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.
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