I spoke to a group of realtors last week. It was the monthly meeting for the JB Real Estate Group (www.jbrealestategroup.com), and the topic I presented was, How To Keep Home Insurance from Derailing the Closing. We had a great discussion and I thought it would be beneficial to share what I presented here. I believe this information is helpful whether you are a home buyer, seller, realtor (listing or buying agent), or even a mortgage loan officer.
Buyer: It all begins with the buyer obtaining a home insurance quote once their offer has been accepted. This should be a “hard” quote which means the agent has run a replacement cost estimate and the CLUE report. The replacement cost estimate determines the amount of home insurance needed to replace your home in the event of a total loss. Ask the agent if they ran a replacement cost estimate. If they didn’t, find another agent.
The CLUE report shows both claims the seller has filed over the last 3 to 5 years, as well as, the buyer’s claims. Some carriers rate for both sets of claims while others only rate for the buyer’s claims. Either way, claims make the home insurance cost more than it would if there were no claims. This helps the buyer confirm nothing is missing in the seller’s disclosure such as a water leak or a hail claim and determine what repairs were made or not made. Ask the agent for a copy of the CLUE report.
Seller: The seller should pull all documentation for claims they’ve filed over the past 5 years. Documentation should include copies of repair bills and paid invoices showing what repairs have been made. This is especially helpful if the sellers have replaced the roof which provides a discount on the buyer’s home insurance.
If a claim has been filed after the seller’s disclosure has been completed, it should be updated to alleviate any surprises to the buyers. I’ve seen a purchase almost fall through because of this.
Listing Agent: When you meet with the sellers to complete the seller’s disclosure, ask about prior claims. I’d also encourage you to ask about any instances where they talked about a possible claim with their agent but did not file one. I’ve seen too many inquiries turn into $0 paid claims, and every underwriter I’ve talked with wants to know what happened and why it wasn’t paid. Help your client pull documents together to share with their buyer.
Buyer’s Agent: Once the offer is made, encourage the buyer to get a home insurance quote as described above. Better to start over now because of a prior claim than right before closing! If something does turn up, coordinate obtaining information from the listing agent, the buyer’s and their agent. This helps the buying process go smoother and negates unwelcomed surprises.
Loan Officer: Since claims, buyers or sellers, can impact the rate, having a hard quote before the end of the option period ensures the home insurance rate doesn’t negatively impact the buyer’s debt to income ratio. Rates in north Texas are increasing based on the storms we’ve had since December of last year and this will help determine how accurate the estimate you gave the buyers is.
What do you think? Share your comments, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you! Also, if you are a realtor or mortgage loan officer in the D/FW area, I’d be honored to speak to your team or office. Ensuring a delighted client experience begins with us.
