Threat of storm puts area home sales temporarily on hold

Aug 24, 2011

The following article was published in the Daytona Beach News Journal on August 24, 2011:

Threat of storm puts area home sales temporarily on hold

By Tom Knox

Even if Hurricane Irene doesn’t hit the Florida coast, it’s already having an impact on area home sales — an industry that can ill-afford setbacks.

It’s a little known fact: People generally aren’t able to buy a home if they are planning on closing their purchase while a hurricane nears.

Homeowners insurance companies do not write insurance policies during the lead-up to a hurricane.

Although the holdup is temporary, real estate professionals are forced to wait until the storm blows by before they can complete deals.

When a company institutes this restriction, and how far along the coast that restriction spreads, depends on the insurance company.

But for now, most insurers have a block on granting new coverage to local homes, and it won’t go away until the storm safely surpasses the area. A lender won’t approve a loan if the home isn’t insured. So the process is held up, causing a delay when Realtors can ill afford any hiccups in a distressed market.

“If you have a closing this week, you’re watching the weather,” said Kristi Tyrrell, president of the West Volusia Association of Realtors.

The situation is not desirable, area Realtors say, but it could be a lot worse.

Post-storm calamity shouldn’t be too severe because Hurricane Irene isn’t forecast to directly hit Volusia or Flagler counties. That means that insurers could be ready to approve new policies by early next week.

Homebuyers tend to favor finalizing their home purchases at the end of the month, so there could be a little bit of a glut when the storm passes.

“It could statistically impact monthly sales because you’re going to lose some closings, but probably because of where it’s hitting, the month will end up fine,” Tyrrell said.

A revision to Florida Realtors association contracts last year has made the process easier to wait out.

In June 2010, Realtors’ home sales contracts went from four pages to 11. Built into that contract is a stipulation that gives the buyer at least 14 days to obtain insurance after a natural disaster strikes. Fourteen is the default and it can be adjusted. After the state was hit by four hurricanes in 2004, many Realtors had to place an addendum to the contract with the 14-day exception.

“I’d have to go back to the buyer and seller and get them to sign it,” said John Adams, general manager of real estate brokerage Adams, Cameron & Co. in Daytona Beach.

“In some situations, (such as if) you’ve got a buyer in Jersey, you had to fax things around. It got messy,” Adams said. “If you had six to eight things pending, it was a lot of work.”

If damage occurs to a home that’s waiting on an insurance policy, the seller has time to fix it because of the 14-day exception, but the buyer can pull out if the damage is too great and takes too long to fix.

Jessica Morford, sales director at Real Living All Florida Realty in Holly Hill, is currently representing the seller of a riverfront home on John Anderson Drive in Ormond Beach.

After more than a year on the market, that home is scheduled to be sold later this week.

Morford said she and the seller are waiting to find out if the buyer binded his insurance policy. When the homeowner’s insurance is binded, the coverage starts as soon as the house sale is closed. But in order to bind insurance, the buyer has to make a payment and sign the policy.

Unless the buyer has done that — and Morford won’t find out until today — the sale won’t be finalized until after Hurricane Irene passes.

A hurricane brings other problems besides rejiggering a homebuyer’s moving plans. It keeps prospective out-of-state buyers from coming and looking at houses. And vacant for-sale homes need to be checked for damage, and oftentimes it’s the Realtor who does that.

“It makes life hectic,” Morford said.

Daytona Beach insurance agency Hayward Brown sold real estate for 70 years before selling that line of business to Adams, Cameron & Co. in September 2006. Hayward Brown CEO Dick Brown said the frustration to area Realtors and their clients caused by Hurricane Irene should be just temporary. By next week, things should be back to normal, he said.

“One hurricane’s not too bad,” he said.

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