Posted On 01 Oct 2020
What to know about buying a vacant home.
Why buy a vacant home? One of the biggest perks is being able to make the home whatever you want it to be. You can make it your new home, create a vacation home, rent it out, or fix it up and sell it to someone else. In some cases, the seller may be willing to sell a vacant home cheaper than an occupied home. This is good news for you because you can save some money, but it could also mean something might be wrong with the house. It may need a little love, attention and renovating. Before you purchase a vacant home, here are a few things to do and watch out for:
Ask for an inspection from a professional and take notes on what they discover. You’ll want to know what’s broken, what needs to be fixed and what could possibly go wrong.
Since vacant homes can sit for quite some time, critters may come in and make themselves at home. Although they are usually small animals such as mice or bats, they can cause damage to a vacant house. Those unwanted critters can eat at the floors, carpets, walls and wiring. Be aware that you may need to hire a pest control service, and this could be costly based on the number of animals and the amount of damage.
There may be plumbing issues that have caused dried and cracked seals, slow faucets, leaks and other issues. If the heat hasn’t been on and the temperatures dropped, the pipes could be at risk to freeze or burst.
The previous owner may not have unplugged their indoor appliances, such as refrigerators and freezers, or let them dry out. There may be mold inside from the moisture being trapped. Having appliances plugged in with no one there could result in a fire (if the electric was on). Appliances in the house may become unusable due to long periods of sitting with no use, which means you will need new ones.
Remember, molds can grow on more than just appliances! Check for mold in the walls, floors, pipes…everywhere! Some molds may cause health issues, so if mold is found during your inspection, you may want to rethink purchasing the home. Talk with your inspector about the extremity and presence of mold, and evaluate the safety risks.
There are other potential sources of damage. For example, break-ins are more likely when a home appears empty, and windows, doors and other items could be damaged by the intruder. Storms are another danger. Debris could hit the home and cause damage that may have gone undetected. Always thoroughly inspect the home before buying!
There are a lot of things to do and watch out for before purchasing a vacant home, but the possibilities of what the home could be are endless. If you are looking to buy a vacant home consider the cost of properly insuring a vacant home.
Vacant home insurance: What to ask about
Homes become vacant for many reasons. Maybe the home is for sale but hasn’t been sold yet. Or you’ve purchased a new home but won’t move in for a while. It could be a rental property that’s between tenants. Whatever the cause, there are some insurance risks that you should keep in mind.
You may be thinking, why get vacant home insurance when you already have regular homeowners insurance? Well, most homeowners policies exclude or limit coverage if the home is vacant, so you’ll need more specific coverage.
Insurance coverage is extremely important for a vacant home, because there are lots of dangers that threaten vacant homes in particular. If you’re debating whether or not you need a vacant policy, talk to your insurance agent! Here are some things to ask about:
Vacant home insurance typically costs more than regular homeowners insurance due to potential risks like weather threats, fires and vandalism. However, you may be able to get a discount by installing security systems around the house. Even if your insurance company doesn’t provide a discount for extra security, it’s a good idea that will make your home safer!
Each vacant home insurance policy is different. Many cover damages caused by fires, lightning, wind storms, hail, vandalism and theft. Check with your insurance company to see what options you have. (Remember to ask if flood damage coverage is an option!) There are also different time lengths for policies. Many are 12 months long, but they could go up to four years, so find out what will work best for you. You’ll also want to consider Liability coverage, which applies if anyone is hurt on your property and you’re found legally responsible.
Many insurance companies have different definitions of what is vacant and what is unoccupied. Additionally, there may be a specific time length distinction for the type of coverage. Restrictions can also be based on the age or value of the home. Discuss these variables with your insurance agent to find the coverage that works best for you! Is it vacant or is it unoccupied?
There seems to be confusion among all involved in the process regarding what is vacant and what is considered unoccupied. Courts have ruled that the terms “vacant” and “unoccupied” are not synonymous. According to precedent, vacant is defined as entirely empty (i.e., lack of animate or inanimate objects), while unoccupied is defined as the lack of habitual presence of human beings (i.e., lack of animate objects).
Let’s examine vacant buildings, houses or structures. The term is used most with real-estate transactions. The insureds are relocating and have purchased a new home somewhere else. Their old home has not sold but they have already moved all of their belongings from the first house and will not be returning to it.
When this scenario occurs, how should it be handled? Insurers typically will allow the homeowners insurance to stay intact for the remainder of the policy period; after that it becomes a nonrenewal. Don’t forget that many homeowners policies have a coverage exclusion for vandalism and glass breakage if the home has been vacant for more than 30 or 60 days (depending on the policy). The insureds still have the exposure because they are still the owners of the property. A bank may still hold a note on the property and the owners still have a liability exposure if someone happens to be injured on the property. So how do you insure it after the homeowners policy terminates? The easiest way is to write a dwelling policy and see if you can extend liability from the insureds primary home policy to a second location. If the insurer is unwilling to do this, there are markets out there that specialize in insuring vacant properties. A vacant home in most cases can be covered for fire damage but vandalism and glass breakage are excluded. Pest infestations of all types are exclusions on all homeowners policies.
Let’s look at unoccupied or “the snowbird special”—when an insured owns two separate residences and lives in each for a portion of the year.
Here are two other specific cases to consider:
- The named insured still has most of his or her belongings in a residence but now lives in a nursing home and does not expect to return. In this case, it is not vacant because the belongings are there, but it is unoccupied. Since the homeowners policy does not address unoccupied then it must be all right, right? Wrong. The problem is that the home is no longer owner-occupied, which is a policy condition and an underwriting criterion.
The bottom line is: vacancy and unoccupancy can affect coverage for the owner.
- How about the situation in which the insured has moved into a new house (in the same town), but left a few items staged to help sell the house? The insured visits the first house every week to check on the dwelling (e.g., mow the grass, check the water, etc.). This house would still be considered unoccupied and, like the last example, would be classified as no longer owner-occupied.
The bottom line is: if no one is living there anymore, it is an unoccupied building.
Still not sure if vacant home insurance is for you? Contact us to learn more and get a quote! Overall, don’t be afraid to ask questions about insurance.
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