Insurance On Wrap / Seller Carry

8 Replies

Hi Everyone,

Alright so I'm in the middle of my first "seller carry" deal, there is a property that the seller is can no longer afford the payments to and have negotiated the following with the seller. They will allow me to take title and have setup a wrap with title where they will service the current loan. So basically the loan is not assumable and I'd rather not go conventional on a loan since I'd have to do 25% down for the investment property loan so my plan is to let appreciation do it's thing and then finance it conventionally at that time. Title has a loan servicing option so the idea is that I get title and make payments to them every month which would go to the loan company making sure the PITI is paid every month.

My question is, how does one go about getting home owners insurance on this. I'd assume it would be the same process as usually by calling my insurance company but my thoughts are wouldn't a change in insurance and name of the person insured be a red flag for the loan company and possibly call the loan due? Not sure what everyone else does when they do something like this, any thoughts?

Originally posted by @Jason Torres:

Hi Everyone,

Alright so I'm in the middle of my first "seller carry" deal, there is a property that the seller is can no longer afford the payments to and have negotiated the following with the seller. They will allow me to take title and have setup a wrap with title where they will service the current loan. So basically the loan is not assumable and I'd rather not go conventional on a loan since I'd have to do 25% down for the investment property loan so my plan is to let appreciation do it's thing and then finance it conventionally at that time. Title has a loan servicing option so the idea is that I get title and make payments to them every month which would go to the loan company making sure the PITI is paid every month.

My question is, how does one go about getting home owners insurance on this. I'd assume it would be the same process as usually by calling my insurance company but my thoughts are wouldn't a change in insurance and name of the person insured be a red flag for the loan company and possibly call the loan due? Not sure what everyone else does when they do something like this, any thoughts?

Ask the Title company who they would recommend.

Other than that, call insurance agents and ask "do you issue policies for wraps and subject to transactions?". If they say "yes, we do them all the time, you have the right place". If they say, "you can't do that" then they don't know that it can be done and they don't know how to do it.

 

Account Closed Thanks, I'll give that a try. I'm wonder if the original owner will be able to cancel her policy once I get mine placed on the home. Definitely uncharted waters for me.

Originally posted by @Jason Torres:

@Mike M. Thanks, I'll give that a try. I'm wonder if the original owner will be able to cancel her policy once I get mine placed on the home. Definitely uncharted waters for me.

 The lender will require that insurance be in place. There is a proper and legal way for this to be completed that protects you and the seller. You can't have two insurance policies on one property. The agent will know how to address this. I let my agent take care of it so that it is done properly. 

Well as the insurance provider the seller uses .You can be underwritten into the same plan . Insurance changes triggers due on sale clauses so do this correctly

Just updating for anyone else that may encounter this. Instructions came from title and put the mortgage company as 1st, then the owner 2nd. Speak with your title company and they'll have the instructions for your insurance company. Finally closing this deal tomorrow, wahoo!

@J Torres
I'm supposed to be closing on one tomorrow, but I am totally confused as to how the insurance works. I'm probably in the same position as you were in a year ago. I'm wrapping my primary insurance, which is escrowed. Does my buyer purchase insurance and pay it in full for the year, and I remove my current policy? If they do pay the insurance in full, then do my monthly payments go down since the year has been paid in full, or is this even an option since everything is escrowed? This is uncharted territory for me, so I have no idea what to expect, and we're supposed to be closing this week!!!

@Ramon Mendoza Contact your insurance agent and tell them exactly what you're trying to do. On my end My policy basically added the seller as an additional insured but I was the buyer and not the seller. They should be contacting their insurance agent to get this figured out. No idea what the seller did in terms of escrowed insurance but I'd assumed it stayed on as I paid the same monthly payment until I refinanced the property about 7 months later. Hope that helps