Skip to main content

Do You REALLY Need Homeowners Insurance at Closing? (yes)

A cautionary tale for all my friends and colleagues who represent buyers in real estate transactions.

I had the good fortune to help a long time client close on her purchase of a three flat last Friday. In a year that has been replete with difficult transactions, this one was pretty easy. An all cash purchase of a bank owned property. Clean title to boot. (What can possibly go wrong, right?) The deal came together pretty quickly. We closed in just three weeks.

It is a lovely building  (purchased by a delightful client). The bank that was selling had foreclosed on a developer who (like many others) had apparently run out of money before he could complete a conversion from a rental to condominiums. Overall the place was in good shape. The first floor unit lacked finish plumbing, fixtures and  appliances on the first floor, but the second and third were pretty much rent-able and ready to go. The purchase price seems a bargain. My client is very likely to do well on this one

But in the run up to our closing, there was just one little nagging thing;  hazard insurance. It can be hard enough to shell out money for insurance under the best of circumstances, but for whatever the cause reason, we were getting towards a closing date and still no insurance.  There were distractions at work. A trip out of the country. Some delays in getting the agent to return calls. Typical sorts of things. At my insistence however, the client did finally get purchase insurance the day before closing our Friday afternoon.

Not even four hours later, I took a frantic phone call from the client. While we were at the closing table, the burglars stripped out the second floor kitchen, liberating all the cabinets and appliances!

Yes, there will be a deductible to pay. Yes, this throws her off schedule to rent that unit out for November. Certainly the hassle and aggravation levels have risen. But can you imagine the loss she would have suffered if she had not placed her insurance?

This is only the second time in 25 years that I have heard of a day-of-closing break in (I represented the seller in that one) but that is hardly the point.

Do not go to closing before your insurance is in place. Just. Don't. Do. It.  

Note: This is not so much of a problem where a Buyer uses mortgage financing to make the purchase; lenders all insist on seeing proof of insurance before they will draw closing documents, let alone fund the closing. Cash buyers however have no one to "force" them to buy the coverage.  It is up to us as lawyers and Realtors to nudge them to do so. In this instance, at least one client is glad that I did.


Popular posts from this blog

Do I HAVE to shovel? Chicago snow shoveling law and etiquette

Set aside any discussion of climate change for a moment. It’s winter. It’s Chicago. It snows. As a homeowner, you owe it to your friends, family, neighbors and delivery people to keep the sidewalks free of snow and ice.

The Equifax data breach and you — 6 steps to take now

Identity thieves hit a major credit reporting agency—hard. Millions of consumers’ confidential identity information has been compromised.

Equifax, one of the big three credit reporting agencies announced that a massive security breach took place earlier this year. Offenders accessed data sets of 143 million US consumers.

With federal tax reform looming, should I prepay 2017 Cook County property taxes?

By Michael H. Wasserman

Paying property tax bills before the end of the 2017 may help some owners save on their federal income tax liabilities.

The Tax Cuts and Jobs Act has been called the most sweeping tax reform bill in decades. Like it or
not, tax reform is coming. Others might wring their hands with glee or with worry. We are already working on ways to minimize the pain this reform might cause. 
One aspect of the pending tax reform plan presents a clear challenge for most Chicagoland home owners, the elimination of deductions for State and Local Taxes (SALT). The house and senate plans both limit deductibility to $10,000. Once the tax reform is signed into law, we will pay federal income taxes on the money we use to pay our local taxes exceeding that $10,000 threshold. Some homeowners who have the foresight (and lets face it, the savings) to act swiftly may want to pre-pay their first installment 2017 property tax bills this year before the tax laws kick in, so that those payments …