Hard-to-Insure Properties: Rural properties are not the only assets that are hard to insure. Houses in a designated flood zone will need special flood insurance. It’s more expensive to own a house in a flood zone compared to a house that is not in a flood zone. Homes with an old roof may raise issues with insurers. If the roof has a very limited useful life left — say under two years — it is more difficult to get insurance. Often, the insurance companies will require that the roof be replaced before they’ll approve the insurance for the property. Vacation properties or properties planned for use as short-term rentals (think Airbnb properties) can be more challenging to insure. This is because different people will likely be staying in the home, which raises the chances of something going wrong. Homes in desperate need of repairs are also obviously difficult to insure. While the idea of buying a “fixer-upper” might be appealing to some buyers, the cost of insuring a house that is falling apart can sometimes be too off-putting for lenders to handle. Mobile homes are also difficult to insure, due to the fact that the structural integrity of a mobile home is weaker compared to a traditional home. One heavy storm could completely destroy a mobile home, while a traditional home would survive without issue. All of these factors need to be taken into account by your loan officer. This chapter is filled with limitations, problem areas, and red flags for the many different types of loans and property purchases. Ask yourself: does your loan officer know all these things? If they don’t — should you even be working with them?
68
Powered by FlippingBook