How Do Hurricanes Impact Buying And Selling Real Estate?

Hurricanes are a reality in the state of Florida, always have been and always will be, but have you ever wondered how they impact buying or selling real estate? I’m not talking about how a hurricane impacts the state of the market after it makes landfall and causes damage but how a hurricane might impact the actual transaction of buying or selling a home.

A lot of people don’t realize that hurricanes often impact real estate long before the storm hits and oftentimes even when they don’t make landfall. Let me introduce you to “The Hurricane Box,” which if you’ve ever purchased a home during hurricane season, you may be all too familiar with. If a named tropical storm or hurricane gets within a certain distance of the state, then insurance companies issue what’s usually referred to as “the box” or “the hurricane box”.

“The box” may vary slightly from one company to the next, but the basic principle is the same: a box is drawn over the state near the storm’s projected path, and anyone who falls inside the box won’t be able to bind insurance until after the storm is no longer a threat. And we’re talking about a storm that’s sometimes hundreds of miles off the coast. Since binding insurance is a requirement for sales that involve financing, this impacts a lot of transactions. If a storm gets close enough, it could delay or derail closing on the property until the buyer can finally bind insurance.

So a lot of times, these storms that skirt our coast still have an impact on real estate. But once a storm approaches and is expected to hit the area, some additional things come into play. The seller is responsible for taking care of the property just as they would for any other storm prior. They’ll need to board up windows, get sandbags, clear loose debris, and do any other storm prep necessary. While buyers may be concerned about what they need to do to prep their future home for the storm, it’s not the buyer’s responsibility or ability to prep a home they don’t yet own.

After the storm, there are a number of things that take place. Most contracts in our area are written on the FAR/BAR As-Is Contract and include a clause called force majeure. Force majeure removes liability for unforeseen and unavoidable catastrophes, like hurricanes, that interrupt the expected timeline for the contract. In other words, if the buyers have a 7 day inspection period, force majeure would take effect to allow more time if needed. It basically gives all parties an opportunity to evaluate the situation and better manage risk in the event of a hurricane.

If the property is damaged in the storm, it’s the seller’s responsibility to repair the home. Just as it isn’t up to the buyer to prepare the home for a storm; it’s not the buyer’s responsibility to repair a home they don’t yet own. The home must be restored to the same condition as when the buyer and seller entered into the contract. For example, if all the screens were blown out of a pool cage, the seller would be obligated to replace all of the screens or the buyer might be able to cancel the contract. Now, of course, the buyer and seller may be able to negotiate something different, but ultimately, the responsibility lies with the seller.

Now if the buyer is financing, the bank will usually order a re-inspection of the home to make sure there hasn’t been any damage. If they find the home is damaged, again, it’s up to the homeowner to make any repairs and/or file an insurance claim. As a general rule of thumb, the seller should decide if the amount of damage warrants making an insurance claim or if paying out of pocket makes more sense for their particular situation.

Bottom line, hurricanes are a fact of life for Floridians, and when a storm hits- or even skirts by it can have a big impact on a real estate transaction. The good news is, our standard contracts take hurricanes into consideration to minimize complications, and a good real estate professional knows how to navigate the process. One more reason to always hire a real estate professional when buying or selling.