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Can I Get Home Insurance for a Foreclosure?

There are many inexpensive foreclosure homes available for purchase in today’s market, and for many these provide opportunities to purchase homes that would be out of their price range in other circumstances. The question is, will you be able to get insurance for that home if you decide to purchase it?

Some of these homes require tons of work before their new owners can live in them due to neglect or former owners, scavengers, and vandals who have damaged the homes in some way. While you can repair these things, you will want the home to be covered during the repairs process. Getting insurance for a vacant foreclosure is not as easy as getting a policy for a home that is readily inhabitable. Here’s what you need to know beforehand.

It takes work.

It is possible to get insurance for homes like this, but it is not common and can take some work to find. It is also unlikely that the coverage you get with a policy for a foreclosure that needs repairs done will not be on the same level as a standard insurance policy. Other policies won’t cover a home unless someone is living it. So it will take a significant amount of digging to get the coverage you need.

Inspections are essential.

Make sure you get a qualified home inspector to inspect your home before any deals are signed. You will want to have an accurate estimate of the repairs you will need and how much they will cost you. Insurance companies will also want to evaluate an inspection report in order to see how much work needs to be done and how long it will take.

If the home will remain vacant for a long time, the risk is higher, and the rates for the insurance will be higher as well. The reason is if a home is left unattended without maintenance, if will deteriorate faster than occupied homes that are heated and cooled properly.

There are three different kinds of coverage options that you will come across while a foreclosure is being repaired:

“Builder’s Risk”

This coverage protects renovation, new construction, and remodeling while you aren’t currently living in the house. This kind of policy is normally less expensive at the start of the improvements and gets more expensive as the risks increase.

“Vacant Dwelling”

These policies provide coverage for the majority of physical losses for unoccupied homes with the exception of earthquakes or floods. While these policies will include vandalism in the coverage, theft is not included, which is oftentimes a major problem with vacant homes. For example, copper wiring and pipes are often stolen from vacant homes, and replacing those can cost over $20,000.

“HO-8”

This is a policy specifically designed for older homes, but it provides limited coverage for foreclosure properties. It would work fine though if the damages weren’t so severe and you were able to live in the home while repairs were made.

If the damage on the foreclosure isn’t too bad, and you are able to move in within 30 days after closing on it, then getting standard home insurance shouldn’t be a problem.


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