Buyers who need property insurance to close are out of luck while a hurricane threatens Fla., but many insurers expect to start writing policies again on Mon.
MIAMI – Property insurers paused underwriting new residential deals across Florida ahead of Hurricane Ian’s landfall, delaying the closing process for some home buyers. But the wait won’t be too long.
Some property insurers stopped approving coverage statewide for single-family homes, condos and townhouses over the weekend once the National Weather Service announced a tropical storm watch for parts of Florida. New homeowners insurance and flood policies should resume as soon as Monday after Hurricane Ian leaves Florida and the National Weather Service lifts the hurricane watch, said Michael Peltier, spokesperson for residential and commercial insurance provider Citizens Property Insurance.
The pause only impacts buyers who need a mortgage since mortgage lenders require homeowners and flood insurance. It does not affect home buyers who use cash – nearly half of South Florida purchasers.
Weather forecasters predict Hurricane Ian will hit south of the Tampa Bay area as a Category 3 hurricane by Wednesday or Thursday morning. It is expected to exit the state by Saturday morning, according to the latest National Weather Service and National Hurricane Center models.
“It is standard insurance industry practice that once a tropical storm or hurricane is issued by the state, insurers stop writing new policies at that time,” said Peltier. “There is no time to do your due diligence.”
The moratorium is expected to impact about 10% of buyers across the state, said Craig Garcia, president of the Coral Springs-based Capital Partners Mortgage. Most buyers either rush to bind a policy or extend one before an official hurricane warning or watch.
“If you were proactive about it, you could get that bound,” Garcia said. “You always have someone who waits to the bitter end. It’s always going to happen to some people. By large it doesn’t cause delays. The disruption (for mortgage lenders) happens after landfall and then you’re dealing with damage.”
Some mortgage lenders may hesitate to allow a closing to move forward this week, even if a buyer has property insurance in hand. It all depends on where the buyer’s closing is in the state, said Juan Jaureguizar, senior vice president and director of residential lending at the Coconut Grove-based Grove Bank & Trust. He said he would sign off on deals in Miami but think twice about Tampa, which may be in the path of the hurricane.
Miami isn’t a direct hit but, Jaureguizar said, “if I’m looking at closing a property in Tampa, I would hold off.”
Prospective buyers may face more tropical storms and hurricanes this year. Hurricane season starts in June and lasts until late November.
For other storms in the future, it’s up to the buyer to decide whether to request an extension or fast forward to a binding insurance policy ahead of a tropical storm or hurricane, Jaureguizar said. On one hand, buyers risk losing a potentially lower interest rate at a time when interest rates continue to rise, as well as prolong a process that normally takes between 30 and 60 days.
On the other hand, buyers risk closing on a single-family home or condo that may face damage from a storm and either be on the hook for repairs or bank on a force majeure – a clause often written into closings that allows parties to exit a deal in case of an unforeseen event.
© 2022 Miami Herald. Distributed by Tribune Content Agency, LLC.