A buyer or seller who receives payment of insurance proceeds as a result of damage to a dwelling structure shall apply the proceeds to the repair of the damage. However, the buyer and seller may make a fair and reasonable distribution of the insurance proceeds between each of them by a signed written agreement. The written agreement shall not be made until at least 7 days after any award of insurance on a claim has been settled and written notice of the settlement and award has been made by the insurer to both the buyer and seller. There shall be an exception for the application of insurance proceeds to the seller’s mortgage balance when required by the terms of the seller’s mortgage, with a corresponding credit to the buyer for the amount payable due on the installment sales contract.