Storm damage on rental property we are about to close on!

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Storm damage on rental property we are about to close on!

James W Saunoris
Investor · Member since 2020 · 2 posts · 0 votes

Hi Everyone!

New Investors in Green Bay, WI here...We are about to purchase our second SFH rental property and we are scheduled to close this Monday, July 19th. We just received a text from our realtor that a tree fell on the (detached) garage from the storms last night. She said that the seller is filing an insurance claim and that the money for the repair will get to us at the time of closing. I'm not sure of the extent of the damage and plan on driving by this weekend to check it out but was wondering if there are any suggestions out there on if there is anything we should do or anything we need to be worried about?

Thank you in advance for any input you can offer!

Jim

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Karen MargraveBusiness Member
Moderator
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
5y

I'd see about extending the closing if possible, until you get something from the insurance company showing it's going to be covered if it closes escrow. Another option is to get the seller to leave the amount of the repair in escrow and have the work done, then the contractor gets paid from the proceeds in escrow, and the seller gets reimbursed by the insurance company. 

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  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    5y

    I'd see about extending the closing if possible, until you get something from the insurance company showing it's going to be covered if it closes escrow. Another option is to get the seller to leave the amount of the repair in escrow and have the work done, then the contractor gets paid from the proceeds in escrow, and the seller gets reimbursed by the insurance company. 

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    I agree with Karen. You need to extend closing long enough to confirm the damage will be 100% repaired to your satisfaction.

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    5y

    As Karen said if you don't want to delay closing, keep a chunk of money in escrow after closing.  The amount needs to be large enough to cover the repairs.  Once the garage is repaired, the funds are released to the seller.  

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  • Scott M.
    Real Estate Broker · Rochester Hills, MI · Member since 2009 · 2k+ posts · 2k+ votes
    5y

    I would not wait for the weekend and request a several week extension and they should have no problem giving it so you can get this sorted properly. You need to have your own contractors (not the sellers) go out and tell you what it is going to cost to get it repaired and operational again. Don't forget to include any city permits / inspections if they are needed. Then you can ask for a credit on the HUD that you know covers you.

    You also want to ask if you need to wait to do repairs or not.  If they filed a claim, their insurance co needs to come out and appraise the situation and that may take a bit if the storms were bad.  So I would find this all out prior to close so you know what you are getting into.  

    Try to minimize the surprises.  

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  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    5y

    Good responses, but keeping money in escrow may not be enough. What if the Contractor gets into the job and finds out a major structural piece in the attic is damaged and need replacement. His engineer says the roof must be removed to do this....All of a sudden your $5,000 fix turns into $20,000. Now your options are limited. I think you have to delay the close of escrow until the work is completed and signed off by a city inspector or engineer or both. Too much risk of you getting screwed here IMO...

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  • James W Saunoris
    OP
    Investor · Member since 2020 · 2 posts · 0 votes
    5y

    Thank you all very much for the responses. I took a drive by this morning and, although it's not totaled, I would think about $5k worth of damage. The limb from the tree that broke off was quite large and the tree itself is huge and may need to be removed too. I received a message from our realtor that closing has been delayed 1 week for the insurance adjuster to come out, but I think I will delay a bit longer to get everything sorted out like some of you mentioned. Also talked with my lender and there is about $25k net proceeds that can be left in escrow which should be plenty enough to cover everything so that is an option too. Thanks again everyone!

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