It’s happening more and more often. A buyer and seller agree on terms and the real estate transaction moves forward. Then I get a call from an upset buyer saying no insurance company they are calling will even write a policy for the property they are in escrow on. At that point I give them some references for companies I have used that first of all will find a policy and then are as reasonably priced as possible, considering the circumstances. I encourage buyers to research home insurance right away as it is not like it used to be. Wildfires are changing things and insurance has gotten harder to get and more expensive, sometimes shockingly so.
There are many stories out there about buyers waiting till the last minute to shop for insurance only to find it is almost impossible to get and when found is way more than they were thinking. In fact I know of a recent transaction that fell out because the quoted policy cost which was around $3,000 a year threw the buyers out of qualifying for their home loan, as the lender weighs all the buyers obligations as part of their loan approval.
We have a steady influx of buyers from out of the area, especially the Bay area, areas such as San Francisco, Oakland, San Jose. Many of these buyers have had a years long relationship with their insurance agent in the Bay area and so they call that agent and ask them to write a policy for their new home purchase up here in Yuba or Nevada counties. All seems well as their agent quotes them a policy for some amazing price like $750 a year. When I hear about that price I know right away something is wrong. It is too low for our area and their agent did not know what he was doing, he was out of his territory. This again can scuttle a transaction when buyers assume that they have taken care of the insurance needs only to find out right before closing that the insurance company will not honor that quote due to the wildfire danger up here.
The bottom line is to make sure and shop for homeowners insurance as one of the first things you do when buying a home in these high wildfire danger areas.
Most major and familiar names like State Farm, Allstate, AAA, etc are not even willing to write policies in large areas of Yuba and Nevada counties. The agents you contact if they are good, will then shop alternate markets even sometimes having to go to high cost Lloyds of London to finally get a policy.
Other odd realities include buying a house during fire season and an insurance policy is secured but then just before closing a wildfire breaks out within say 20 miles of the address. The insurance company will often cancel the policy due to the active fire in the area and that can end the transaction.
I’m certainly not trying to dissuade people from buying homes in our beautiful areas.
It is more about understanding the insurance realities and making sure to address them as soon as your offer is accepted. Sellers when confronted with the fact that their buyers are having a hard time securing a policy will suggest the buyers call the insurer they the seller has been using. But not even that works, as most of the companies that have insured past clients will no longer insure the same home for a new client.
It’s an ongoing issue, probably a new permanent reality. I hope you found this read useful.