Dealing with insurance on a burned house

2 Replies

I have a solid lead on a house that was burned out last year. The lady owned it free-and-clear but I'm not sure what things to ask about the insurance claim or what to look out for there. Am I ok if they just received a check for personal property & loss of use? How do insurance companies typically deal with fire damaged houses? 

Normally, they send out a private fire investigator to see if it was arson.  If that checks out, they will send an adjuster to run the info through the insurance computer program, which will give the value of the claim.  Is it replacement costs or Actual Cash Value?  If replacement, they will withhold a large amount of money for depreciation.  The depreciation amount has to be recovered when the work is done.  You may even need a licensed contractor and not your own subs.  If Actual Cash Value, you will not get the total amount of damage (no depreciation check) and that one time check is all you get.

Are you sure the mortgage is paid?  If it not, the mortgage company will confiscate the insurance check and dole it out piecemeal and subject you to inspections before they dole out each breadcrumb.

Also, if it is an older house, it will have to brought up to code, which will cost more money.  The policy may have ordinance coverage which will offset these costs.

I'm planning on replacing all wiring, plumbing & mechanicals so code shouldn't be an issue. The biggest thing I need to clear up with the owners is what they've done with the insurance company so far. They purchased the place in '97 for $30k so I don't doubt that title is clear but I always verify before signing a contract.

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