In my area the county does not assign the tax deed to the auction winner until about 30 days after the sale. They also do not let you collect rents, evict or basically look or think about the property after the sale & before you get the deed. If you do, they can cancel the sale. They of course DO take your cash payment the day of the sale though ;)
So what does this mean in terms of risk/liability? How could the soon-to-be deed holder but protect themselves in this period where you have paid for the deed, but not received ?
I could see some risk if there are squatters, previous owners, "renters", etc. there that might be upset to learn the home was sold - perhaps even upset enough to trash it or burn it down during this period. Going to ask my insurance agent tomorrow, but I doubt this is a very common problem that he runs across.
Investor · Charlotte, NC · Member since 2016 · 374 posts · 189 votes
9y
I would get the insurance. You won and to some degree have an interest in the property so insuring it is appropriate. Will you get your money back if it burns down between now and the issuing of the deed? If that answer is no, then you bet your bottom dollar you get it insured tonight!
I mean I would absolutely get it if I can.... but the interesting bit will be to find out if my insurer (Farmers) or anyone else would provide some type of coverage in this case. It'll be through my LLC, so maybe it could be a case for some type of umbrella coverage of assets. I'll update with what I find out tomorrow if nobody here chimes in.
I would get the insurance. You won and to some degree have an interest in the property so insuring it is appropriate. Will you get your money back if it burns down between now and the issuing of the deed? If that answer is no, then you bet your bottom dollar you get it insured tonight!
Sometimes properties go for less than the value of the scraped lot, so it wouldn't be totally devastating if one were burned down without insurance during that window of risk. Would feel real bad, but at least you would still have the lot.
Investor · Charlotte, NC · Member since 2016 · 374 posts · 189 votes
9y
You don't need to get it through your LLC. Your LLC is you. Get personal landlord insurance on it in your name. Once issued, call back and ad your LLC to the policy. It just says that your LLC has an interest in the property too in case something happens they can't say they didn't know. Umbrella policies cover you and you will want one.
Hope so. I'll reply tomorrow with info from my agent. Funny to imagine agent going through the 20 questions of a real asset being insured and not having the answer to 17 of them because I've never been inside.
Agent: "Is there any existing damage to the property?"
My Response: "No idea. I've never been inside and I can't get inside for 30 days... please cover me for damage during this period?"
Agent: "Are you sure there is still a structure on the lot?"
My Response: "It was there yesterday...but there are hobos outside in the front yard cooking with a fire barrel & I'm not allowed to tell them to scram...."
I see these as a bit of an issue, but I'll find out tomorrow.
Investor · Charlotte, NC · Member since 2016 · 374 posts · 189 votes
9y
Does your agent actually ask those questions? I have 8 homes (9th is in process right now) and it has taken less than 10 minutes to go through the whole process of getting insurance. They have requested an inspector a few times, but never once had an issue getting a policy to cover the rebuild amount, not the amount of the sale or actual value.
They can't request an inspector. It could invalidate the sale & delivery of the deed. See the issue?
I mean if the inspector can inspect from the street & they have some sort of rock bottom rebuild amount they cover me for during that 30 day risk window until a more thorough inspection could be performed... maybe something like that.
Investor · Charlotte, NC · Member since 2016 · 374 posts · 189 votes
9y
Nope. I just say I need to rehab and I need 90 days to complete. They send an inspector out after 90 days. So, no. I don't see an issue. Trust me when I say I have A LOT of insurance.
After talking to my agent he's going to explore some options for the liability side during that short window. Nothing definitive to report just yet on this.
Investor · Charlotte, NC · Member since 2016 · 374 posts · 189 votes
9y
Call more agents and say the following. "I purchased an investment home and need some landlord insurance." When they ask you how much you paid tell them the amount. When they ask when you want it to take effect, say today. Don't offer anything more. Bet you have something in 10 minutes or less.