What Should a Home Seller Do If a Storm Damages the Property Before Closing?
If a storm hits while a home is under contract, the seller should promptly inspect the property, photograph any damage, prevent the damage from getting worse, notify the seller’s attorney and insurance carrier, and determine the extent of the problem before promising repairs or credits to the buyer. Material new damage may need to be disclosed, and the purchase contract may give the parties specific rights and obligations when the property is damaged before closing.
This issue is particularly relevant in the Chicago area after repeated storms have brought destructive winds, hail, flooding and heavy rain. A signed contract does not freeze the property in its pre-storm condition. Until the transaction closes, storm damage can create disclosure, insurance, inspection and contract issues that must be addressed.
1. Inspect the Property Promptly
Once conditions are safe, the seller should inspect the property even if it appears undamaged from the street.
Areas to check include:
- Basement and crawlspace
- Attic and ceilings
- Roof and siding, viewed safely from the ground
- Windows and exterior doors
- Sump pump and backup system
- Electrical service and outdoor equipment
- Trees, fences, garages and other structures
Some storm damage is not immediately obvious. Water may enter an attic through a damaged roof without producing a visible ceiling stain until later. A sump pump may lose power or fail during heavy rain. Wind-driven rain may enter around a window even though the glass remains intact.
This inspection is especially important when the seller has already moved out. A vacant property should be checked after a substantial storm rather than left unattended until the buyer’s final walkthrough.
A seller should not climb onto a wet or damaged roof. If roof, electrical or structural damage is suspected, the appropriate professional should inspect it.
2. Photograph and Document Any Damage
Before cleanup or permanent repairs begin, the seller should take photographs and video showing the condition of the property.
The documentation should include:
- The location and extent of the damage
- Standing water or signs of water intrusion
- Fallen trees or branches
- Damage to the roof, siding or windows
- Emergency mitigation work
- Damaged personal property
- The condition after repairs are completed
The seller should also retain contractor estimates, paid invoices, inspection reports, insurance correspondence and photographs of completed work.
Good records can help establish what happened, how quickly the seller responded and what was done to correct the problem. Those records may also be relevant to the insurance claim and any later discussion with the buyer.
3. Prevent Additional Damage Without Concealing the Problem
A seller should take reasonable steps to keep storm damage from getting worse. That may include extracting standing water, arranging professional drying, removing a fallen branch or temporarily covering a damaged section of the roof.
Emergency mitigation is different from concealing the evidence.
For example, a seller should not simply paint over a ceiling stain without identifying and correcting the source of the water. Similarly, wet drywall should not be replaced before determining whether water remains inside the wall or whether additional drying or remediation is required.
The proper sequence is generally:
- Prevent additional damage.
- Determine the source and extent of the problem.
- Document the condition.
- Complete an appropriate permanent repair.
- Preserve the records.
Cosmetic work should not be used as a substitute for investigating the underlying condition.
4. Notify the Seller’s Attorney and Insurance Carrier
A seller whose property is damaged while under contract should notify their real-estate attorney promptly. If the seller has a broker, the broker should also be informed.
The seller should contact the property insurer when a potential covered loss has occurred. The insurer may have requirements concerning photographs, emergency mitigation, contractor estimates and inspections. A seller should understand those requirements before beginning substantial permanent repairs.
The buyer may also need to be notified. Illinois’ Residential Real Property Disclosure Report warns sellers that they may have a continuing common-law obligation to advise prospective buyers about the property’s condition even after the report has been delivered.
That does not mean every fallen branch or minor condition necessarily requires a new disclosure report. The appropriate response depends on the nature of the damage, the seller’s knowledge, the terms of the contract and whether the condition has been repaired.
A seller should not decide independently that the damage is too minor to mention. That decision should be discussed with the seller’s attorney.
5. Understand the Damage Before Negotiating With the Buyer
Once damage is discovered, a seller may feel pressure to immediately promise a repair or offer the buyer a closing credit. That can be a mistake.
Before negotiating a solution, the seller should determine:
- What was damaged
- What caused the damage
- Whether the condition is temporary or structural
- The estimated cost of repair
- Whether insurance coverage is available
- The amount of any deductible
- Whether permits are required
- Whether repairs can be completed before closing
- Whether the buyer or lender will require a reinspection
- What the purchase contract says about casualty damage
Depending on the circumstances, the solution could involve completing repairs before closing, providing documentation to the buyer, assigning or applying insurance proceeds, establishing an escrow holdback, issuing a closing credit or postponing the closing.
Serious damage may also trigger provisions in the contract addressing casualty loss or the required condition of the property at closing. The precise rights of the seller and buyer will depend on the language of their agreement.
What Happens at the Final Walkthrough?
The final walkthrough gives the buyer an opportunity to confirm that the property remains in the required condition and that agreed repairs have been completed.
If the buyer first discovers storm damage during the walkthrough, the parties may have very little time to investigate the problem before closing. That can result in rushed negotiations, escrow demands, delayed closing or a dispute over whether the seller adequately disclosed the condition.
Prompt inspection and communication give the parties more time to obtain estimates, deal with the insurance company and reach a documented agreement.
Does This Apply to FSBO Sellers?
Yes. The same storm-related issues can arise whether a property is listed by a real-estate broker or sold directly by the owner.
A FSBO seller, however, may not have a listing agent checking on a vacant property, monitoring deadlines or coordinating communications among the parties. The seller must be particularly deliberate about inspecting the property, preserving documentation and notifying the appropriate professionals.
Selling without a broker does not change the physical condition requirements in the purchase contract or eliminate the seller’s disclosure obligations.
The Bottom Line
When a substantial storm hits before closing, a seller should not assume that everything is fine or wait for the buyer to discover damage at the final walkthrough.
Inspect the property, document any damage, prevent it from getting worse, notify the appropriate professionals and understand the problem before negotiating a solution. A prompt and transparent response is generally much easier to manage than a storm-related surprise on the day of closing.
This article provides general information and is not legal advice. The parties’ rights and obligations depend on the purchase contract, the nature of the damage and the particular facts of the transaction.
