Is it possible to sell a SFH after two water claims in 36 months

[Rhys Williams]

Hi, I could really use some guidance on the feasibility of selling my primary SFH and a buyer being able to get in insured following two water claims within a 36 month period.

Backstory... I live in South Florida and my wife and I purchased a 2-story, 10 year old 4/3 SFH in 2016 ahead of our second child being born to give ourselves more space since we had been in a 2 bedroom townhouse. Long story short, we ended up having an issue with pinhole leaks in the copper pipes a year into living in the new home. We filed an insurance claim and after a long process, the insurance company paid for the repairs. While repairs were being made, including completely replacing the home's piping system and adding a whole home water filtration system, the same leak issue had rotted the cabinet of the kitchen island.

I always knew filing too many claims in a short period was not a good idea. However, after foolishly taking our GCs advice that it was a valid claim (which it was), I wish we looked for another solution to repair the kitchen rather than filing a 2nd claim almost a year later. Again, I knew it was never a good idea to file claims so close, but I never realized truly how much of an issue it would later become after the fact. 

As you can expect, my insurer dropped us and I have since learned that almost all insurance companies won't touch you with a 10-foot pole if you have 2 water claims within 36 months (at least in this market). So, as a result, we got less coverage at almost double the price for at least the next few years.

So as we stand today, we had to redo the bathrooms and kitchen and also took the opportunity to redo the floors on the first level. As we are a few months away from our 3rd child and as I now view real estate as an investment only if it is generating money for you (thanks to BP), I have thought about taking advantage of the upgrades that we have made to the home. I have had the idea of selling the home and renting our next primary and using any proceeds to fund true real estate investments. I personally would like to get into the BRRR strategy.

That said, my fear is that because of the water claims, a new purchaser may not be able to get insurance on the home or the insurance available would be wildly expensive for inferior coverage. 

At the same time, our pipes that caused the issue are now completely brand new (installed in 2018; all permitted). So from an actuarial standpoint, the risk of any future water claim issues is greatly mitigated. I thought that our broker would have been able to reason with an insurance company to get this point across when we were searching but it was to no avail. To the insurance companies, it was 2 water claim in 36 months was an automatic no, no exceptions. 

I hope someone can give some guidance as to whether there is a way around this? If we chose to do so, could we sell our home and have the new buyer get it insured? Is there a way to reason with an insurance company to understand that their true risk from a water leak is essentially the same as a newly constructed home?

Please advise and thank you in advance

RW