Post-Disaster: Impacts on Closing

On September 28, 2022, at 3:05 pm, Hurricane Ian made landfall in Florida as a Category 4 hurricane with maximum sustained winds of 150 mph. Hurricane Ian came ashore near Cayo Costa, an island off the coast of Fort Myers, and then proceeded to batter Southwest Florida with wind, rain, and flooding for several hours until crossing the state and traveling up towards South Carolina. Many counties in Florida were severely impacted, leaving millions without power or water, damaging homes and businesses, and injuring or killing residents. The impacts from Hurricane Ian will continue into the foreseeable future as Florida works to restore the damage. In the meantime, if you have a property under contract, you may be asking what comes next for buyers and sellers.

Lender Requirements in a Post-Disaster Affected Area

If a buyer or seller is party to a real estate contract with financing, there may be new lender requirements following Hurricane Ian. Many lenders will require a property re-inspection if the original appraisal was completed on or before the event date. The lender will likely need an updated exterior inspection, appraisal, and/or Disaster Certificate signed by the original appraiser. In most cases, the lender will order the necessary appraisal update, which can be accomplished through a drive-by with no entry required. If the property has noticeable damage or flooding, the lender will likely require additional steps, including a full house appraisal. If you have a contract with financing in one of the impacted areas, it is best to have the buyer reach out to the lender to determine when the appraisal update can be scheduled.

What if a Property Inspection Waiver Was Originally Utilized?

If a property inspection waiver was granted and the property is in a flood zone, the lender will likely require a new full appraisal. However, only an exterior inspection will likely be necessary if the property is not in a flood zone.

Which Areas of Florida are Impacted?

FEMA has identified the following counties as Emergency Areas following Hurricane Ian: Charlotte, Collier, DeSoto, Flagler, Hardee, Hillsborough, Lee, Manatee, Orange, Osceola, Pinellas, Polk, Putnam, Sarasota, Seminole, St. Johns, Volusia. Therefore, the property is located in one of these counties, the lender will likely require an appraisal update, as discussed above.

Do Buyers have a Right to Re-Inspect Following the Disaster?

Buyers do not have a right to re-inspect the property after a significant weather event under the FAR/BAR Contracts. However, the seller must maintain the real property pursuant to the FAR/BAR Contracts’ Paragraph 11 Property Maintenance requirement. Buyers may still conduct a walk-through inspection on the day prior to or the day of Closing to confirm that seller has complied with the maintenance requirement pursuant to Paragraph 11 of the FAR/BAR Contracts (this walk-through inspection right does not apply to FAR Vacant Land Contracts).

What if the Hurricane Severely damaged the Property?

The property may have sustained significant water damage following a major hurricane or need extensive roof repairs. If that is the case, you may find yourself asking “what are the buyer’s options?” This is where Paragraph 18M of the FAR/BAR Contracts “Risk of Loss” section comes into play. This section provides a few options if there is a casualty loss after the Effective Date but before Closing, and the cost to restore the loss exceeds 1.5% of the purchase price.

  • The buyer may close “AS IS” with a 1.5% purchase price deduction.
  • The buyer may cancel the purchase and receive the return of the escrow deposit. Or,
  • Alternatively, the parties can elect to have the seller complete all repairs.

If the cost of restoration does not exceed 1.5% of the purchase price, the seller is required to restore and repair the property. The seller’s restoration obligations includes the costs of removing and pruning trees. Further, if the repairs cannot be completed in time for closing, the seller would be required to escrow 125% of the cost of the repair (not to exceed the 1.5% limit) to ensure that the work was properly completed. Buyers should consider the cost to make the repairs, the time it will take to complete repairs, and whether an escrow holdback, credit, or extension is an option.

We hope that everyone is safe following this disaster. If you have any questions regarding a property in an impacted area, please do not hesitate to reach out to your local trusted real estate attorney.


Jill Bowen, Esq.

Jill focuses her practice on Residential and Commercial real property transactions.

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