Closing Delays & Hurricane Matthew – South Carolina REALTORS® Legal Update
Q. Is Hurricane Matthew causing delays in real estate closings?
As result of Hurricane Matthew, thirteen counties in South Carolina have been pronounced Presidentially-Declared Major Disaster Areas (PDMDA). The counties include: Beaufort, Berkeley, Charleston, Colleton, Darlington, Dillon, Dorchester, Florence, Georgetown, Horry, Jasper, Marion, and Williamsburg counties. With such widespread impact and damage across the state, there will likely be expected delays with closings. One delay in particular to be aware of involves the re-inspection of property being purchased through FHA loans.
Please see below for the key details regarding this process:
- All Properties with pending Mortgages or endorsements in Presidentially-Declared Major Disaster Areas (PDMDA) must have a damage inspection report that identifies and quantifies any dwelling damage.
- The damage inspection report must be completed by an FHA Roster Appraiser even if the inspection shows no damage to the Property, and the report must be dated after the Incident Period (as defined by FEMA).
- Streamline Refinances are allowed to proceed to closing and/or endorsement without any additional requirements
- FHA does not require the Appraiser to ensure utilities are on at the time of this inspection if they have not yet been restored for the area
- Damage inspections should be completed by the original Appraiser. However, if the original Appraiser is not available, another FHA Roster Appraiser in good standing with geographic competence in the affected market may be used
- All damages must be repaired by licensed contractors or per local jurisdictional requirements.
- All damages, regardless of amount, must be repaired and the Property restored to pre-loss condition with appropriate and applicable documentation.
Please refer to this chart from the FHA Handbook.
| Pending Mortgage Closure | |
| If… | Then… |
| The Mortgage is not closed, | Inspect the Property to determine damage exists. Provide on-site inspection with interior/exterior photographs. |
| No damage exists, | Close Mortgage and document inspection. |
| Damage exists but is below $5,000 and Property is habitable, | Complete repairs and close Mortgage or establish repair escrow and close Mortgage. |
| Damage exists and is above $5,000 or the Property is not habitable, | Do not close Mortgage. Repairs must be complete prior to closing. |
| When… |
Then… |
| Repairs above $5,000 are completed and inspected with interior/exterior photographs, | Document inspection and close Mortgage. |
Mortgages Pending Endorsement
The following table shows inspection and escrow requirements that apply to Mortgages on Properties that have closed but are not yet endorsed:
| Pending Mortgage Endorsement | |
| If… | Then… |
| The Mortgage is closed but not yet endorsed, | Inspect the Property to determine if damage exists. Provide drive-by inspection with exterior photographs. |
| No damage exists, | Endorse Mortgage and document inspection. |
| Damage exists but is below $5,000 and Property is habitable, | Complete repairs and endorse Mortgage or establish repair escrow and endorse Mortgage. |
| Damage exists and is above $5,000 or the Property is not habitable, |
Do not endorse Mortgage. |
| When… |
Then… |
| Repairs above $5,000 are completed and inspected with interior/exterior photographs, | Document inspection and endorse Mortgage. |
Q. What should ALL REALTORS® do to help clients with possible closing delays?
- Whether you are in an affected county or not, haveAll buyers check with ALL lenders to determine if the recent hurricane will require any re-inspection or re-appraiser visit and the costs and timing which may impact closings.
- Communicate with other brokerages and parties and closing attorneys.
Q. How does the SCR Contract address storm damage and delays?
- Section #2 PROPERTY: Seller must maintain Property from Effective Date to Closing Date (subject to normal wear and tear).
- Section #4 CONVEYANCE/CLOSING/POSSESSION: Parties agree on a no-fault automatic extension to Closing Date.
- Section #7 FINANCE: Allows parties to make contract contingent upon financing. Lender will not lend or damaged collateral.
- Section #8 REPAIR PROCEDURE: Allows parties to make the contract subject to seller making agreed upon required repair.
- Section #9: INSPECTION/REINSEPCTION RIGHTS: Buyers allowed to inspect property through the closing
- Section #10 APPRAISED VALUE: Allows parties to make the contract contingent upon appraising for purchase price or higher.
- Section#11 WOOD INFESTATION REPORT: Allows parties to make the contract subject to seller making agreed upon required repairs.
- Section #15 CASUALTY: Allows parties to terminate or work out a solution, either repairs or money or insurance proceeds.
- Form 311 DUE DILIGENCE ADDENDUM: Allows parties to agree that buyer can timely/properly terminate for a termination fee timely/properly delivered to seller.
Please contact the Legal Hotline (803-772-5206) for further assistance.