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Florida property insurance biggest unknown for real estate after Ian

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just two weeks ago Hurricane Ian devastated many areas of south west florida with devastating winds and historic floods. We are beginning to answer questions about how this storm will affect the local real estate market as affected communities struggle to restore some degree of normalcy through the restoration of power, water and communications. increase. I will discuss some of the immediate implications that realtors are dealing with pending sales contracts and the impact of hurricane events during the contract period. It also touches on the positive aspects of the real estate market and how home prices may be impacted when repairing and rebuilding from the devastating force of a hurricane.

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From the days before Ian’s landing to today, several questions and concerns have arisen about the rights and obligations of both buyers and sellers under the pending sales contract. For simplicity, we will only refer to the FR/BAR “AS IS” Housing Purchase Agreement (“Purchase Agreement”). Not the only contract used in our market. As management, we have found that our managing broker and in-house counsel brush aside contract terms that are seldom, if not, used in the normal course of business. In deciphering the rights and obligations of parties in post-hurricane purchase agreements, contractual clauses dealing with issues such as force majeure, risk of loss and right to inspection became paramount.

When natural disasters such as hurricanes occur, the legal term “force majeure” can prematurely circulate. The term “force majeure” is French for “greater force”. In a contractual context, it refers to the inability of the parties to the contract to perform the contract at all, or at least to perform the work within the time frame originally set, due to a natural disaster (such as a hurricane) or other disaster (such as a war). . by contract.

For purchase agreements, restrictions imposed by the hurricane (such as inability to access the property) may prevent compliance with the timeframes associated with inspections. Additionally, certain terms of loan approval may not be possible due to the condition of the property as a result of the hurricane. Force majeure clauses in purchase contracts provide for extensions of these periods in some cases and provide for the right to cancel the contract in other circumstances.

Some buyers wanted to cancel pending purchase agreements just before and after the hurricane, citing the discomfort and uncertainty the hurricane brings before and after its landfall. Often it’s not that simple. Due to the risk of loss provision of the purchase contract, the seller is obligated to repair damage to property up to her 1.5% of the purchase price. This provision of purchase contracts is rarely referenced and has required some revision after actual implementation over the past few weeks. What if there is disagreement about the amount of ? These are gray areas where real estate attorneys need to maintain favorable employment and further clarify in future revisions to purchase agreements.

Another clause in the purchase contract is the right to inspect. This generally states that, upon reasonable notice, the seller will provide access to the property for prospective purchasers to conduct an inspection and final walkthrough prior to closing. Highly reputable real estate experts and attorneys have differing opinions on this clause regarding the buyer’s right to re-inspect the post-hurricane property to ensure it is in the same condition as when it was contracted. I’m here. Common sense holds that the buyer has that right, but some argue that once the buyer has passed the inspection period, this part of the contract does not provide the right to revisit the property for further inspection. .

A final area outside of the purchase agreement that has caused significant confusion but remains highly relevant is the allocation of benefits under the seller’s homeowner’s insurance policy. Essentially, under certain circumstances, the seller can allocate the proceeds of the insurance policy to the new buyer so that necessary repairs can proceed. I highly recommend anyone considering this path to consult with a knowledgeable insurance agent or real estate attorney to ensure the correct steps are taken.

Now that we’ve covered some of the contractual issues related to pending real estate deals, let’s move on to the future of the real estate market after Hurricane Ian. Generally speaking, prices tend to rise after natural disasters. According to a recent article published by Florida Realtors, “Veros Real Estate Solutions estimates that property prices in five metropolitan areas were 7% above the national average in the 12 months after major storms hit. If the past few weeks have witnessed anything, it’s no doubt that Southwest Florida’s people are a resilient collective that will rebuild even better than before.

The most important factor that could throw a curveball in the local real estate market recovery is the cost and availability of property and casualty insurance. Even before this hurricane (which was historic in its size and damage), the Florida property insurance market was hit hard and operated precariously at best. A combination of federal and/or state subsidies may be required to attract the amount of private capital needed to maintain an affordable and sustainable property insurance market in Florida.

Anyway, we are back in home sales and I am confident that our real estate market will prove to be as resilient as our citizens. We remain committed to helping those affected in the South and will do everything we can to put them back on the road to recovery.

Peter Crowley is President of the Re/Max Alliance Group.

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