Need insurance for a building with an old roof ASAP!

9 Replies

I am 90% through the entire process of purchasing my first 2 properties, but I have hit a MAJOR hurdle.  While performing the inspections, we found out that the roofs are old and needs to be replaced within the next 3 years.  My plan was to fix both roofs within 12mths.  I did not believe this would stop the sale, until the lender refused to honor the loan, until I fix the roofs on property that I do not own. The seller reduced the price of sale, but will not replace the roofs; placing me in a position of chasing my tail.

I've searched for insurance companies for the past 4 days, to no avail.  They've all stated that I cannot receive insurance until I fix the roofs, but I also cannot receive the loan to purchase the property either.  Are there any Insurance companies willing to insure properties with an aging roof, long enough to be fixed within 2 months?

Have you considered asking the lender if they'd allow a scenario where the seller raised the price of the sale back up to allow an escrow kept for roof replacement?  If you have it invoiced, scheduled, and paid for at settlement or escrow payment at settlement, perhaps the lender and the insurance company may allow it?  Now that seller knows he's not going to be able to find a buyer if they need a loan without providing a new roof, he might be willing to play along.

What you can do is escrow the funds to replace the roof and/or get a surety bond to guarantee a replacement and make the roof replacement part of the closing agreement. That will satisfy some lenders. If the deal does not close, you get your escrowed funds back and if it does close, the funds go towards replacing the roof. This is not uncommon. I did it recently on a home that required major mechanical renovations. If the lender does not accept it, you will need a bridge loan.

Thank you @Jeff Willis .  I will look into a Surety Bond.

@Lynn M.  I actually had that process in mind, but I was not sure of the seller's willingness. If they want to sell their properties, I believe that this flexibility will be needed. Thank you.

California has CFP, California Fair Plan, insurance for worse off properties that are harder to insure. Not sure what state you are transacting in but maybe there is a sister-plan in that state. If you get a construction loan, the rehab is inherent with the loan so the roof is a non-issue.

We have a couple of properties that do not have roof coverage. One was because on the close the large workshop had a leaking roof. We insured without coverage as the CFD guy was a roofer & it was repaired & he proceeded to roof the apartments & the small warehouse. That was 7 years ago & to this day no roof coverage.

Another was a very large older home we closed on in 2005 that had a distinctive sagging roof line over the rear 1200 sq ft addition. The roof tile was all new but we couldn't justify the expense to tear out the 1870's era 4x12 slightly sagging ridge beam. We opted for coverage without the roof & we still have the coverage with that exclusion to this day.

On another property we did have roof coverage & a large limb from somewhere nearby went through it after a bad windstorm, the carrier would NOT cover it.

Then again these properties are free & clear so we do not have mortgage underwriters to bother us.

Thank you @Pat L.   I am definitely in a different ballgame as yourself, because these properties will be bought using a lender.  Since the ordeal of 08, we all know how particular their processes has become; therefore I have to play the game.  Thanks again.