How Home Sales Proceed During a Natural Disaster

Here’s what happens when a natural disaster affects a for-sale home.

Welcome back to the Central Iowa Real Estate Scoreboard. This time, we’re with Rob Keller of Country Financial and answering the question, “What happens when there is a natural disaster when a home is for sale?”

If you do have damage that has occurred as the result of a natural disaster, the seller’s disclosure needs to be updated. The owner of the home is responsible for fixing the damage, but if you are under contract and ready to close, it’s a bit of a different situation. From the mortgage company’s standpoint, they will require that appraisers recheck the property to make sure the asset they’re lending on still has the same value. Even if you’ve gotten past the appraisal already, the bank will send another appraiser and there is a charge for a second appraisal that would not be covered by insurance.

When you’re in the process of closing a home sale during a natural disaster, most insurance companies will also send a representative out to make sure the home is still there.

We have verbiage in our purchase agreement that addresses natural disasters. If there is a significant amount of insurable damage, it’s up to the buyer and seller to come to an agreement. Nobody is obligated to move forward with the sale, but they can agree to that. It doesn’t work as well with a mortgage company involved, but it does work better with cash buyers.

I came across a home in Polk City recently that was purchased by a homebuyer from Seattle. On the morning of closing, the listing agent called me and told me the ceiling to the kitchen was on the floor and the basement was full of water. Everything had been so smooth and easy, and then this happened. The buyer talked to their insurance agent, and we ended up having the buyers stay in a hotel for the month, but they also got to make all the selections for the repairs in their new home. A pipe burst and it ended up being a huge inconvenience, but the buyer also got new cabinets, new flooring, and the insurance company paid for it all, along with the hotel stay.

If you ever run into a situation like this or have any other real estate-related questions, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.