Hurricanes, Real Estate Closings, & "The Box"

While most of our hurricanes make landfall in September or October, hurricane season is actually five months long, beginning June 1st and ending November 30th.  That’s important to know when purchasing property within that time frame.  

Here is some little known information that could affect your real estate closing if a hurricane or tropical storm is on the radar: any closing that involves property with a structure and financing by a lender will require hazard, wind & hail, and flood insurance (if needed) to be in place and in full force at the time of the closing. If any of the insurance required by your lender is not in place at closing, the lender will not allow the loan funds to be used until the property is properly insured.  

What does a hurricane or tropical storm have to do with your insurance and a real estate closing? Well, not only can the threat of a hurricane cause a run on batteries, ice, and bottled water, it can also cause insurance companies to stop issuing new policies, not take new applications or increase current coverage amount. The reason is a little-known rule that the North Carolina Joint Underwriters Association's has called the "Hurricane Restriction Rule". 

The rule states: No new or increased coverage shall be bound or application for new or increased coverage be accepted after 12:01AM the following day when the center of a designated named storm is located within Longitudes 65º West and 85º West, and Latitudes 20º North and 37º North.  The term "designated named storm” is a windstorm designated as a hurricane or tropical storm by the National Weather Service. 

These coordinates form a “Box” and encompass an area from Norfolk, Virginia at the top down to the Dominican Republic at the bottom and a width that spans from Apalachicola, Florida on the left to Bermuda on the right. 

Hurricane Box

 

The main thing to keep in mind in understanding the rule is that it goes into effect whether the property you are trying to purchase is in the projected path or not. Even if the windstorm is moving out to sea, nothing can be done until it clears the Box. If the insurance cannot be issued, a real estate closing will not take place. 

If you have a real estate closing pending and there is a tropical storm or hurricane on the horizon, here are Two Tips to making sure you get your keys on time:

  • get the insurance application in early
  • ask your insurance agent if the policy can be pre-paid and bound early 

When it comes to tropical storms and hurricanes, it is always a good idea to think outside the “Box” to make sure your property is covered as required and quickly. 

If you need a closing attorney for your real estate investment, Hutchens Law Firm is happy to help. We have offices in the Carolinas in Fayetteville, Charlotte, Southern Pines, and Wilmington as well as in Columbia and Myrtle Beach.

Published by J. Chris Huff on September 17, 2015