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Trust This.
By Joseph E. Seagle, Esq. ● Sep 30, 2022
Smart Brevity® count: 3.5 mins...903 words
Congratulations! If you’re reading this, then that means you have power and an internet connection after Ian made his presence known.
I’m writing this from a hotel room down the street from my house, because our garage and basement (yes, we have a basement in Florida) flooded. So even with power, we still have no AC or hot water because — yes — those are located in the basement and were drowned under five feet of water.
In other words, today’s Post will be extremely short since I’ve been up and at it since 4:24 am, trying to get the water to go through the garage instead of down into the basement.
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1 big thing: A 500-year storm
Hurricane Ian, at over 400 miles wide, was as strong as Charley and as slow as Frances, cutting a swath of destruction diagonally across Florida from the southwest to the northeast on Wednesday and Thursday this week.
It’s the sixth Category 4 or higher storm that has hit the gulf coast in the past five years. Losses of property and life are still being calculated, and they’re going to be large.
Hurricanes always bring wind and water, but the amount of rain that Ian delivered was a tremendous amount that is being called a 500-year storm.
There will undoubtedly be arguments between insureds and insurers over water damage that may be covered or may be covered only by flood insurance.
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In Orlando, it appears that many of the properties that experienced water damage were not located in flood zones where their lenders would require them to carry flood insurance.
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Regular hazard insurance does not cover “floods,” but how that term is defined, and how the casualty occurs, is often up to a judge or a group of justices to determine.
Based on past experience with hurricanes, we expect to see:
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Debris cleanup and property repairs, including roads and other infrastructure, will take months or even years.
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People who recently moved to Florida from non-hurricane areas will be looking for the exit.
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Insurers that survive and pay the claims will be looking for the exit.
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Some insurers will look for the exit and leave the State and the insureds holding the bag.
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There’s going to be a larger shortage of housing for those looking to buy or rent, driving prices higher for those who want to stay in Florida despite hurricanes.
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More people will buy flood insurance at least for a few years, and then drop it right before the next big hurricane hits.
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Those of us with basements will be trying to figure out a way to fill in that sucker.
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It’s a buyer’s market again, and they want all the repairs completed prior to closing. But not all sellers can afford to complete the repairs until they have the closing funds.
Why it matters: If the buyer is getting a conventional, FHA or VA loan, escrows for repairs after closing cause the loan underwriters heartburn, and some closing agents won’t hold such post-closing escrowed repair funds.
Some ways to handle payments for repairs:
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Best practice: Seller pays for the repairs that are completed prior to closing;
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Next best practice: Seller pays for the repairs on the settlement statement at closing after the repairs have been completed. The contractor will sometimes require affirmation from the closing agent that payment is on the settlement statement.
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Not the best practice, but it works under contract: The seller must pay the contractor for the repairs within a certain number of days after closing. This requires the buyer and seller to enter into a post-closing undertaking agreement which a lawyer will typically draft. Sometimes the lawyer agrees to also act as the escrow agent for the funds that the seller sends to the lawyer immediately after closing.
Our thought bubble: “Best practices” are called that for a reason. Anything less is risking a problem.
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Home affordability hits 39-year low. National Mortgage Professional
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Goldman Sachs expects home prices to fall in 39% of US cities over the next year. Yahoo Finance
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House Canary says that the housing market cooldown will last at least through fall. DSNews
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US pending home sales, a leading indicator on the economy, fell two percent in August, the third straight monthly drop. Realtor dot com
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Mortgage rates are at 6.7%, cooling the market further. When will buyers figure out that it’s not going to get any better anytime soon, and come off the sidelines? Washington Post
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Left - Backyard bush on Tuesday; Right, same backyard bush on Thursday after Ian
This bush in our backyard is always so full and pretty before a hurricane. But each hurricane that has hit has always left it looking like it does on the right. Give it a few years, without a hurricane, and it will be back to its old self, just like all of us will be.
All day on Thursday, this song kept running through my head.
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We hope you found this helpful — any feedback is appreciated and can be shared by hitting reply or using the feedback feature below.
Be on the lookout for our next issue! 👋
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