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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
Ravi
November 04, 2012 at 8:03 am

FEMAvictim I also survived Hurricane Sandy here in NYC but it looks like it might not live to see Chase close my loan.My closing was scheduled to be held on Oct 29th, the day of the Hurricane, but it was postponed. I understand that they have to do the FEMA re-inspection, but Chase is doing a SECOND underwriting, which is just darn ridiculous and postpones my closing to 2 more weeks. My fatwallet friends, please heed my advice and stay away from this bank. Their loan officers,underwriters and processors will take pleasure in sc*ewing with you. My dream of owning my 1st home is beginning to turn into a nightmare. When will this never-ending hassle end?

k
November 03, 2012 at 9:00 am

We are in contract on a home in LongBeach NY.
The home according to sources is OKAY, but all around there is
devestation.
My concern, is that the property value will go down? According to my broker, all the businesses in the surronding area are destroyed.

When we reached out to our bank, they said they already did an appraisal, and would not be doing another.
Is this something to be concerned about?

FEMAVictim
November 02, 2012 at 3:22 pm

Just thought I would share Chase's response...
Unfortunately we must obtain a disaster inspection, we cannot accept photos.
I guess it was worth the effort!
Wonder if this was a question I should have asked when selecting my lender ;-)

FEMAvictim
November 02, 2012 at 2:54 pm

I am working with Chase. Polyana - Just emailed them your suggestion. Thanks!
They have managed to get an inspection scheduled for Nov 5th however I am still worried that the inspection won't go through or the report will take too long and right now every day counts.
I requested an extension on my current apartment but I think the building management is not working yet? They may live in areas affected more by the storm.
Kevin - I have my fingers crossed for you too!!!
Tim - that's insane! Your old mortgage doesn't exist anymore - you signed for the new one - what can they possible do retroactively ressurrect the old one?
I think the lenders need better disaster preparation management!

Tim
November 02, 2012 at 11:26 am

I'm in north eastern MD and had no storm damage. My closing was scheduled for 10/31 on my refi and took place as planned. Then on 11/1 I got a email and a new GFE from my lender indicating that they now need to do an inspection and want to close later this month. I can't believe this.... they're trying to "delay" a closing that already took place. I have no words to express my anger.

KEVIN
November 01, 2012 at 11:24 am

I am in same situation in Maryland. My closing was cancelled yesterday for November 5th. No damage at all in area, just some higher than normal winds and rain. Lender did say that they have already ordered re-inspection and are not going to wait for FEMA to issue the "disaster declaration". I also have to be out of my apartment by Nov 14th. Keeping my fingers crossed!!!

Polyana
November 01, 2012 at 10:43 am

@ FEMAvictim: It depends on the lender. I've been told that some lenders are allowing borrowers to send them photos of the exterior of the house with a date and time stamp to show the property was not damaged. They may still require a reinspection but that may help speed up the process. Have you been able to talk to your lender yet?

FEMAvictim
November 01, 2012 at 12:14 am

My Nov 1st closing in NYC was canceled on Oct 31st at 3:00 despite nothing happening in that area (no flooding, no power loss, it didn't even feel like more than a bad storm). Am now at risk of being homeless as I have to vacate my current apartment on Nov 10th. Any idea how fast these inspections can happen??! Its crazy that its done by county and not by zip or area!!!

Ray
October 31, 2012 at 12:02 am

I just got news from my lender that my Nov 1st closing is being delayed because of this foolishness. The damage here in MD is not significant enough to warrant this. This is an epic waste of resources.

Laurie
October 30, 2012 at 8:05 pm

Old Town did not suffer any damage (outside of leaves and some smaller branches on road, but they list us as State of Emergency making it hard to close quickly. This is beauracratic nonsense at its beast