Page 83 - New Agent Real Estate training book

Guide for Buying or selling during a Hurricane

In light of the devastation caused by recent hurricanes last couple of years, homebuyers and sellers
should be aware of how natural disasters can affect real estate. The Atlantic hurricane season lasts for
half the year, from June 1 through November 30, and tropical activity can interfere with closings and
properties under contract. 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, the contract will dictate procedures for moving
forward with the sale.

If the property under contract is damaged, buyer can continue “As-is” (which is not likely) or refer to
Article 15 in the contract. South Carolina Sales contract states on page 5 clause 15: If property is
damaged wholly or partially by fire or other casualty prior to closing, parties have the right 5 calendar
days after notice of damage to deliver notice of termination to other party. If termination notice is not
given within 5 days after notice of damage the contract moves forward and seller has the option to
either:

1. Repair all damage
2. Remit to buyer an amount sufficient for repairs
3. Assign buyer the right to all proceeds from insurance and pay any deductible owed

(You must determine if the property is insured, which will determine what options will be able for
your client in case of damage, repairs made to the property are not considered upgrades, and contract
price cannot be altered to reflect new repairs while under current contract)

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