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Maintaining Homeowners Insurance after selling a property

5,755 Views | 18 Replies | Last: 2 yr ago by H-town ag
H-town ag
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11:36a, 4/17/23
AG
So I am selling my primary residence for a cash offer. We have negotiated a 2 month lease back and there is a requirement to have renters insurance.

On the day of close, they buyer requests that we maintain our homeowners insurance in addition to the added renters insurance for the next two months when the lease back expires.

1. This was unexpected and will cost me more $$ for 2 months of homeowners insurance.

2. Is this normal or legal?

I am understanding if it was for a few days or a week until their policy was in effect, but this was a surprise.
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Red Pear Realty
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In reply to H-town ag • 11:42a, 4/17/23
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AG
1. Not normal.

2. Legal for them to ask but also sounds like a dumb plan on their side to me. Also sounds like you aren't dealing with an honorable person for them to retrade you at the last minute like that. Who is it so we know not to do business with them?
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dubi
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In reply to H-town ag • 1:20p, 4/17/23
AG
H-town ag said:
So I am selling my primary residence for a cash offer. We have negotiated a 2 month lease back and there is a requirement to have renters insurance.

On the day of close, they buyer requests that we maintain our homeowners insurance in addition to the added renters insurance for the next two months when the lease back expires.

1. This was unexpected and will cost me more $$ for 2 months of homeowners insurance.

2. Is this normal or legal?

I am understanding if it was for a few days or a week until their policy was in effect, but this was a surprise.
That is BS.

Renters insurance is really cheap. HO is $$$$$ and they are responsible.

I'm not even sure you can insure a home you don't own.
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H-town ag
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1:58p, 4/17/23
AG
Thanks for the feedback. You confirmed my thoughts. I am hoping that this is just a "naive" request from the buyer. I really can't believe that two experienced agents forwarded this request to me the day of close. To maintain this insurance is close to $1,000 for 2 months. There are so many unknowns if there were to be a claim or major damage to the house. No way am I meeting this request and we are still closing.
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a07nathanb
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7:40p, 4/17/23
AG
You won't have insurable interest after you sell the property. You need renters, they need HOwners
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Dr. Horrible
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In reply to a07nathanb • 9:11p, 4/17/23
a07nathanb said:
You won't have insurable interest after you sell the property. You need renters, they need HOwners
This was going to be my answer.
Not an expert but I did stay at a holiday inn express last night.
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DadAG10
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In reply to a07nathanb • 11:42a, 4/18/23
a07nathanb said:
You won't have insurable interest after you sell the property. You need renters, they need HOwners
Buyer made need a landlord/dwelling policy for the 2 month period.

Homeowner policy requires property to be occupied by the insured/owner.
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Win At Life
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In reply to H-town ag • 12:13p, 4/18/23
AG
H-town ag said:
Thanks for the feedback. You confirmed my thoughts. I am hoping that this is just a "naive" request from the buyer. I really can't believe that two experienced agents forwarded this request to me the day of close. To maintain this insurance is close to $1,000 for 2 months. There are so many unknowns if there were to be a claim or major damage to the house. No way am I meeting this request and we are still closing.
You're paying $6000/year for home insurance?
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dubi
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In reply to Win At Life • 12:24p, 4/18/23
AG
Quote:
You're paying $6000/year for home insurance?
Maybe along the coast with HO, flood, and wind?
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Sea Speed
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In reply to dubi • 1:16p, 4/18/23
AG
dubi said:
Quote:
You're paying $6000/year for home insurance?
Maybe along the coast with HO, flood, and wind?


Here.
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H-town ag
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In reply to Win At Life • 2:12p, 4/18/23
AG
Win At Life said:
H-town ag said:
Thanks for the feedback. You confirmed my thoughts. I am hoping that this is just a "naive" request from the buyer. I really can't believe that two experienced agents forwarded this request to me the day of close. To maintain this insurance is close to $1,000 for 2 months. There are so many unknowns if there were to be a claim or major damage to the house. No way am I meeting this request and we are still closing.
You're paying $6000/year for home insurance?
Yes and without flood insurance.
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Win At Life
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In reply to H-town ag • 3:57p, 4/18/23
AG
H-town ag said:
Win At Life said:
H-town ag said:
Thanks for the feedback. You confirmed my thoughts. I am hoping that this is just a "naive" request from the buyer. I really can't believe that two experienced agents forwarded this request to me the day of close. To maintain this insurance is close to $1,000 for 2 months. There are so many unknowns if there were to be a claim or major damage to the house. No way am I meeting this request and we are still closing.
You're paying $6000/year for home insurance?
Yes and without flood insurance.
Is your house worth $2MM or are you just demanding a policy with $10 deductible and diamond door knob coverage?
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The Silverback
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8:36a, 4/20/23
AG
I own an Independent Insurance agency, I don't even know if this is legal let alone the proper way to go about things.

If the home burns down to the ground the insurance company isn't paying off the new buyers. They would pay off your lender. And when they found out you have no loan, they would pay you. And when they find out you are not on the deed anymore, they would probably close the claim out and not pay off anyone. And if they we aware of this situation they would cancel you immediately.

The buyers would be the ones who could potentially be F'd in this situation.

They need to get a short term landlord policy in place the day you close. And then when you move out they need to cancel and rewrite that policy into a homeowners policy. I really dont see any other scenario in which this can be done.
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Furlock Bones
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In reply to The Silverback • 8:43a, 4/20/23
AG
Right. The buyers lender wouldn't even close on that.
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H-town ag
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9:55a, 4/21/23
AG
Thanks for all of the feedback. As I said earlier, I think this was just a naive request from the buyers. They paid cash for house, so they did not need insurance at closing. I have since canceled homeowners insurance and have renters insurance.
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dubi
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In reply to H-town ag • 10:31a, 4/21/23
AG
H-town ag said:
Thanks for all of the feedback. As I said earlier, I think this was just a naive request from the buyers. They paid cash for house, so they did not need insurance at closing. I have since canceled homeowners insurance and have renters insurance.


If there is a catastrophe like a fire then they would lose big.
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MookieBlaylock
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12:28p, 4/23/23
AG
Yeah something is missing in the equation

Their lender will not close without hazard insurance
If they paid cash then f em
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Omperlodge
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1:02p, 4/24/23
I hate leasebacks. Though most don't have any issues, the potential from the buyer's side is a ton of risk that I wouldn't take on. Your the seller so I will not go into my soap box.


My guess is that you got a no-cost lease back. The buyer got to closing and figured out that homeowner's insurance was costly, especially on what they consider a rental while you live there. They were hoping to make you cover that cost, but it is too late since it wasn't in the leaseback.
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H-town ag
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In reply to Omperlodge • 12:18p, 4/26/23
AG
dallasiteinsa02 said:
I hate leasebacks. Though most don't have any issues, the potential from the buyer's side is a ton of risk that I wouldn't take on. Your the seller so I will not go into my soap box.


My guess is that you got a no-cost lease back. The buyer got to closing and figured out that homeowner's insurance was costly, especially on what they consider a rental while you live there. They were hoping to make you cover that cost, but it is too late since it wasn't in the leaseback.
You are 100% on all of your assumptions!
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