I have signed a purchase agreement and the electrician's inspection showed that the knob and tube wiring requires $10-$13k in repairs to bring to an insurable condition. Sellers are in their 80s and don't want to oversee the repair prior to closing due to pandemic. They must be grandfathered in with their insurance as if they tried to insure the house in its condition today, they would have to do the repairs first. Is there a way forward with the purchase, where the buyer takes on the repair? The problem I've found is that I won't be able to close on the house without home insurance and noone will insure it in its current condition, given the electricals? Help please!
Insurance Agent · Chicago, IL · Member since 2020 · 41 posts · 32 votes
5y
@Pavel Quinane
You can buy builders risk insurance in order to upgrade the electric and any other repairs you are considering. This will not only satisfy the lender but is actually the correct coverage for a repair of this magnitude. Plus you can do the upgrade and not the sellers. The caveat is the house will need to be vacant during the construction period, which it may be anyway considering it is the electrical service.
Let me know if you have any other questions. I’d be happy to point you in the correct direction.
Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
5y
@Pavel Quinane The state of MN has a special insurance fund for uninsurable houses. It's bad coverage & very expensive but you can get that insurance through any insurance broker, make the repairs and then get regular insurance provided your lender will allow it. I know an insurance agent if you need a referral PM me.
Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
5y
I'm in South Dakota but I recommend to talk with your bank and insurer. The bank might let you escrow funds (that come from the seller at closing) in order to do the repair. This money is only released by the bank when the repairs are completed and after closing. Insurance might be willing to take a risk for a higher premium with the requirement that you make the repair. Have the seller credit you the premium increase at close. You may need to talk with a few insurance companies and banks to get this worked out.
Insurance Agent · Chicago, IL · Member since 2020 · 41 posts · 32 votes
5y
@Pavel Quinane
You can buy builders risk insurance in order to upgrade the electric and any other repairs you are considering. This will not only satisfy the lender but is actually the correct coverage for a repair of this magnitude. Plus you can do the upgrade and not the sellers. The caveat is the house will need to be vacant during the construction period, which it may be anyway considering it is the electrical service.
Let me know if you have any other questions. I’d be happy to point you in the correct direction.
Thank you everyone!!! We're looking at either builder's risk insurance or an insurer who can provide coverage between closing, repairs and completing repairs!