Hello BP Community!
My husband and I are currently in negotiations for our second property. We knew that we would have to replace the roof once we acquired the property. However, what we didn't anticipate is not being able to get homeowners insurance coverage due to the roof needing repair. Our lender wants this information to move forward with the loan. We don't want to lose the deal and I'm looking for advice on how to possibly work around this. Looking forward to your responses.
@Shellie Johnson , have you asked the insurance company what they require to provide coverage? E.g. a signed contract with a roofer to begin work on the day you closed. How many insurance agents have you contacted?
The bank won't budge on the insurance requirement, so you'll have to figure out a way to satisfy the insurance company.
@Jaysen Medhurst Thank you for your response! I contacted several insurance companies to see if they would be willing to accept some type of certificate or contract for repair but no one was willing to accept that risk. I contacted the lender to see if they would be willing to move forward with the loan pending a contract for roof repair but again, no luck. We're currently attempting to re-negotiate with the seller for the roof repair. I'm hoping it works out, if not, we'll just have to look for a different deal...
I had a very similar situation recently. I talked to my local independent agent for advice. He was able to write a policy with a lower rated company with higher premiums. They were the only company that would do it. As soon as the roof was replaced, my agent switched me to my regular insurance company.
If you cannot do that, MAYBE you could pay for the roof and put a lein on the property, until you close. But, I'm not an attorney, and don't know how to do that.
You need a builder's risk type of policy. And I'm not an insurance guy so that may not be the correct term. But basically you need someone to insure that needs to be rehabbed.
What you need to do is contact an insurance company that specializes in investor property insurance. Try nreig.com. They'll do those all day long.
My american family insurance provider was able to get me full replacement value on the whole duplex expect the roof. I can't remember if he depreciated it 5-10% of replacement cost or would not cover the roof at all for replacement cost.
or see if the current owner's insurance company will extend to you
I will definitely look into NREIG or asking if the current homeowners insurance will extend coverage to us if the seller doesn't go for the roof repair. Thank you so much to everyone that has responded! I'll keep you posted on what happens with this deal.
Mike H. is correct, If you are doing renovations on the house you should look into a Renovation Builders Risk. You will also need Liability coverage as most Builders Risk policies only deal with the property. A traditional builders risk policy was designed to deal with a ground up construction of a building. The Renovation Builders Risk policy is designed to handle the existing structure and the value of the renovations/additions. Some companies still call it a Builders Risk but rate it differently due to the existing structure.
You should look to an agent that writes Commercial Insurance as they will probably have more options for the two policies.
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