You probably assume I’m going to write (yet again) about all the creative ways you can make your home more appealing to potential buyers…
But I’m not. I want to discuss the dull, dull subject of homeowners insurance.
Many sellers decide to sell their home “as-is.” Meaning the home sale contract does not include any specific obligation for the seller to make repairs to the home based on inspection results.
But there are certain issues that the buyer MUST have addressed by the seller prior to closing, or the deal is off.
Here’s the thing. For older homes – typically 25 years or more – insurance companies require what is called a “4-point inspection” report. This is a standardized report that the buyer’s property inspector prepares, at an additional cost to the buyer (about $75), and without which the buyer’s insurance company will not issue an insurance policy for the older home under contract. (Again, this 4-point inspection applies to older homes. If the home you’re selling or purchasing was built in 2002, you won’t need a 4-point.)
The “four points” that must get a passing grade are:
- Electrical system
- HVAC (heating, ventilation and air conditioning)
The buyer’s lender – for some reason – expects the new owner to insure the property! (And protect the lender’s financial interest.) And to really make that point stick, without a binder (promise to insure) from the insurance company, the loan will not get underwriting approval, and the deal will not close.
Ouch for both buyer and seller.
Painful for the buyer because at this stage in the transaction, he has paid for inspections ($400 and up) and an appraisal ($450 and up), plus he has an earnest money deposit sitting in an escrow account at the title company, not paying him a dime. And possibly, during the weeks he has been under contract, the buyer has missed opportunities with other desirable homes listed for sale.
And painful for the seller, since he has already started packing, hired the movers, and might have a contract to purchase another property, which is contingent upon the sale of his own home closing.
If you are considering selling an older home, the smart move is to pay a property inspector to do a 4-point inspection in advance. Then, if you find out your home will not qualify for a buyer to get a new insurance policy, you can fix things ahead of time – often much more economically. Plus, your Realtor can promote that the house has already passed a recent 4-point inspection, which is very reassuring to potential buyers.
If you are getting ready to make an offer on a home, have your own Realtor ask probing questions about the ages of the roof, hot water heater, AC system, electrical panel, etc. When you are looking at homes, take a hard look yourself at the roof. Look at the electrical panel and be sure it isn’t ancient, with glass fuses. (Yes, those are still around.) Also, make sure the panel isn’t a Federal Pacific Stab-Lok panel, which is on a list of older panels that companies will not insure – about $1,000 to replace. Do not assume that the seller will financially be able to correct any and all 4-point deficits! Have your agent put the other side on notice that you will require the seller to fix anything that fails a 4-point, and if the response is “selling as-is, take it or leave it,” leave it! Do this homework before you spend money on inspections, loan application fees and an appraisal, none of which are refundable.
Home selling and buying is complex, with a lot of moving parts. Whether you are a buyer or seller, find the most trained and experienced Realtor you know. Use your new knowledge about the 4-point inspection and quiz them to see if they could advise a client on how not to lose money on inspection problems with older homes!
Or call us, Team Bellmaine! John and I are ready to help whenever you have a real estate need. Call us at 727-286-1249.Google+