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What Sandy does to your closing

By Polyana da Costa · Bankrate.com
Monday, October 29, 2012
Posted: 1 pm ET

Homebuyers, sellers and refinancers: If you are in Superstorm Sandy's path, be prepared for delays and potential obstacles before closing.

Mortgage lenders will want to reinspect homes in Federal Emergency Management Agency-declared disaster areas before closing, says Matt Hackett, operations manager at Equity Now. If the house suffers substantial damage, the owner will be required to make repairs before the lender allows the mortgage closing. The lender may also request another appraisal of the home.

FEMA has declared emergencies in New York, Pennsylvania, Rhode Island, New Jersey, Connecticut, D.C., Massachusetts and Maryland. Lenders will not require a reinspection of your home for being in an emergency area. If FEMA declares disaster in your area, that's when you should worry about having your house reinspected by the lender.

If your home is in an area that will require reinspection, expect delays, says Neil Garfinkel, a real estate attorney and partner with Abrams Garfinkel Margolis Bergson LLP in New York. If your rate lock expires due to delays related to Superstorm Sandy, many lenders may still honor the rate, he says.

"We represent lots of banks, and after Hurricane Irene, we had a number of lenders that did not close until the property was reinspected," Garfinkel says. "But all the lenders we work with were more than willing to honor their rates."

Have your homeowners insurance policy available and the phone number to your insurance company handy before the storm hits, Garfinkel says. Taking pictures of your home before and after the storm also may help speed up the process, says Hackett.

Homebuyers under contract

Homebuyers who are under contract to buy a house that sits in an area affected by the storm should also expect delays, says Christine Smith, a real estate agent at Buyers Brokers Only, a brokerage company in Canton, Mass., that exclusively represents buyers.

Smith, who is also an attorney, says buyers should do at least a walk-through of the house before closing. If the storm damages the house, the buyer more than likely will be able to cancel the contract and receive the deposit back, but it really depends on what the purchase contract spells out, she says.

"Generally, the seller is obligated to deliver the house in the same condition of when it was inspected, and the seller is expected to maintain insurance on the house," Smith says.

The key words on your contract are "risk of loss" and "damage to the property," Garfinkel says. Find the section that spells out those provisions to determine if the seller is responsible for damage. If so, the buyer can probably walk from the deal if the house suffers any damage that can't be fixed by closing.

"Usually, until the property transfers, it’s the seller's obligation to repair the loss," Garfinkel says. "But each contract could be different."

And much depends on how big is the damage, says Smith. If the damage isn't major, the seller may reach an agreement with the buyer and issue the buyer credit to repair the house, she says.

Make sure you have your contract and any other documents related to the home available before the storm hits.

If you want me to keep you posted, follow me on Twitter @Polyanad.

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15 Comments
Trisha
December 14, 2012 at 10:22 am

Is it the Lenders or is it FEMA. If it is FEMA CALL YOUR SENATORS AND REPRESENTATIVES. FEMA supposes to clean up disasters not creating it.

Burnadette
November 14, 2012 at 1:14 am

I can't believe I have to pay for an inspection when my area wasn't touched by the storm. This is starting to sound like fraud.

Joke
November 08, 2012 at 12:18 pm

My closing in Bronx, NY was scheduled for October 31, 2012, and the whole process is delayed. I understand that the banks have to do their job and confirm everything is fine with the property, but they also have to use common sense. There are parts in New York that nothing happened. In my situation the property that I am purchasing has no damage. This is a complete disaster.

Mike
November 05, 2012 at 9:29 am

My closing in MA was scheduled for October 31st and is delayed until.... no idea. The bank wont give me a date a freaking week later. The house has no damage. No trees fell in the yard. It wasn't bad up here in MA. This is a complete joke. The sellers are going to start asking for concessions soon because they are paying for two mortgages.