Orlando Real Estate

No Insurance, No Loan, No Sale

June 30th, 2014 8:12 AM by David W. Welch

If you are selling or buying a home that is over 25 years old, the buyers insurance company may require a four point inspection report before writing a home owners policy. The four points of the report are: roof, electrical, plumbing and mechanical (HVAC). If one of these points is a problem, the buyer may have trouble getting coverage. If two or more points are problems, they are probably not going to find insurance for the property.

The roof may be the most obvious potential issue on this list. If you have an old leaky roof, you may not be able to get insurance. Quite frankly, if the roof looks suspiciously old it may not even pass an appraisal. Roofing standards changed after the 2004 hurricanes, and a roof put on after this change may actually reduce the cost of insurance.

Electrical issues come in one of two forms: aluminum wiring and the electrical distribution panel. Aluminum wiring is usually seen in homes built in the early 70's. Certain electrical panels such as Federal Pacific, FPC and Stab-Loc are the usual supects. You do not necessarily have to re-wire a house if it has aluminum wiring, but insurance may be a bit more costly. Replacing an electrical panel usually costs between $600-$1,200 depending on the type and location.

Plumbing problems for insurers usually comes in the form of polybutylene piping. This was popular for years, but I see a lot of homes plumbed or re-plumbed in the 80's and early 90's with poly. The gray piping has had a bad reputation with insurers for quite a while now. If it has plastic connectors watch out, because it is going to leak. Brass connectors are best. If the home was built after about 1996 it should not have poly at all.

The temperature has already been in the 90's for over a month down here in Orlando, but if you don't have a working heater it may be hard to close a financed sale. I do not recall an insurer taking exception with an air-conditioning system, yet. I am sure there are examples I just have not run into. If the buyer is using FHA, VA or USDA financing though, they will almost certainly need to have a working heater.

The single most common solution every seller and buyer wants to use to "fix" an insurance problem is to call the seller's current insurer. To put it bluntly, that does not work. No insurance company cares that they have covered you for 40 years. New buyer, new policy, new rules. In fact your trusted insurer probably won't cover you in your next house either. Selling or buying it pays to be aware of these potential issues and be prepared to either remedy them or pay a higher premium.

Posted in:General
Posted by David W. Welch on June 30th, 2014 8:12 AM

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