Luxury residential brokers were sweating bullets over the possible damage a direct hit from Hurricane Irma would inflict on South Florida’s hottest single-family neighborhoods and high-rise towers.
But since the historic storm tore through Florida, some industry leaders are not worried Irma will have lasting damage for the Miami residential market, while one analyst offered a more sobering take.
Jack McCabe, CEO and managing partner for McCabe Research and Consulting, said images and videos of the widespread destruction Irma caused from the Lower Keys to southwest Florida to Jacksonville will make buyers think twice about investing in properties close to the water and in evacuation zones.
“We are entering an age of superstorms,” McCabe said, noting Irma and Hurricane Harvey represented the first time that two monster hurricanes hit two coastal regions in the U.S. within a month of each other. McCabe specializes in providing market analysis and consulting services to consumers involved in personal real estate transactions, as well as institutional investors.
“Over the next 10 years, living where you can walk out your front door to the beach won’t be as valuable as it has been,” McCabe continued. “Some people will really think hard about putting all their nest egg into a property that could get washed away, wiped out or where they could be without electricity for weeks.”
Yet prominent brokers who spoke to The Real Deal were more optimistic. Danny Hertzberg, an agent with Coldwell Banker’s The Jills, said he doesn’t anticipate a pullback in buyer confidence. If anything, he said, buyers will likely have to contend with price increases for newer homes and newer condo buildings that typically come with hurricane impact windows and are built at higher elevation than properties built prior to Hurricane Andrew in 1992.
“I haven’t heard anyone say they are no longer interested in buying here,” Hertzberg said. “We have people interested in properties who have scheduled trips here for the winter to attend events like Art Basel. They are still coming.”
Moreover, buyers are more cognizant about major hurricanes potentially devastating coastal areas from the Gulf of Mexico all the way to the northeast Atlantic coast, Hertzberg said. “People are starting to realize this is not just a Miami thing or a Houston thing or a New York thing,” he said. “It can happen anywhere.”
Andres Asion, founder of Miami Real Estate Group, said there was no major damage to newer buildings, despite doom and gloom images broadcast on television news reports. “Maybe someone who sees the photos and the videos will say, “Oh my God, maybe we shouldn’t buy there,’” Asion said. “But the reality is that you can’t determine where these storms will go. Any state in the Atlantic or the gulf can get hit. Miami and Miami Beach have gotten the luck of the draw.”
Nevertheless, there is a general consensus that Irma will cause short-term disruptions on deals that were scheduled for closing this month. “I had two deals scheduled for Monday that we pushed back one week,” Hertzberg said. “The buyers and the sellers have been really cooperative. Everyone seems to be moving forward.”
He said he also expects some delays as a result of lenders requiring re-inspection of properties under contract.
Jill Hertzberg, co-founder of The Jills, said she has sent a photographer to take pictures of different properties under contract that her firm is handling and is then sending the images to the buyers and sellers to allay their concerns. “I’m seeing a lot of trees that came down, a lot of foliage work that has to be done,” she said. “It all has to get cleaned up before closing.”
Scott Marcus, a shareholder with the law firm Becker & Poliakoff, said Florida law protects buyers and sellers if a closing has to be delayed because of events that are out of their control such as a lender being unable to prepare loan documents due to storm-related power outages or an inability to obtain insurance on the home.
“If any or all of those factors prevented the closing from moving forward, the deadline or closing date is automatically extended,” he said.
Most residential contracts provide that if a property has sustained severe structural damage — such as a roof being completely ripped off — the buyer would typically have the opportunity have a credit applied to the final purchase price or to terminate the transaction, Marcus said. The credit is usually calculated based on a percentage of the purchase price, he added.
He said the law also allows buyers and lenders to request a re-inspection of the property post-storm. If there is storm-related damage to the property, the contract will dictate which party is obligated to repair the property and up to what amount they are obligated.
But buyers getting cold feet cannot use the threat of hurricanes as an exit strategy in the aftermath of Irma, he said. “They risk losing their deposits,” Marcus said. “You are only able to exit the contract if it allows you an exit.”