Hazard Insurance for Seller Financing Deal

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Hazard Insurance for Seller Financing Deal

Jaren Woeppel
Lender · St. Augustine, FL · Member since 2015 · 120 posts · 26 votes

Hey, BP

Would love your perspective and any possible help on our current situation. We have a 4-unit multi-family property under contract. We had lender financing and a great insurance quote. The appraisal came back poor, and the sellers have offered seller financing terms. We would like to move forward with the seller financing terms, but then we just heard back from the insurance company that they would not offer the insurance if it is seller financed. I did not know that an insurance company cares who holds the note, so this is new to me. 

Has anyone out there had a similar experience and found a good solution or what the next step should be? The next quote we received from a different carrier was 3.5x higher than the previous quote, only change being seller financing. 

This is in Florida (FL) by the way. Thanks!

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Jared Townsend
Insurance Agent · Orlando, FL · Member since 2015 · 297 posts · 122 votes
1y

I've never heard of a carrier taking issue with seller financing before either. If you want to send me the details I'd be happy to review it. 

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  • Matt Devincenzo
    Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
    1y

    I've never heard that. Did the first company state why? I'd reach out to a broker and see what they can come up with.

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    • Jaren Woeppel
      OP
      Lender · St. Augustine, FL · Member since 2015 · 120 posts · 26 votes
      1y
      Quote from @Matt Devincenzo:

      I've never heard that. Did the first company state why? I'd reach out to a broker and see what they can come up with.

      This is the first time I have come across this as well. My broker just reached out and said they spoke with them and they will not extend coverage to own financing, that’s about it. 
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  • Jared Townsend
    Insurance Agent · Orlando, FL · Member since 2015 · 297 posts · 122 votes
    1y

    I've never heard of a carrier taking issue with seller financing before either. If you want to send me the details I'd be happy to review it. 

    1Reply
  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    1y
    Quote from @Jaren Woeppel:

    Hey, BP

    Would love your perspective and any possible help on our current situation. We have a 4-unit multi-family property under contract. We had lender financing and a great insurance quote. The appraisal came back poor, and the sellers have offered seller financing terms. We would like to move forward with the seller financing terms, but then we just heard back from the insurance company that they would not offer the insurance if it is seller financed. I did not know that an insurance company cares who holds the note, so this is new to me. 

    Has anyone out there had a similar experience and found a good solution or what the next step should be? The next quote we received from a different carrier was 3.5x higher than the previous quote, only change being seller financing. 

    This is in Florida (FL) by the way. Thanks!

    Is there an underlying mortgage that is not being paid off?  In other words is this a wrap around being proposed? 

    you state that the appraisal “came back poor”.  Does that mean that the appraised VALUE was less than you and the seller were expecting?  If so, how much less than the purchase price? Have you thoroughly reviewed the appraisal as to ascertain the methodology utilized by the appraiser?  

    what specifically do you believe the appraiser did or didn’t do that caused an incorrect valuation?  Were the comps utilized not adjusted properly?  Were the comps located in an area of lesser valuation? 4 units are considered residential, not multifamily which is 5 + units, and commercial.  Was the appraiser a state licensed residential appraiser or did the appraiser also hold a designation from the Appraisal Institute (MAI or SRA).  

    in other words how sure are you that your valuation is correct and the appraiser’s is wrong? 


    I’d be extremely careful before paying more than an appraised valuation, and would certainly require a second appraisal before I did.  Further, at this point I would require the seller to pay for a second appraisal before I moved forward. 

    Getting back to the insurance issue, have you contacted the sellers insurance company for a quote? 
    Private Mortgage Financing Partners, LLC
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