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What to Do When Storm Damage Occurs During Escrow

If a natural disaster damages your property while you are still in escrow, you must re-address critical due diligence and appraisal concerns before weighing risk tolerance for closing the deal.

Let’s face it, there’s no good time for a storm or disaster event to occur. The devastating impact of recent Hurricanes Irma, Harvey, and Maria showcase the full-scale capacity of destruction that Mother Nature can incur. But if a natural disaster occurs while you are still in escrow, and before the deal has been closed with the lender, it presents some unique challenges, especially if the property has been heavily damaged, beyond cursory drive-by visual assessments.

If your third-party reports (Phase I Environmental Site Assessment, Property Condition Assessment, and Appraisal) have been done, you need to re-inspect. When the value of the property has been compromised, it essentially presents a reboot on escrow and the due diligence process. It is in every stakeholder’s best interest to carefully reassess full damage, remediation cost, and time scale for restoring the property relative to the investor or buyer’s needs.

Because of many potential vectors of contamination, a prompt Phase I ESA is an important starting point.

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