Posted by George on December 11, 2004 at 08:55:10:
Jim, do you list the borrower on the loan as an additional insured? Have you found it makes a difference with the company writing the insurance, or with the mortgage company whether or not the borrower is listed as an additional insured? Thanks!
Newbie George
Being named “additionally insured”… - Posted by Richard
Posted by Richard on December 08, 2004 at 12:31:49:
Is it better to maintain my own Landlord’s insurance when working L/O’s or should you have the Seller name you as “additionally insured” on their policy?
Re: Being named - Posted by Rob FL
Posted by Rob FL on December 08, 2004 at 21:40:54:
Get the deed and then get your own insurance.
After facing 3 hurricanes in Florida, I can honestly tell you that one thing you don’t want is for the insurance policy to be screwed up. It’s already a tough enough battle disputing with your own insurance policy over claims. Imagine trying to dispute with the previous seller’s insurance policy when you have a huge claim. Not cool!
If the insurance company can find any way to deny your claim they will. Take Jim’s advice. You do not want a homeowner’s policy for a rental property. They will DENY YOUR CLAIM if it comes time for them to pay.
Also, try cashing a 20K insurance check that has the name of some previous seller on it. I don’t care if you have a power of attorney or an assignment document notarized by The Pope, the bank won’t let you deposit a check that big in your account unless it has your name on it and nobody else’s. The additional insured may sound neat in the course you bought, but in real life you could have major problems if a claim results.
take the bull by the horns! - Posted by Jim FL
Posted by Jim FL on December 08, 2004 at 14:52:14:
Richard,
Some folks advocate having the sellers add you as additionally insured.
The thing is, most L/O deals investors do, are with sellers who are living in the house and moving out.
This means that most of the time, the insurance is owner occupied.
Once the seller leaves, that policy is no longer any good, no matter who the insured is, because the house is now a rental.
Check around for rental dweeling policies, or fire and hazard policy.
The insurance needs to cover the structure(s) on the land, and everything else.
Personal belongings of the T/B’ers will need to be covered by the T/B’ers own renters insurance policy, something I make mandatory in my leases.
I have not done a sandwich lease option in a LONG time, I prefer to own.
But, when I did, I simply shopped for a new rental dwelling policy, naming the sellers, myself(my entity), and the lenders as insured loss payee etc.
When the policy is paid for out of escrow thru the lender, simply giving the lenders info to the agent/broker for insurance takes care of that.
Of course, have the sellers cancel the old policy as well.
This way you know its covered, and you are as well.
If this is too much for the sellers to handle, as it often is, simply getting a limited power of attorney on a state recognized form, with appropriate witnesses and notarized allows you to do all this for them.
HTH,
Jim FL
Re: Being named - Posted by Dave NY
Posted by Dave NY on December 08, 2004 at 12:38:24:
On a landlord policy, your belongings are insured. You will also pay a high premium for having a landlord policy, thats why many investors just add the t/b as additional insured.
Dave NY
Re: Being named - Posted by Richard
Posted by Richard on December 08, 2004 at 22:19:47:
Thanks, Rob.
I’m in Hurricane land too (MS Gulf Coast), so I don’t want to take any chances. I’m not getting the deed in a L/O setup so does that change my strategy in any way?
Thanks for all the advice!
Richard
Re: take the bull by the horns! - Posted by Richard
Posted by Richard on December 08, 2004 at 22:15:45:
The seller has already moved. Does that mean their insurance is really invalid at this point?
If I get a new “rental dwelling policy” as you suggested and the seller then cancels the original policy, will they still escrow the insurance payments with her monthly house payment?
JIM_FL - Posted by Caroo
Posted by Caroo on December 08, 2004 at 18:19:25:
…I have not done a sandwich lease option in a LONG time, I prefer to own.
Jim----
Do you now prefer landcontracts as opposed to Lease options?
Re: Being named - Posted by Richard
Posted by Richard on December 08, 2004 at 13:00:16:
Dan,
Do you meet w/much resistance from the Seller when you ask them to name someone they don’t know as “additionally insured”? I was actually asking about having the investor (myself) named as “additionally insured” are you saying that the T/B, not the investor, should be named a.i.?
Also, does the insurance company ask a lot of questions when the policyholder calls and asks to have this done? If the insurance company determines that the house is vacant or rented out the policyholder’s rates can (and probably will) be increased.
Re: Being named - Posted by Rob FL
Posted by Rob FL on December 09, 2004 at 07:54:20:
Personally I wouldn’t do a deal where my only interest in the property is a lease option form. Too much downside and not enough upside when buying on lease option.
I don’t know what to tell you other than to get the deed and forget the lease option. Lease option would be a last resort to me.
Re: take the bull by the horns! - Posted by Jim FL
Posted by Jim FL on December 08, 2004 at 23:48:36:
Richard,
Yes, if the policy was owner occupied, it is invalid sometimes right away, and other times, 30 days or so later.
Best bet is to get a new policy cancelling the old one.
If escrowed currently, simply have the sellers get it, or you take power of attorney and get it, giving the insurance broker or agent the loan account info etc, for billing.
Then followup and make sure it gets done.
Never leave a property uninsured.
HTH,
Jim FL
Re: JIM_FL - Posted by Jim FL
Posted by Jim FL on December 08, 2004 at 23:49:29:
Caroo,
I buy sub2 most of the time.
Jim FL
Re: Being named - Posted by Kimberly (OK)
Posted by Kimberly (OK) on December 08, 2004 at 14:45:41:
The house would be insured on a landlords policy. As such, their would be only a minor amount for contents – appliances, window coverings, etc. This would NOT cover the tenant/buyers personal property. The t/b needs to have a renters policy to cover their belongings.
It does not cost the seller any extra money to add you (an investor) as an additional insured. The agent won’t ask any questions. The homeowner should just send the request in writing to their agent.
A landlords policy plus a renters policy is approximately equal in cost to a homeowners policy. At least here (OK).
Kim
Re: Being named - Posted by Richard
Posted by Richard on December 09, 2004 at 08:05:36:
Rob, could you elaborate? I see no downside (risk) on my part and a three paydays (option consideration, monthly spread and spread on sales price. What am I missing?
Richard
Re: take the bull by the horns! - Posted by Randy
Posted by Randy on December 09, 2004 at 11:24:02:
What all info does the broker need when you give him the info for an existing escrow, in order to bill it? I am looking at my first sub2 and it is escrowed. I found an insurance guy that understands the basics but i’m not sure about the escrow part.
Re: take the bull by the horns! - Posted by Richard
Posted by Richard on December 09, 2004 at 07:07:43:
In this case the seller is my sister. She was concerned about her insurance rates going up if the insurance company found out the house was vacant. She has no idea that she may not be insured AT ALL since she moved out months ago! Does that mean that all of the vacant houses you see with Realtor’s signs in the yard aren’t insured? I’m gonna take a look at her policy to be certain. Thanks for all of the advice! I was going to just get her to name me as “additionally insured” before this thread!
Re: Being named - Posted by Rob FL
Posted by Rob FL on December 09, 2004 at 09:25:28:
Personally, I don’t like the idea of putting out money for down payments, repairs, monthly payments, etc. on someone else’s property. I also don’t like putting my own time and energy into a property I don’t own.
What happens if the seller dies, goes into foreclosure, gets divorced, changes his mind not to sell, refinances for 125%, moves to Timbuktu without a forwarding address, etc. You might get screwed, that’s what happens. So many of the sellers we deal with our marginal, why take the risk?
Bill Bronchick suggests recording a “performance mortgage” to protect your interest, but if you are going to all that trouble why not just get the deed? I hear some talk about having a title company hold a deed in escrow, but good luck getting anyone to insure an unrecorded deed signed 6 or 12 months ago. There is alot that could go wrong. It’s just as easy to get the deed.
Re: take the bull by the horns! - Posted by Jim FL
Posted by Jim FL on December 09, 2004 at 13:39:11:
Randy,
I just give them the mortgage lenders name, the account number, and the customer service phone number.
The agent handles the rest. (They are told to use the trust as who is getting the insurance, and the barrowers names as well, in case the lender needs it.)
HTH,
Jim FL