Sub-2 Ins Question??????
When you guys do a subject-to deal, do you leave the current home owners insurance in place and open your own policy or do you risk changing the policy and tipping off the mortgage company? Any OTHER ideas? <IMG SRC="images/forum/smilies/icon_biggrin.gif">
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White Sand and Real Estate Dreams! I wanna actually live on the water someday, Now it is a 10 min walk![ Edited by nwflbeachbum on Date 08/31/2003 ]
I'll Post this directly to John Locke. John, What do YOU do for insurance on Subject to?
[addsig]
When I do a Subject to deal, the seller's insurance stays in place, they sign a letter to the insurance co. that I will take care of whatever needs to be done, it is a limited POA. The payments will be made through the loan servicing co.
Ladybug
BeachBum,
There are several schools of thought when it comes to the insurance issue with subject to deals.
Assuming of course you are doing them the way most courses and books teach them these days using a land trust.
I'll give you the three most common ways this is dealt with;
1. Leave the existing policy in place, using a letter and POA from the sellers, to contact the insurance company and change the policy from owner occupied to non-owner uccpied or rental dwellling.
This is not always possible, because some insurance companies will not provide such a thing, so converting is not going to happen.
2. Leave the existing policy in place, keep paying for it, and get a second policy, non owner occupied, listing the trust as the insured. This means you would be paying for two policies, which in my opinion is just plain silly. Those who do this, most times, say it is because they are afraid of "Tipping off the lender", which really is a non issue.
3. Cancel the old policy, get a new one, naming the trust as the insured, and the lender and trust as the loss payee, of course making sure to get a non-owner occupied loan.
I prefer the third option myself, and will most times just do this, unless the original policy can be converted, and is cheaper, or roughly the same cost as a new policy.
As I said, the lender will not care about who the insurance is covering, as long as the payments on the loan are made, and the collateral is protected with a policy.
Besides, placing property into a trust is a very common thing these days for estate planning, so the lenders will not question it.
HTH,
Jim FL