At a recent weekly real estate broker meeting, a manager brought up a situation that was affecting a buyer and the purchase of a home. The deal was accepted but when it came time for the buyer to find insurance for the house, he couldn't find a company that would cover him. Down to the wire, he had 24 hours left and the seller was threatening to take him to court if the sale didn't go through as planned.
Insurance is becoming more complicated
A decade ago, it was never an issue to get your house covered. It usually took about 20 minutes on the phone answering questions. Over the years, insurance companies have installed new procedures. Today, it’s common for them to send over an evaluator to make sure that there aren't any problems, such as missing railings, which could result in an accident; or cracked foundations and faulty brickwork, which could allow water penetration.
Any potential hazard or liability is enough for an insurer to reject your application. Normally, issues to repair are flagged and you are given a list and an expiration date to have the job completed. But times continue to change, and many companies are now asking for the actual inspection report.
The story of the buyer who was struggling to get insurance finally ended up with him getting it in the nick of time. He was lucky. There are more and more stories out there about people not getting coverage. Worse yet, there are stories about sticker-shock: prices so incredibly high that if buyers had known beforehand, they would have never bought.
Strategies to avoid problems with insurers
It’s important that you don’t underestimate the difficulty and expense involved in getting your new property insured. Here are some strategies to help you protect yourself:
- As soon as your offer is accepted, start looking for insurance right away. This will give you enough time to find the right company and ensure you are comfortably insured before the signing date.
- Better yet, if you can, shop for insurance before you put in your offer.
- If the building has a lot of issues, you can make the promise to purchase conditional upon obtaining insurance. This will give you the time to figure out the cost involved. A warning: this method may make a seller nervous.
Banks have insurance divisions
Sometimes, buyers have a bad history with an insurance company and have a warning on their file. It’s important to understand that insurance companies share information. Insurance companies might also be wary if you don't have much of a history. This may particularly be a problem if you are new to Canada.
Many banks have insurance divisions, so if you are planning on buying a property with issues or if you’re history doesn’t reflect favorably; you might want to get your insurance through the same institution that is giving you the mortgage. They tend to be more flexible.
Jennifer Lynn Walker has been active in Montreal Real Estate since 2003. She founded the Montreal Real Estate Investor’s Group, which has more than 1,060 members. She specializes in buying and selling, eco- friendly homes and helping real estate investors.
For more articles and e-books visit her online at: www.montreal-realestate.ca
—Jennifer Lynn Walker