O/T Home Owners Insurance.

I just looked at a foreclosed house, a little ways down the road. I was thinking about making an offer on it, until I looked at it closer. There were four additions done to the original house at some time, before the last owner bought it. Nothing was built to code, so they were obviously done with out a permit. In order for the last owner to get financing, the house would have had to be insured.
My question is, don't insurance companies have certain standards that have to be met before they will insure a house, or will they insure almost anything?

If this house was sold during the bubble, it's possible it was included in "bubble fever"--that condition where everyone involved was blinded (morally and ethically, at least) by the amounts of money being made, and some "niceties" were overlooked...
If that was a foreclosure of a bundled securitised sliced and diced mtg, you'll want to be sure the local title co will write Owner ins on it, and if their policy is written under a Hold Harmless guarantee from a lender, how shaky the lender itself is.
If strictly a "local" foreclosure, there shouldn't be any such title problems.

Anymore, most insurance companies insist on an inspection before insuring. However, that inspection is usually superficial. They'll check to see if there are any wood-burning stoves, the condition of the roof and other factors that affect insurability. They'll confirm the type of construction (eg. brick versus wood siding). They won't check for code compliance.

My insurance company gave me 30 days to bring the house up to code.

Sure, Insurance companies have minimum standards, but they're more concerned with fire hazards then strict structural "code" compliance. They often simply allow their local agents to perform an "inspection" and take pictures etc for the underwriters approval.

When theres no mortgage which usually requires a certain degree of code compliance prior to issuance of the loan, a homeowner can get by with more. Just because there are no known reported code violations, that doesnt mean a new bank is gonna improve a loan on a home in its present condition.

I wouldnt be afraid to purchase such a home so long as your price allows for all the necessary repairs PLUS THE FOLLOWING.

ATTORNEY'S NOTE: If youre going to buy a foreclosed home, I wouldnt do it unless and until a reputable Title Insurance company is willing to sell you title insurance !!!!!!!!!!

John T Country Lawyer

if previous owner couldnt/wouldnt get homeowners on their own when bank financed it , the bank would have it insured under their forced place blanket insurance up to the amount of payoff, as it gets paid down insurance declines, no insurance on contents, lot of people use that as their "insurance"

noncompos: " If that was a foreclosure of a bundled securitised sliced and diced mtg, you'll want to be sure the local title co will write Owner ins on it, and if their policy is written under a Hold Harmless guarantee from a lender, how shaky the lender itself is."
You are correct. There is a huge number of people who can not determine who really owns title to their home right now. A big legal mess..

Well, these days there are tons of homes that are worth far less than the mortgage owed on them. Take that into account when considering purchasing. Is that home or property worth what it owed or asked for, and long term, what will it be worth to you, or those after you if the plan is to sell it later before MAKING AN OFFER.

On every home that I have ever owned, the insurance company sent an agent out to take a look at the properties and photo them, particularly the buildings before writing a policy for me. I would imagine that information was filed with the policies for future reference.

Never had I heard of getting real estate attornies involved until my first purchase when I was in illinois. As a seller, perhaps. But as a buyer, the mortgage company told me that they wouldn't stop me from paying the typical fee at the time of about $350 if I wanted to, but in their opinion I would not need to, because if they couldn't get a clear shot at the title, doing their homework first to insure there were no leins, etc, then they would not even offer a mortgage, period. As a seller to protect myself, I have had an attorney. To purchase through a mortgage company, not yet.

Much good luck in your decision.

Mark

You did not say where you are located. It makes a big difference state to state and city to city. As for insurance they are going to be looking for safety issues, like fire hazards.

As for the house being built to code. I live in a state that the codes are handled county by county. My county does not have any codes as such. I like that way. I OWN THE LAND. What I put on it should be my decision as long as it does not effect the neighbors negatively. Even then it should have to be way out there before anything is done.

You sound like you want the government to "protect" you from buying a house with issues. The responsibility should rest with you and the seller. You should be able to see any obvious defects. The seller should tell you and hidden ones, such as a well that goes dry in the summer.

(quoted from post at 01:36:32 08/31/11) I just looked at a foreclosed house, a little ways down the road. I was thinking about making an offer on it, until I looked at it closer. There were four additions done to the original house at some time, before the last owner bought it. Nothing was built to code, so they were obviously done with out a permit. In order for the last owner to get financing, the house would have had to be insured.
My question is, don't insurance companies have certain standards that have to be met before they will insure a house, or will they insure almost anything?

Click to expand...

If the house has been "added onto" over the years without a permit, I'd also check to see if it meets the zoning ordinances (if you have any) especially with regard to setbacks and classification. It is now common for insurance companies to refuse to insure a purchased property if it does not meet the zoning ordinances because many municipalities will not allow it to be rebuilt if it is destroyed by fire, for example. This can also happen if it had been "grandfathered in" as a non-compliant structure.

Be very careful.Getting home insurance can be like getting a mortgage.They are brutal these days.

Good Luck

Stan

When I made that post, I'd forgoten a report I'd seen somewhere on the net--unsubstantiated, so I don't know if reliable or not--that some Title Co was sidestepping the issue by inserting a new clause in the "Exceptions" to their Owners policies that exempted the Title Co from any liability due to mtg/TD forclosure irregularities.
I've not tried to run this down, so have no personal knowledge.
Depending on the form, you'd have to look in the "printed exceptions" section (patent rights, eminent domain etc) as well as what we called here "Schedule B" (recorded easements, cond's/rest's, mtgs, etc) for anything that could be construed to cover foreclosure actions, which could well be couched in language that looked innocent to anyone unaccustomed to legal interpretations.

My sister had a pole barn fire. Couldn't rebuild because it was in a flood plain. Insurance paid off full amount. They were lucky.

VERY GOOD POINT noncompos, go to the head of the class lol

Heres the deal and dirty secret some realtors either arent aware of and/or dont inform their clients of.

If there are issues of risk, the insurer can EXCEPT (opt out of coverage)them in the A or B Exceptions clauses. Buttttttttt the realtor or title insurance company just tells the Buyer, Yes, the title insurance is done and youre covered. TRUE BUTTTTTTTTTTTT you have to read the exceptions clauses !!!!!!!!!!!!

John T Ex Realtor and Attorney

Now see whay Im always preachin to gents here TO CONSULT A TRAINED PROFESSIONAL

John: Per Yves at nakedcapitalism.com today the AG of Nevada, of all people, has finally filed on BofA/Countrywide, spelling the WHOLE MESS out in so many words--alleging fraud, misrepresentation, failure to secure the collateral, ad nauseum.
My computers sick, can't get clear copy of complaint, not that most of it wouldn't be way over my head; you'll find it fascinating reading, I'm sure.
I'm dying to see how the Powers That Be are going to bury this financial black hole.

I don't want the government to protect me from anything! How could you get that from my original post? I was asking about the standards that insurance companies use to decide whether or not they will write a home owners policy.

Thanks to everyone for their replys.

Most insurance companies "inspect" the home for damage. What they are trying to do is protect themselves from a claim for damage that occured before the property was insured through them. You would be supprised at the number of people who would think nothing of buying a place with a damaged roof, wait for the 1st storm with hail and then file a claim. They insure many homes that were built at different times. Some before building codes exsisted.

Call your agent and ask em about insuring the place and tell him/her you are thinking of buying it. Don't ask about codes and see what they tell you.

Rick