Hi,
I have learnt a lot from this forum and thought to do a lesson learnt on my recent experience to help the newbies. This is to help with most common disasters which is water damage to homes. Again, I am a newbie and not an expert so take things with grain of salt and double check it. If anybody things otherwise, feel free to comment and correct me, add your thoughts.
Again- Each disaster is different. Below is my timeline of how events played out. *** Excuse my grammar as I am tying as I think.
Cause: Sewage Backup/Clog in drain lines/Sinking belly Pipe
What Happened:
1> Tenant messages me 11pm that water is leaking. Tenant did not mention it was a disaster. Next day when I did follow-up, she mentioned water/sewage overflowed in the rooms. I asked the tenant to send photos so I can understand the situation and it turned out to be worst that what tenant was describing over the phone. It was sewage backup with living room and a master room full of gray water/sewage.
2> Immediately I called my broker to open a claim. What I learnt was never tell insurance too much info when opening a claim as it may bite you if you use wrong terms. The correct term is "Water Damage" as many insurance may deny a claim if you use term Sewage Backup. In my case I had sewage backup coverage so it was not a big deal.
3> Other lesson learnt is insurance agent are suppose to open a claim if you call and inform them. If you later decide not to file a claim, its too late. So make sure you do your analysis in terms of damage, deductible etc. Also insurance agent in my experience were of no use as they did not care nor advice. Its a call center and nothing else. (I had a leading insurance agency and they had sold me policy fee as a fee for which you have to sit back and they will do the work. Truth was they sat back and did no work)
4> Whenever there is water damage Mold hazard happens. For Gray water, its a health hazard. Make sure you turn off the lines so there is no more water damage. But yes, you can take 24 hours to sit and decide. Nothing is so urgent that you have to panic and make decisions. Decisions in haste are sometimes the worst decisions. Just make sure your tenant is safe.
5> Also its best do not try to clean it up yourself but rather have insurance take care of the cleanup. In my case, insurance asked me if I wanted to choose my contractor or wanted insurance to take care. I let them take care and within few hours cleanup crew was there. The quotes I got were around 6k-8k and later I came to know that insurance paid their vendor 5k (Negotiated price). So I guess it was best to let insurance do the mitigation as they have negotiated price. Also if their vendor gets delayed, they would be responsible for further damage. You do not have to worry about change orders. Since insurance vendors are doing the job, you do not have to pay a dime and insurance will pay them.
6> Once mitigation is done, the adjuster will walk thru to access the damage. You do not need to be there but some may advice you should be there. The adjuster will send you a detail estimate of the damage. Double check the line items to make sure he is covering everything. Sometimes you can ask them to include stairs carpet or upstairs carpet replacement/wash as tenant may have used carpet with wet/gray water to move belongings etc. Gray water is hazard so may need sanitization of all areas with footprints.
7>Have water turnoff at the property bcoz you do not want tenant to use water. In my case, although I said not to use water multiple times, the members were using it. This family had poor communication among themselves and had teenagers who would not listen. Best get there and turn it off. Put notes on restrooms not to use or tape toilet and sinks.
8> Do not rely on home warranty to unclog the pipe. In my case, they took 2 days to show up and did half the job. There were two clog which they only unclog one. They refuse camera or hydrojet etc. Best call a private plumber (Non franchise) and have them come, run a video and just tell them to hydrojet. Drain cleaning cost $150 + Camera fee ($150 +/- ) while hydro cost $400 with Camera. If I had went to private company (non franchise), hydro may cost $250- $350. Again contractors charge premium if you tell them you had a disaster. So just tell them, I want hydro my lines, run camera to check and how much over the phone?. Plumber prices were all over the place. If you do hydro, its cleaning every clog.
9> After you get estimate from insurance, its time to get contractor bids. Do not share insurance estimate with contractors as you will never get true cost. The incident happen after Texas freeze so all the contractor were busy with freeze work. None were able to do a walk down as they were too busy. For walk down they were giving me 2-3 weeks wait time and to perform work 6-8 weeks upto 3 months. I had called 15 contractors and all refused or said they are too busy
10> The best way to get a contractor for estimate is to ask insurance agent to give you list of recommended contractors. Here is an example of how the conversation went. I call the preferred contractor and they said they are not taking jobs as they are busy. Then I said, I am calling because Agent xyz with abc insurance asked me to call you and please have your manager know. Guess want, the same day I get a call back saying they will do the walk thru very next day because they work with this agent all the time etc!
11> You do not have to use insurance preferred contractors and can choose your own. Any difference in final price will be adjusted by insurance. Many contractors work within insurance pricing if you give them the insurance estimate as they do not want to change order and get kickout by insurance for future work.
12> Insurance will send you following checks: Rental Loss if applicable., Depreciable Loss and Recoverable Depreciable loss. . Depreciable amount is the amount paid upfront before any work is done. Once the work has been completed, you can claim the recoverable depreciable amount by providing photos and invoices.
13> Few situations:
> What if you plan to sell the property as-is?- You will loose the opportunity to claim the Recoverable Depreciable amount as repairs were never done. In some cases you can pass the insurance benefits to the buyer but that needs a lawyer. My insurance company said they will not honor new buyer per the TOS.
> What if you do the work yourself to fix the repairs? I was told the total estimate amount will change since I am a individual and not a GC. The Insurance estimate has line items of GC overhead, GC profits etc which does not apply if I am performing the work.
14> Public adjustor needs. I did not hire a public adjuster and one of them was kind enough to just tell me it wont be worth. But my understanding is they take a 10% +/- of the claim amount. If your bids are coming near to the insurance estimate, I do not see a need for Public Adjustor. You may need one only if bids are too off OR insurance is denying claims etc.
15> Have tenant renters insurance so that you are off the hook for damage to their belongings. Help them out if needed as many tenants are not good with claims etc
16. Other finding on my property was that there was a under the foundation pipe sinking/belly. Guess what, a plumbing franchise company gave me a estimate for 24k when it really cost $3-5k. If you are in Texas/Clay soil, every foundation pipe sinks/settles. I am still debating if I should fix the pipe or not bcoz contractors will always try to sell you. In my case insurance paid for the plumbing test to find the issue but then denied the belly pipe coverage.
17. Plumbers/Contractors may tell you to fix the pipe now or start mitigation NOW. They will word it "let us get started and we will file claim to your insurance etc". FLAG FLAG DO NOT DO THAT. In my case, pipe belly is not covered by insurance although I have sewage backup. If I had agreed to this plumber, I would be paying $24k. Do not hire contractors under panic. Disaster has already happened waiting few days is all ok. If you have rental loss insurance, definitely no need to speed things up. Always take insurance pre approval or discuss the scope with insurance and have it pre-approved by insurance via email or something. Keep insurance informed of delay and tell them so that rental loss is adjusted as needed.
18> Document in writing with insurance, contractors, tenant. Nothing verbal. take photos form start to finish at every step. For delays, keep tenant inform on why things are delayed.
19> You may have the property under the LLC etc. Many agents write policy under your name rather than LLC as to avoid making it commercial insurance. If you have insurance under your name, make sure you have your LLC as party of interest for all coverages including rental loss. Double check this. My initial Rent Loss was denied as the lease was under LLC and technically LLC is at a loss and I am not so I should not get rental loss income. Since I had my LLC listed as party of interest, I was able to reverse this. Also policy document is too much verbal. There is a Insurance Proof Form (I do not know the technical name) which is few pages and has checkbox stating what is covered, what party has interest etc. Get this form for your insurance policy from broker as its more well defined and easy to read what is covered and not. May be its called certificate of insurance?
