Selling after a natural disaster
If you’re thinking about selling a property that has damage caused by a natural disaster, it’s important to understand your rights and obligations.
Summary of important things to know
Get legal advice and clarification from your insurance provider before signing an agency agreement because there may be conditions on the property that could impact the sale.
Even if you are selling ‘as is, where is’, you must still disclose important information about the property to potential buyers.
Real estate agents must tell buyers about any issues with the property. You must provide your agent with honest information.
If repairs have been completed, The Earthquake Commission (EQC) recommends that any outstanding EQC/insurance claims are assigned to the buyer if possible.
EQC claims and things to consider
When a natural disaster has damaged your property, you may have filed an Earthquake Commission (EQC) claim. EQC is a government agency that provides insurance for residential property owners (contents, dwellings and some coverage of land). It covers environmental damage caused by earthquakes, landslips, volcanic eruption, tsunamis, and geothermal activity.
For more information about EQC and the claims process visit the EQC website.
If you have filed an EQC claim, there are some things to consider before and during the sale process, depending on your situation.
Your claim has been paid out and work completed
If the repairs have been completed, EQC recommends that any outstanding EQC/insurance claims are assigned to the buyer if possible. This will help the buyer if the repairs are later found to be inadequate or if they want to obtain information about past claims.
Any guarantees or warranties offered by the builder who carried out the repairs should also be transferred to the new owner.
Speak to your insurance company and your lawyer about this.
Cash settlement received and no work completed
A buyer is likely to want to know if a cash settlement has been received but no repair works completed. The buyer may want information on what claims have been settled, and what claims, if any, can still be made on the property or land.
Read the 'Selling ‘as is, where is’ section below for more information about selling this way.
We recommend you seek legal advice about your obligations where a claim has been paid, but the repair work has not been done.
Transferring an existing claim
Transferring an existing claim to the buyer may be possible. Your insurance company and your lawyer can help you with this.
Visit the EQC website(external link) for more information about transferring a claim.
EQC claims and the claim process can be complex and lengthy. Your lawyer and your insurer will be able to help you. It’s important to consult with experts because there are proposed changes to the EQC claim process that may impact the sale of your home.
Selling ‘as is, where is’
Selling ‘as is, where is’ means the property is being offered in its present state unless there are conditions in the sale and purchase agreement which outline specific work to be completed before settlement.
When you are selling a damaged house, selling it ‘as is, where is’ may seem like the easiest and quickest course of action.
Before deciding to sell ‘as is, where is’ and signing up to an agency agreement on that basis, you may want to consult your insurer because any offer may be conditional upon a number of things that could affect a sale.
You could think about listing ‘as is, where is’ when:
- the property has suffered substantial damage and or has been written off by the insurers
- insurers have deemed the property capable of repair, but you haven’t managed the repair process and, prefer instead to collect a cash payment to settle the insurance claim
- the property wasn’t insured at the time of the natural disaster.
We recommend you get legal advice because the sale and purchase agreement will need to reflect that the property is being sold ‘as is, where is’. This can affect the clauses and conditions in the agreement.
Disclosures you must make
When you sell a property ‘as is, where is’, you must still answer any questions about the property honestly. If you don’t you could face legal action from the purchasers later.
If you sell with a real estate agent, they must by law disclose any defects the property may have, along with any other information a buyer would likely want to know about the property. Your agent will ask you about the property and any work that has been done. Again, you must answer honestly.
Agents must disclose any defects, such as any structural issues, they are aware of to prospective purchasers. They must stop working for a seller who tells them not to disclose such issues.
Whether you sell privately or with an agent, it’s important to talk to your lawyer about disclosing information about your property.
Supporting documents and important information
If you are selling a damaged home a real estate agent and buyers may ask you for the following documents and information:
- EQC claims and insurance claims including documents and policy numbers
- Engineer’s report
- What land zone the property resides in — if you live in the Canterbury region you can find this out on the My Land Zone website(external link)
- EQC scope of work
- Details of any cash settlement or other payments received
- Copies of sign-offs of completed work, council consents and Code Compliance Certificates
Any guarantees or warranties offered by the builder who carries out the repairs.