Debbie, I used to be an insurance property adjuster and this is true. The owner receives the entire amt for the replacement value once they are provided with proof that the work has been done or the items replaced.
Now, the insurance company doesn’t care that the house is being sold, so it won’t hurt to be honest with them in this scenario. Then you can provide the seller with the receipts and he can receive the proceeds for the remaining amts from the ins. co. It doesn’t matter whether your name or his name is on the receipts, just make absolutely make sure that your contractors put the property address on the receipts.
Got a seller who wants to sell his house to me as is (was flooded) and keep ins. money. Fine by me of course, cuz price is right. Ins. co. says they need receipts/invoices by contractor in order for him to get all his money. Is it a problem that the house will no longer be in his name? I don’t have a problem sending him copies of the invoices. Would they change the terms if he tells the ins. co. he’s selling it as is? Never encountered this before with other buys where people got insurance money. Anybody got a way around it?