Jeff’s Carlsbad Blog for First Time Home Buyers


Insurance on your new home – Part 4

Posted in Insurance by Jeff Dowler on October 11, 2006

Here’s some more advice on insurance for your home.

Q.  Can a seller include a requirement that the buyers demonstrate their insurability as a condition of the sales contract? 

A.  Yes, although not common, such a requirement could be included in an agreement.  However, the specific language of such a condition should be carefully considered.  Check with your real estate agent to find out if any standardized language has been developed in your community and/or consult with your attorney.  As discussed herein the factors used to determine a particular buyer’s insurability will vary from one insurance company to another and can leave questions regarding whether and when such a condition had been satisfied.

 

Q.  Can a buyer include a requirement that property be insurable and/or the insurance be affordable as a condition of the sales contract?

A.  Yes, but the specifics of such a condition should be carefully considered.  Check with your real estate

agent to find out if any standardized language has been developed in your community and/or consult with your attorney.  There are multiple factors which might be used to determine a property’s insurability or the “affordability” of the insurance in such a clause.  The factors used in a contract clause could include, but are certainly not limited to:

a.     acceptable C.L.U.E. report

b.     purchaser is satisfied of the insurability of

property

c.     secure binder of property insurance on property

d.     cost of insurance doesn’t exceed specified

threshold

Both buyers and sellers should be aware that there are advantages and disadvantages to such a clause that should be considered.  The advantage of such a contingency is that it may allow the buyer to cancel the transaction if the property proves uninsurable or insurance is unaffordable.  This avoids reliance on a financing contingency and any question regarding its application where the property and borrower would otherwise qualify for a loan.  On the other hand, the inclusion of such a clause may affect the acceptability of an offer, particularly if the offer is being made in a competitive environment.

 

The information in these 4 installments on insruance were prepared by the Risk Management Committee of the National Association of REALTORS®

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: