Real estate General topic

[ultrarunner]

I keep thinking the insurance companies will pull out of LA now that the inability to control these large scale fires is apparent. Doesn’t matter what their budget is if they don’t have water to fight the fires. Lenders won’t lend without insurance coverage.

As for the rest of the US, much depends on what happens at the federal level to affect the economy. We are in a holding pattern until Jan 20th.

Bought my first home in 1982 and it was not eligible for insurance as it was set for a condemnation hearing...

Insurance agent knew this but wrote the policy after I went into the office as a referral from the listing broker...

I gave him my timeline... 30 yd dumpster delivered day of closing, yard and brush cleared, trash hauled out, broken windows replaced, full exterior paint, new 12x20 driveway and new roof and new mini blinds and patch of sod in front. Home was only 650 square feet lest anyone think I was a magician at age 22.

He told me to call him when cleaned and painted which took a week and he took pictures and mailed them in.

All was good...

Back then agents had more leeway... a lot dependant on loss ratio for seasoned agents.

In other words he could place policies others might not be able because his policies had very low claims.

Kind of rewarding top performers.

As explained to me that all went away due to red lining saying those with connections got preferential treatment.

He was not able to write my last purchase which was perfect because underwriting program instantly said no...

I said I have fire hydrant in front and less than a mile from fire station and fire sprinklered and tile roof... I'm redlined not by a person but AI says I'm too close to a park and it took s lot of digging to discover.

 

[paulsharvey]

I dont think insurance is completely against Risk; but they don't like insuring at inflated prices. So, they might be fine insuring a $500k home for $500k, in a risky area; but they don't like a home that was $500k, and sells at $1.2m, and insuring that $1.2m, in a risky area.

Also, insurance... yes, they are crooks, but so are Many of the people making claims. I know fires are different than hurricanes; but roofing damage from wind, shouldn't entitle you to a new roof, but repair if the damage only. You get fender damage on a car, they replace fender and color match it, but you don't get the whole car painted.

Lot of problems; from the contractors, insurance companies, politicians, customers, ect. All while trying to react and start repair within days/weeks of the end of an event.

 

[paulsharvey]

What i was trying to get at, in FLa, atleast, it's "replacement" value that is often the issue. You pay $400k on a home, that in there estimates is worth $280k, they would be fools to insure at $400; yet your lender want that's to minimize their risk.

It's almost like GAP insurance on cars

 

[Muhammad]

No need to bring politics into it. Plenty to discuss without partisan opinions.

 

[2manyrocks]

What i was trying to get at, in FLa, atleast, it's "replacement" value that is often the issue. You pay $400k on a home, that in there estimates is worth $280k, they would be fools to insure at $400; yet your lender want that's to minimize their risk.

It's almost like GAP insurance on cars

The mortgage lenders lend based on the appraised value put on the property by their approved appraiser, and they expect insurance coverage in line with that appraisal. The borrower is at risk of having their loan called if they can't obtain insurance coverage expected by the lender before the loan is fully repaid. Lenders often have the option of force placing insurance coverage to protect the lender's interest in the short term, but the premium cost is very expensive, it doesn't insure the borrower's equity or property contents, and the lender may call the loan anyway unless the borrower can obtain a regular insurance policy fairly quickly.

 

[paulsharvey]

The mortgage lenders lend based on the appraised value put on the property by their approved appraiser, and they expect insurance coverage in line with that appraisal. The borrower is at risk of having their loan called if they can't obtain insurance coverage expected by the lender before the loan is fully repaid. Lenders often have the option of force placing insurance coverage to protect the lender's interest in the short term, but the premium cost is very expensive, it doesn't insure the borrower's equity or property contents, and the lender may call the loan anyway unless the borrower can obtain a regular insurance policy fairly quickly.

Yeah, you are right of coarse, but when a home maybe costs $265 to build, and sells for $400, appraise how you want, I dont fault insurance for being hesitant to insure above $265.

 

[Muhammad]

Real world example... I had my homeowner's insurance canceled last year. My brother as well, with a different provider. My parents did not get canceled (same zipcode as my brother). A month after I found a new provider (which was NOT easy as every single household insurance name was responding with the same answer, no no no no no not writing new California policies), I got a letter from my old provider informing me that they neglected to follow state law in some way regarding risk assessment and that actually could offer me a new policy at about 3x my old rate.

In the end, there is a state option for fire insurance that is available in California if nobody else will write a policy so talk of people being without insurance is false. That state option is going to be seeking some more money soon though as they have $700 million available to pay an estimated $6 billion in claims now.

As for the real fire risk where I live, it's much much lower than other areas but when you talk to experts in the field, you learn that when a 40-60mph wind comes, we are all utterly powerless. One ember can land in a palm tree and within 10 minutes you've got another street on fire. This has nothing to do with how much water pressure is available in one concentrated neighborhood when every hydrant is being used simultaneously.

I did hear one report from a guy who set up a bunch of lawn sprinklers on his roof and saved his house and probably many more around him. There is probably a lot that could be done to save homes if we were better prepared as homeowners (heat triggered sprinklers like we have on the inside of commercial buildings, for example) but wildfire is not something people generally want to stick around to find out about and few take the risk seriously enough to invest in an expensive protection system when they think they have insurance against anyway. But would I spend $1500 to buy 20 sprinkler heads and a heat sensor that I could put up like Christmas lights and connect to my hose bib in the event of an evacuation order? In a heartbeat.

 

[paulsharvey]

That sounds kinda like Citizens Insurnance in FLa. If you can't get private, you can buy through Citizens, which is a state thing. It's fairly affordable, But its really bad insurance; no injury, no possessions, high deductible, and double that deductible during tropical storm or hurricane warning in effect.

 

[ultrarunner]

A number of people around me lost coverage held for decades including my brother that lives in the middle of a nice neighborhood with sidewalks and cement tile roofs…

He’s a full time Real Estate with lots of contacts and ended up with a carrier from out of state which isn’t subject to the same rules as in State.

A friend of mine really is in regulatory hell.

He was non renewed and applied to Fair Plan which said ok but the oak trees have to go.

OK, for 10k he can get rid of them but this requires a city permit which was denied because Oakland’s Tree Preservation is very strict when it comes to oak trees and it has teeth… such as massive fines and being forced to replant and even post bond should anything happen to the replacement tree.

Sometimes the reality is there is no viable option.

Others I know have split policies such as Lloyds for fire and another for liability… 3200 premium now over 20k

My AG friends are also feeling the pinch… one is a Christmas Tree Farm and when shopping for replacement coverage the only carrier said the horses would have to go…

I only see more trouble ahead… it may very well lower home prices but not total cost of home ownership when higher premiums factored plus the massive hit to property tax base unfolding.

Maybe Fire coverage will become more like government backed flood and earthquake insurance?

 

[2manyrocks]

The guy who saved his house in the interview I watched used what appeared to be a gas powered trash water pump. He used his pool as a water source. Couldn’t see the brand. This one is $289 at harbor freight plus the cost of hoses. https://www.harborfreight.com/2-in-212cc-gasoline-engine-semi-trash-water-pump-158-gpm-63405.html

Oakland…