Insurance Cancelled - Need Some Ideas - Posted by B.L.Renfrow

Real Estate Investing
1

Posted by Bert G on December 07, 1999 at 13:56:43:

Quoth Bryan:

When talking with insurance agents on a previous deal, I was told I cannot insure a property on which I don’t appear on the title…having interest in the form of a purchase agreement isn’t good enough.

Maybe you need to talk to more agents. When I bought my most recent rental, I got the insurance in place a full month before closing. (American Family.)

It was kinda funny, actually. Everything was set for closing on the 21st, when the mortgage broker calls & says there’s a problem because the insurance doesn’t start till the 23rd. I said “Look again, thats the 23rd of LAST month.”

BG

2

Insurance Cancelled - Need Some Ideas - Posted by B.L.Renfrow

Posted by B.L.Renfrow on December 07, 1999 at 10:19:45:

Have a SFR under contract with closing “on or about” Dec. 17. I have it under contract to a retail buyer and I am in the process of setting up a simultaneous close with a note sale at closing.

However, I was advised by my seller that the homeowner’s insurance company discovered the house has been unoccupied for the past 18 months (owners moved to a nursing home, and deeded the property to their daughter, who placed it in a trust, from which I am buying).

The insurance company apparantly mailed something to the house marked “do not forward” and investigated when it was returned. According to my seller, they wanted to cancel the coverage immediately, stating that they will not insure unoccupied properties. Apparently, the seller begged, pleaded and cajoled them into continuing coverage, but they absolutely would not insure beyond the closing date in our contract of Dec. 17, after the seller told them she had a contract to sell on that date.

As the appraisal and title work have not yet been completed - and this is New York - there’s no way I will be ready to close by Dec. 17.

So, what are the options for insuring this place until closing? Obviously, neither my buyer or I can obtain coverage, since neither of us own it yet. The seller is beside herself, and I can’t blame her. She is elderly and is worried about what would happen if the place burns down while uninsured.

I don’t recall the insurer - might have been Allstate, but I’m not certain. The seller is dealing with a local agent, with whom her family has done business for many years, but apparently the agent hasn’t been able to suggest anything.

Any ideas are appreciated.

Brian (NY)

3

Re: Insurance Cancelled - Some Ideas - Posted by GL

Posted by GL on December 07, 1999 at 21:28:56:

Call every insurance agency in the phone book. Tell them you want to insure the property in the present owner’s name and then transfer the policy to the new owner on closing. A standard policy which is for one year. See how many agents you get running around giving you quotes.

4

Re: Insurance Cancelled - Update - Posted by B.L.Renfrow

Posted by B.L.Renfrow on December 07, 1999 at 13:17:19:

Thanks for the suggestions so far.

Actually, I did try to arrange for me or my buyers to lease prior to closing…but sellers won’t go for it, and it’s still a good enough deal for me I don’t want to push them TOO hard on this point!

When talking with insurance agents on a previous deal, I was told I cannot insure a property on which I don’t appear on the title…having interest in the form of a purchase agreement isn’t good enough.

RL: Good idea, but seller owns free and clear. No mortgage.

However, I talked with a State Farm agent whom I know personally. He said that although his company will not write such a policy, there are a couple of independent agents in town who will write a short-term, fire only policy, high deductable and not cheap, but it would solve the problem.

Brian (NY)

5

Re: Insurance Cancelled - Need Some Ideas - Posted by Redline

Posted by Redline on December 07, 1999 at 12:17:39:

Something that comes to mind is: (I’m not sure if it’s good or bad…)

If the mortgage company (assuming there is still a loan on the property) finds out the house is not insured they will order her to get insurance. If she does not, they will force a policy on the property. It is normally very expensive compared, but it might solve your problem.

RL

6

Re: Insurance Cancelled - Need Some Ideas - Posted by Dave T

Posted by Dave T on December 07, 1999 at 11:56:23:

It is not the best practice to allow the buyer to occupy prior to settlement. However, in your case it appears that the insurance company is only objecting because the property is vacant. A simple solution might be to put your buyer into the property on a short term lease (week to week maybe?) pending settlement.

You could enter into a master lease with your seller, then sublet to your buyer. Wouldn’t this solve the insurance problem for your seller without jeopardizing your sale?

7

Re: Insurance Cancelled - Need Some Ideas - Posted by Tim Randle

Posted by Tim Randle on December 07, 1999 at 10:47:41:

I’m not a good source for this, but why can’t you obtain coverage? If you have a contract, I would think you would have an insurable interest? Have you contacted your agent to see what options you might have? Sorry I can’t be more help…