Major Storms Across the Southeast Could Delay Your Closing

As many parts of the Southeast recover from a wave of storms that moved through the area, Realtors and Lenders may be surprised as their borrowers encounter additional costs and/or delays before closing. If you are currently in the process of buying a home, you may be contacted by your lender and told that you will have to have a re-inspection of your property completed by the appraiser.

Collateral is one of the main components in the lending process and in the case of buying a home, the structure itself is the value backing up the loan to protect the lender in case of default. Most lending guidelines have a disaster policy that goes into effect after major storms like, hurricanes, tornadoes, hail, etc. The purpose of these policies is to make sure that the home (the collateral) is still in the same condition as it was when originally appraised. As of this morning, the entire State of Alabama has been declared a disaster area by FEMA.

What that means for those in the middle of the loan process (in Alabama) is that the lender is going to require verification that the home is marketable at the same value and in the same condition as when it was originally appraised. Hopefully, this will just mean a short delay while the appraiser re-inspects the home. If the home was damaged, then repairs will have to be made and a possible decrease in value could occur.

If the property has not been appraised, then the appraiser is supposed to try and find comparables that have sold post disaster, or they must provide photos post disaster of the subject property and all comparables to show that no damage has occurred to either the home, or the comparable sales used in the appraisal report. As of right now, no areas in Tennessee have been declared “Disaster Areas” but as reports of actual damage are analyzed, this could be updated in the future requiring compliance. Make sure that you always deal with a lender that is on top of changes in their market and can anticipate these concerns.

As a Realtor, if you know that storms have passed through the area and caused damage to homes, you may want to be proactive with your buyer and ask the Home Inspector to re-inspect the property, just to make sure that the buyer is protected.


©Richard Swan 2011
This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.