Leaving Anything Out...builder's Insurance?
Trying to get a property thru a SS. Real good potential. Bank should accept offer of 60k, true ARV should be around 110K. House is a mess. Mostly cleanup and cosmetic, landscape and new HVAC. Lining up the appraisal, inspector and repair estimates. I am not familair with the necessary insurance needed while I rehab. Will be doing alot of the work my self with my partner. Will sub some stuff out. Am I leaving anything out? Do I have to have a survey? I understand about doing the title search. What insurance do I need to carry while rehabbing? Anything else I am leaving out.?
Will be doing HML to buy and repair the property and then looking to flip asap or potentially L/O if it does not sell. Mort broker is telling me we should not have any probs with a non-seasoning refi. I hope she is right!
Thanks guys!
Hopefully you get an answer because it would also answer mine
I do not believe you should need a survey, but you will need a copy of a survey for any improvements that require building permits. As for the insurance, you will need to carry it for a mortgage. Builders risk policy is the least expensive way to go. For conventional policy it cost me almost $2K for a 6 month policy on my first one (house was worth 200K). Now I pay almost half of that. Hope this helps.
Dave...when you say " I will need this for the mortgage" does that also mean I need the insurance for a hard money loan?
Thanks in advance.
There are companies that write policies for rehab projects. These policies are much more "user friendly" than the typical builders risk contract. Premiums are not fully earned, and payment plans (even monthly) are usually available. Foremost, if in your area, is one we favor.
Find a local independent insurance agent he can guide you in finding the right insurance to meet your needs.
You need Builders Risk insurance. And, yeah, I use Foremost Insurance Co. You buy it for either a year, or 6 months blocks, and what you don't use, you lose.
Jam,
You should check with your Agent, as many of Foremost's contracts offer monthly plans and return of unused premium (Atleast in the states we use them). Tim
I wouldn't use ANY independent Agent, but one familiar with REI...
The basic requirements are:
title work, with insurance
termite inspection
appraisal
property insurance
Your HML will probably assign the appraiser but allow you to get the title work, which you should begin while the ink on the contract dries.
In the effort to protect themselves, your HML will require you to list them on the insurance policy, and on the title insurance as well.
A “builder’s risk” policy or similar product is the way to go. It’s basically fire and liability for the full value, working off the appraisal. These policies are not cheap. Find an agent that understands your needs as a rehabber. Everything beyond that is up to you and the products available in your area. (Tapco may cover GA, I hear they’re reasonable). Your HML may require a 12 month policy, but if you can find an insurance underwriter that will return unused premium on the back end (many do not), it’s further incentive to retail the property asap. Pay what you have to initially, and then begin your never ending search for greater flexibility and lower cost.
If a recent enough survey was done, or you’re not doing work that requires major permits, you shouldn’t need a new one. Check with your title company (or the building dept) for the rules of the township, which may vary wildly from one to another, especially in regard to what requires a permit. There are towns where you can’t plant a fence over 18 inches high without one, or replace a dishwasher without hiring a licensed plumber -- and pulling the permit.
Some insurance underwriters, even some HMLs, will frown upon you doing the work yourself. What you say and what you do may differ. Your discretion will have a wide berth, but if you are nervous or beginning, it’s best to learn the rules and follow them. I’ve watched many charge in, bullheaded, under the dictum that “rules were meant to broken”. The reality is that rules should mostly be bent, and hopefully with a certain finesse.
Developing that finesse, finding the best products and learning your market are things cultivated over time. You’re never the same the next day, and that perspective is the difference between working under fire and basic training. It’s why everyone says to get the education, but to follow up by doing.
You sound like you’re doing just fine.
Best of luck (and sorry for the length!),
Quinn.