Spring storms and a busier real estate market are making life very interesting for MN buyers, sellers and Realtors! Just over a week ago, 400-500 homes sustained damage as a severe storm that spawned two tornados and devastated the Twin Cities north metro. Yesterday another storm blew through Minnesota. This time homes in the south and west metro were affected by hail and damaging straight-line winds. 2008 is setting up to be a very active storm season in the Land of 10,000 Lakes as more severe weather is already in the forecast for later this week. Will this affect real estate transactions? You betcha!
Even in this changed, buyer-driven market, spring is a busy time for Minnesota real estate. Current statistics showed the deadlock between buyers and sellers loosened earlier this year with many homes going into pending sale status in April.
My curiosity as a Realtor got the best of me. I looked at the devastated Hugo neighborhood with a real estate eye. So many homes damaged and destroyed-Roofs gone. Windows shattered. Vinyl siding looking like Swiss cheese. Trees toppled onto homes. It is an entirely different neighborhood than it was a couple of weeks ago. In this hard hit neighborhood alone, there were 6 active homes on the market and 4 homes in pending at the time of the storm. With all of the damage and in some cases, total devastation, no doubt the risk of loss clause will come into play in some, if not all, of these real estate transactions.
What is the "Risk of Loss" clause? What does it mean to the average home buyer and seller?
Risk of Loss is a "boiler plate" clause on page four of the Minnesota purchase agreement. Line 147 clearly states that the risk of loss due to any reason whether an act of God or the acts of vandals will be the responsibility of the seller from the time the purchase agreement is signed until the date of closing.
I wrote a post last August, Contract Cancelled-Understanding Risk of Loss, that explains the risk of loss clause in detail and what it means to anyone with a signed purchase agreement on a home that sustains damage. After the past few stormy weekends, this topic deserves to be revisited as a reminder to all home Minnesota buyers and sellers as we persevere through this turbulent summer.
For additional information on Risk of Loss read:
Contract Cancelled-Understanding Risk of Loss
If you are buying, selling or relocating to Minnesota and need help from a professional Realtor, give me a call or visit my website for a FREE Relocation Packet. I specialize in acreage and lakeshore properties in the north and east Twin Cities metro area including Ham Lake, Lino Lakes and all communities in the Forest Lake School District! Serving Anoka, Chisago, Ramsey and Washington Counties in Minnesota.
Copyright 2008 Teri Eckholm http://www.terieckholm.com/
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If you are buying, selling or relocating to Minnesota and need help from a professional REALTOR®, give me a call or visit my website for a FREE Relocation Packet or FREE Homebuyers Success Packet. I specialize in acreage and lakeshore properties in the north and east Twin Cities metro area including Ham Lake, Lino Lakes and all communities in the Forest Lake School District! Serving Anoka, Chisago, Ramsey and Washington Counties in Minnesota..JPG)
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Copyright 2012 Teri Eckholm http://www.terieckholm.com/
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I have a listing that got hit and now we are getting offers after the fact. Its obviously needing repairs, but its still uncertain if the house will get all new siding or just two sides of new siding...it does get difficult with the storm damage.
Teri, I think acts of God, like storms are something most don't think of when trying to complete a transaction. A Realtor once told me on new construction the whole deal could be off if the house burned to the ground. Life is full of uncertainty for sure. I hope your tornado hit area will recover slowly.
Weather issues have wrecked markets. Be glad you're not in catastrophic hurricane land!
Teri, As usual you provide great information for both home buyers and home sellers in your area.
Hi Teri,
You pose some interesting issues in your post. I was so sorry to hear about the dramatic loss to folks in your area. One issue of course in-addition to the damage done is whether or not a lender will even fund homes that may have been untouched.
We had a situation years ago where lenders would not fund anything in a few areas after an earthquake. They put a hold on EVERYTHING in process irrespective of damage or the lack thereof.
Hi Teri, I have noticed you guys have had your share of bad weather. We have been very lucky so far. This can only impact the sellers with more repairs and expense then anticipated. Nice update on the impact the storms are having on the market.
Hi Teri, I am sure in one place or another all this has been going for all of our lives. But it sure does seem strange that we have had these tragedies occur in so many places so often. Is it just a cycle or is the earth and its atmosphere really changing ( for the worse). I am no scientist but it sure seems odd to have so many tragedies occurring so frequently.
Teri - What a great point of information for buyers and sellers. Fortunately most of our buyers and sellerswill never have to experience the loss and devastation that so many families have had to go through during recent storms, floods, hurricanes and other natural disasters. We cover that "Risk of Loss" statement so routinely, but it can obviously turn into a real life scenario very quickly. Thanks for bringing the message home.
Teri, thank you for another good post! Knock on wood but my area has never had to go through the devastation as your market. Thank you for your information
Chuck--Minor damage can be negotiated along with the rest of the agreement but as damage becomes more severe it can become difficult. Glad to hear you are getting offers though...good sign for the Twin Cities market!
Gary--I know and appreciate that you are one who likes to look at life in a positive light...But as you know we must advise our clients on the unforseen. Storm damage is just one of those unanticipated events where everything can either be renegotated or cancelled by the buyer in MN.
Vickie--I am very glad not to be in an area where hurricanes are an issue!
Mana--Thank you...I always appreciate your comments.
Lynda--Interesting point...I do know that one of the four homes in pending closed on Friday a few days after the storm. I wonder if the financial package had already been in place for the closing so there was no last minute approval on the file. Personally, as I look at the damage, I would want a structural engineer to assess my home if I lived anywhere in that particular development...and if I was buying in an area with such significant damage, I would request the same prior to closing. With so much inventory out there, it would be a tough decision to move or not move into such a hard hit area. It almost would be a relief if someone such as the bank stepped in to remove the pressure of the decision.
Gary--It certainly is a catch-22 for sellers as new siding or a roof could enhance the sales aspect but the home takes a hit on the CLUE insurance report. Plus with so many people with damage timing of repairs good take time. Hopefully we have seen the worst of the storm activity but the forecast is calling for more unsettled weather in the next few weeks.
William--I cannot speak for the rest of the country but this is by no means the worst tornado seen in MN. In 1965 there was a huge tornado in Fridley that was significantly larger than the one that hit Hugo. We generally see more straight line winds and hail in MN than tornados but it seems to be cyclical. According to the news this morning, we are in a similar weather pattern to 1965. There were a few years in the 1970's that also were like this. Our colder than normal spring is part of the problem. Once that jet stream gets up to Canada where it belongs, things should settle down for us. I for one hate the unpredicability of severe weather like we are seeing but can deal with it every 20-30 years or so.
Lynn--Thank you! I do know of agents who have glossed over the boiler plate page of the purchase agreement. Some buyers and sellers are at a loss as to what to do in the situation not realizing it was already discussed at the time of the purchase agreement and the buyer gets to make the decisions as to whether the agreement will move forward if there is damage. This little clause will be coming into play a lot this summer!
Jean--Thank goodness the total devestation of property was localized and very rare in our area too. But we do get some storm damage every year so the risk of loss clause is an important one to revisit every so often.
Teri - I have wondered how some of these storms affected you and your market
Teri- Good topic to cover. I am sure with the flooding that has hit the Midwest, many buyers and sellers will need to review this and agents should be versed in it.