SoFla real estate deals on hold: Insurers delay closings ahead of Hurricane Dorian

Hurricanes and tropical storms can also impact refis

Aug.August 30, 2019 09:45 AM
Miami skyline (Credit: iStock)

Miami skyline (Credit: iStock)

Hurricane Dorian is putting real estate deals in a holding pattern as it approaches South Florida.

Insurance companies hold the key to any real estate closing that involves a mortgage, so it’s no surprise that a major storm would throw a wrench in a buyer’s plans to close on a property.

In recent years, insurers have moved away from using the box method – which meant that if a storm fell within a certain geographic box, insurance companies would not bind new policies for properties in that area until after the storm passed and properties were re-inspected.

Now, insurers generally rely on the National Weather Service’s watches and warnings, according to South Florida real estate attorneys and title brokers.

Marcie Gregorio of Brickell-based Worldwide Title tells her clients to have their insurance agents bind their policies by the date of the closing, prior to the NWS issuing a warning or watch. “As long as they do it and bind it by that effective date, [the insurance company] will honor that,” she said.

Gregorio has some clients who had their closings delayed due to Hurricane Dorian, which is expected to make landfall in Florida as a Category 4 storm early next week. Others got their insurance binders before the storm became a threat.

“I always recommend a local insurance agent. They know exactly what happens, especially in your neighborhood,” she added.

Nancy Klock Corey, regional vice president of Coldwell Banker, said the brokerage has post-storm documents available to its agents that can be added to contracts if closings are delayed.

A hurricane can also impact refinances, said Gary Singer of the Fort Lauderdale-based Law Firm of Gary M. Singer. With home purchases, it’s important to make sure that buyers have their policies bound in time. “People get a quote and don’t bind it in time,” he said.

Lenders require homeowner’s insurance, but if it’s an all-cash deal the closing could still occur.

“If it’s a cash deal, there’s really nothing stopping you,” Singer said.

Most contracts include a force majeure clause, which would give the buyer or seller the ability to delay the closing within a certain period of time after the storm passes. After 30 days, either party could cancel.

“You want to get the house re-inspected” following a storm, Singer said. “Everything depends on the contract. Typically the seller is responsible to turn the property over in the condition it was in the beginning. … If that becomes too expensive, they may be released.”

Fred E. Karlinsky, co-chair of Greenberg Traurig’s Insurance Regulatory and Transactions Practice Group, said that if a property is damaged, that could impact whether it can be insured.

Karlinsky represents a wide range of commercial and residential insurers in Florida and across the U.S.

“Whenever you’re in a state like Florida, you always have these issues and you need to be cognizant of them when you’re dealing with real estate closings,” he said.

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