Homeowners insurance is once again in the news, and home owners (as well as those actively wanting to buy or sell a home) need to know how this may impact real estate transactions. This type of coverage is also called Fire Insurance, though it does cover losses beyond just those caused by fire.
Several major insurance carriers have either stopped writing new homeowners insurance policies in California or are severely limiting the number of policies that they’ll write.
For property owners in the Very High Fire Hazard Severity Zone, this limitation of conventional coverage is causing insurance premiums to skyrocket, especially if the insurer or last resort has to be used, the California Fair Plan. We’ve heard of insurance costs going up 10 times the previous rate or more in some cases!
There are some other options, listed below, that may provide some possible relief.
Buying a home in an area with a higher fire risk? Find out about the insurability of the property BEFORE writing the offer.
Major Homeowners Insurance Carriers Pull Back
Allstate, State Farm, and now Farmers have all pulled back from writing new policies in the Golden State, either completely or partially, due to the fires of recent years and the financial liability that they have caused those companies.
We’re not really in new territory here. Over the last 35 years, we’ve had several cycles of difficulty with obtaining homeowners insurance. In California. In years gone by it was challenging to get it after the Loma Prieta and Northridge earthquakes in 1989 and 1994, respectively. When a spate of mold cases came up in California and Texas in the late 1990s and early 2000s there was also a pullback by insurance companies. (more…)
Home buyers & sellers in Silicon Valley hear about various types of real estate related insurance products and they can sometimes be confused with one another: Homeowner’s (or Fire) Insurance, Title Insurance and Home Warranties. We’ll discuss them today and hopefully will clear up the confusion.
Insurance Choices: Homeowner’s Insurance, Title Insurance, and Home Warranties
Homeowner’s Insurance pays you money to cover losses in the event of a fire or other unseen catastrophe (such as a tree falling on your home, a fire caused by lightening or a fence falling down in a windstorm). Often there’s a deductible but beyond that you have major coverage for losses in most cases. There are some caveats, of course. If you purchase a home using financing, your lender will require you to buy this type of insurance. It is sometimes also called Fire Insurance.
Homeowner’s insurance does not cover damage from earthquakes or flooding from creeks, rivers or dam failure. If you have a fixture that fails and the home floods, though, that is probably covered.
Homeowner’s insurance does not guarantee that if something is destroyed it can be rebuilt. For instance, in older parts of Santa Clara County (such as downtown Saratoga, San Jose, Los Gatos and Willow Glen) there are detached garages built right up against the property line or very close to it. In most places there are now setback requirements of about 5 feet or so. Should that garage burn down (or be destroyed by termites or anything else), it can only be rebuilt, most often, if it’s moved. Creating a new foundation is expensive – and that may not be covered by your HO insurance. (more…)
Title insurance seems to be a mystery to many home buyers and sellers, so I want to give an overview on it in this post. We’ll discuss what it is, why it’s needed and when, and also who pays for it. (For the difference between title insurance, home warranties, and homeowner’s insurance, please see another post on this blog: Homeowner’s Insurance, Title Insurance and Home Warranties.)
What is title insurance?
The purpose of title insuranceis to protect against loss of ownership of the land, condo, house, estate, or other real estate due to a problem or defect with title. The loss could be complete (losing the property entirely) or partial (losing a portion of ownership or use). It may also include a financial loss, whether direct or in terms of future market value of the property. A company providing this type of insurance is called either a title company or a title insurance company.
Sometimes the loss could be as a result of a “defective recording” of a document, an improper signing of a document, or much worse, forgery or signing under duress (being forced to sign under undue pressure, such as by blackmail).
Loss of title can also result from hidden heirs who may claim a partial interest in the property.
If there’s a recorded easement that the title company does not find when a home is sold, and the buyer is surprised by it after the closing, that title company may be writing a check to the new owner for the loss incurred in market value due to that easement, which should have been found.
Another type of loss would be if someone claimed an unrecorded easement, which might cause a “partial loss”. When the title is somewhat in question, or considered “not clear”, it is often said that there is “a cloud on title”. What you want, though, is “clear title“. You want to know that no one else will have any kind of right or claim to the property: not a lienholder, not the IRS, not a contractor, not the county tax collector or anyone else.
Title insurance covers smaller issues too, such as finding out later that a major component of the home has a building permit violation. (more…)
PMI, or Private Mortgage Insurance, is used when buyers have less than 20% down when buying a home. Do all buyers purchase PMI? Many Americans seem to think so.
Last week I read an article in a real estate publication quoting a Zillow survey stating that 41% of home buyers believe that everyone has to purchase private mortgage insurance, or PMI.
Who needs PMI?
If you have 20% to put down (your down payment), and it’s a regular or conventional loan (not FHA), you do not need to pay for PMI.
If you’re purchasing with FHA backed financing, there’s mortgage insurance built into the product.
Who is protected with PMI?
This type of insurance does not protect the consumer. Instead, it protects lenders in case of a default by the borrower.
Christie's International Real Estate Sereno, Los Gatos, CA 95030 408 204-7673 Mary@PopeHandy.com License# 01153805
Clair Handy, Realtor
GREEN
Christie's International Real Estate Sereno 214 Los Gatos-Saratoga Rd Los Gatos, CA 95030 ClairHandy@sereno.com License# 02153633
Mary & Clair sell homes throughout Silicon Valley: Santa Clara County, San Mateo County, and Santa Cruz County. with a special focus on: San Jose, Los Gatos, Saratoga, Campbell, Almaden Valley, Cambrian Park.
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Homeowners insurance is once again in the news, and home owners (as well as those actively wanting to buy or sell a home) need to know how this may impact real estate transactions. This type of coverage is also called Fire Insurance, though it does cover losses beyond just those caused by fire.
