lenders suspend all closings while the hurricane is in the “box” – that is, a specific radius within which the hurricane is close to and approaching land, which is determined by the projected path of the storm. Once the storm has passed, and prior to reinstating closings, your lender will probably require a new appraisal to make sure the home is in the same condition as it was pre-storm.
Appraisals are out-of-pocket expenses for the buyer to the tune of $400-$500. To protect your investment, you may want to consider having another 4-point inspection performed following a storm, to catch any potential damage that may not be obvious – such as a damaged section of the roof, for example.
These are just some of the most common concerns home buyers might have while under contract to purchase during a major hurricane threat.
The number one tip is to make sure you are working with an experienced Realtor or attorney who you trust to get the facts straight, and who can guide you through this sometimes difficult process.
For any additional questions, email me at ASeligman@WardDamon.com.
Adam Seligman, a real estate and business attorney at Ward Damon, co-authored this article with Tom Copeland.