I have a really nosey seller-finance and now there is a problem

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I have a really nosey seller-finance and now there is a problem

Carlos Duran
Investor · Las Vegas, NM · Member since 2013 · 4 posts · 3 votes

Hi everybody. Back in 2013, I purchased a home where the owner financed 85% of the property. It was a bad deal from the beginning but my lack of proper full investigation lead to my paying all utilities because he didn't fully disclose that they are not separated. Still, I have kept a peaceable relationship with this man but he is too nosy. He calls me to tell me of insurances that are cheaper and checks up on me with the property taxes, which I just soaked in and let happen. 

Well, just recently I did an insurance claim on the roof and rain gutters only expecting the portion of the roof to be covered. Well, they adjusted a full roof replacement. I don't want to replace the whole roof because it's a waste of money instead I want to use it for other repairs and cosmetic fix-ups. 

The former owner won't sign the check that the insurance made because I won't allow him to participate in the organizing with the contractors. I don't even plan to use a contractor. I'm hiring people myself. Because I find him to be intrusive I prefer not to tell him anything. Am I in the wrong for not doing this and isn't it my right to do with the insurance claim in the manner I choose? Should I get a lawyer to make him sign the check? 

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
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He may not have the right to pick your contractor, but like any lender, depending on your mortgage document, he does have the right to verify the insurance proceeds are used to do the proper repairs on His security.

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  • Anthony GaydenPro Member
    Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
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    Carlos Duran I personally wouldn't do a seller finance deal unless I had full ownership and the seller simply held the note and nothing else.
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  • Kyle Steiner
    Investor · Orange County, CA · Member since 2015 · 30 posts · 9 votes
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    I agree with Anthony.  What is the agreement you have with the seller?  Is he still part owner of the home? 

    Usually when you do seller financing, the former owner essentially becomes the bank.  If I were in the situation you describe, my bank wouldn't have any right to tell me what contractor to use to repair items listed in an insurance claim.  So I'm not sure why he thinks he has the right to dictate who you use for the repairs.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
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    He may not have the right to pick your contractor, but like any lender, depending on your mortgage document, he does have the right to verify the insurance proceeds are used to do the proper repairs on His security.

    2Reply
  • Brian Pulaski
    Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
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    @Wayne Brooks question... My wife contacted our insurance company due to our pool getting damaged during a winter storm. She filed the claim, and we were open and honest with them. We have two little kids and did not want the pool any more. We had planned to remove it and rebuild the deck (the deck completely encompassed the pool, so fairly large deck project) to give more yard/less pool. The insurance adjuster as well as the people in the office all said the same thing... after they cut the check, they explained they could care less if we went on a vacation with the money. Our mortgage company had no involvement, however we never reached out to them (not sure if that is required). I wasn't aware a mortgage company would be concerned with insurance money and how it is spent.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    its customary for insurance if the checks are large enough to mandate both lender and owner sign off..  tis a pain if you have say B of A  you have to send the check in and it just slows things down..

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  • Richard C.
    Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    9y

    As others have said, it is completely routine for a lender to have to sign off on insurance checks (or draws, if it is a larger claim.)

    Insisting on choosing the contractor is a bit much.  But it would be common for a lender to require a licensed contractor.

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    9y

    I have dealt with insurance claims on a financed property and the lender is absolutely involved in handling the payment.  Its possible the lender may even insist the you sign the check and send it to them and then they make the payments to the contractors.  They may insist on inspecting the work.  I'm not making this up, I've been through it.  So what you're experiencing is par for the course with insurance claims on financed property.

    @Brian Pulaski something is wrong with your policy setup.  With a lender, any checks from the insurance company would have been made out to you AND the lenders.  You would have had to get the lenders to endorse any checks.  It can be a big pain.  The fact the insurance company made out a check to just you means they're unaware of the lender.  Which may mean the lender is unaware of the insurance.  In that case, lenders can put in place a "forced place" policy.  Those policies are very expensive and have poor coverage.

    @Carlos Duran you are making a huge mistake accepting this payment for the entire roof and not fixing the entire roof.  If you do this, and then you have another roof claim, the insurance company may not pay or may not pay the full amount.   Once they have paid on an item, they will only pay again if you can prove the work was actually done.   They will inspect the roof and say "we paid for repairs here once, but they were not done, you're not covered."  Roofs are especially tricky.  There may come a time when they inspect the property (they have that right to do this at any time, and may do it when your policy is renewed) and say "this roof is damaged, it must be replaced before we will cover it".   This happened with my grandma's house.  Then, if your lender finds out, the lender may put a "force placed" policy in place.

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  • Brian Pulaski
    Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
    9y

    @Jon Holdman interesting as the homeowners never changed from the day we purchased, and both parties were very aware the other existed. There was no requirement of song off or anything like that. The house has since been sold, but odd that it sounds like it should have been done a different way.

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