When most people think about preparing a home for sale, they think about cleaning, painting, repairs, and making everything look nice. Homeowners insurance usually does not enter the conversation until the buyer is already in escrow. In California, that may be too late.

If a buyer is getting a mortgage, their lender will generally require proof of homeowners insurance before the loan can close. If the buyer cannot find coverage, or the premium is much higher than expected, it could increase their monthly payment, affect their loan approval, or possibly stop the sale altogether.

Insurance companies may look at the location of the property, wildfire risk, the age and condition of the roof, electrical system, plumbing, surrounding trees, and previous insurance claims. Even homes outside the areas we normally consider high fire risks can sometimes be difficult or expensive to insure.

That is why buyers should begin looking for insurance as soon as their offer is accepted. Calling only one company may not be enough. Different insurance companies have different guidelines, so working with an experienced insurance broker who can check several companies may be helpful.

Sellers can also prepare ahead of time. Before listing, it may be wise to speak with an insurance professional and find out whether anything about the property could create a problem. Trimming overgrown trees, clearing debris, repairing a worn roof, or addressing an outdated electrical panel may make the home safer and possibly easier to insure.

If regular insurance is not available, the California FAIR Plan may be an option. Of course, many California homeowners feel there is not much that is actually “fair” about the FAIR Plan, especially when they see the price. Still, it may provide coverage when traditional insurance is unavailable. It is generally considered coverage of last resort, and additional coverage may be needed, so buyers should understand the complete cost before moving forward.

Sellers should also remember that their current policy does not guarantee the buyer will receive the same coverage or price. Every buyer and property will be reviewed according to the insurance company’s guidelines at that time.

Insurance may not be the most exciting part of buying or selling a home, but finding out about a problem early is much better than discovering it a few days before closing. A beautiful home still needs to be insurable.  Do yourself a favor and research early to set yourself up for success and all parties will be happy!!

If you are thinking about selling, I would be happy to help you look at the entire picture and prepare for the issues that could affect your sale.

I’m a realtor working with you, for you, and by you, because my business is you.