Can you buy sinkhole homes and repair them with the seller’s coverage?
This is a very complicated situation that can go the way you want, but it is advised that you be careful. Buying a home with a known, unrepaired sinkhole can put you in a difficult situation if you can’t afford to get it fixed, nor can you get insurance coverage. So what should you know if you buy sinkhole homes with the intention of fixing them with your seller’s insurance policy?
When insurance can be transferred
The general rule is that the insurance claim already filed may be transferred to a new owner, but the insurance policy has a whole is not transferred. Be sure to be educated on what the insurance policy says because how the insurance company responds to this situation is almost impossible to predict.
It’s important to understand that insurance claims, while defined by the insurance policy, do not stay with the policy when the home transfers ownership. Therefore, when a homeowner sells their home with an open insurance claim, they lose their insurance but keep the insurance claim.
First things first, though, is to keep the lines of communication open with the insurance company. Most policies have a “consent to assignment” provision, meaning you can’t just transfer policies or claims without the insurance company signing off first.
What happens when you buy sinkhole homes
When purchasing a home with a known sinkhole that has not been repaired, you could potentially be putting yourself in a difficult situation. Theoretically, the homeowner already knows what repairs are necessary and how much they cost so you can assess whether or not purchasing the home is a good decision.
Therefore, you should be purchasing the home for significantly less than the home’s actual retail value, as you’ll be putting in a considerable amount of time and money into bringing the home to a livable quality.
At the end of the day, as always, the first priority is contacting the insurance company to find out about any caveats regarding transferring an open sinkhole claim between owners. While it can be done, you don’t want to buy a home and find yourself unable to afford to fix it!