Why do I need a 4-Point Inspection for insurance or when purchasing an older home?
Why should I get a Wind Mitigation Inspection?
Insurance Inspections and the Real Estate Process
A 4-Point Inspection is usually now required for homes 30 years old and older prior to binding a new home insurance policy. In the past, this inspection was mandatory only on 50 year old homes! The Insurance definition of older homes is getting younger and many sellers and buyers are feeling the difference.
Realtors are learning first hand that selling a home today and keeping the deal together is much harder than ever before. Not only will the home inspection report be important, but also the new buyer’s ability to obtain good homeowner's insurance based on the inspection findings and more importantly, the ever changing insurance inspection requirements. What was once acceptable for a home inspector to disclose for real estate needs, may no longer be!
Homeowner's Insurance in Florida has always been a daunting task, but some of the more recent industry changes have made it even more challenging, especially for the older homes or the "new older home" 30 years and up.
Polybutylene plumbing, Aluminum Branch wiring, old water heaters, older roof coverings, Federal Pacific Electrical Panels, Knob and Tube wiring, Electric fuses, open flame heat sources are all just a few of the insurance buzz words that are coming back on many today. These issues can cause a deal to go south faster than the flick of a switch, especially for the ill prepared buyer or Realtor requesting insurance coverage right before closing without the necessary inspection reports. Making last minute updates or agreements to fix or replace major components of the home will delay closings and possibly cost the sale of the home.
Add to this the new flood certificate insurance requirements for those homeowners in the flood zones, and Realtors’ heads are spinning.
Insurance carriers will typically require a 4-Point Inspection when homes are in excess of 30 years or a roof inspection for homes with older roofs. The four point inspection will include an assessment of the Roof covering, Electrical system, HVAC, and the Plumbing components to make sure there is no undue risk to the homeowner or insurer. This age requirement will vary depending on the insurance carrier but the concept is the same - Are the main four components of the home relatively safe and in good condition?
Most insurance carriers will require a remaining functional roof life of at least three years before they will write the insurance policy. Homes that are for sale with composition shingle roof coverings 14-16 years old therefore are at risk for early replacement This may and has resulted in some roofs being replaced before the end of functional life, just to facilitate insurance coverage. The presence of polybutylene piping or a Federal Pacific panel for example will warrant replacement prior to closing. None of these make a happy seller or buyer especially in today’s market and all result in some form or contract re-negotiations!
I hear you say, "the current owner has insurance, why can’t the new owner get the same?" The fact is many times homes are grandfathered to the new underwriting guidelines, and as such may not be subject to such rigorous inspections and requirements. The same home has also aged and now may be a higher insurance risk than before.
Proactive Realtors are changing the way they do business because of these insurance changes. It all starts with the listing agent, who is responsible for getting the home ready for sale. By understanding the insurance bottlenecks and having the necessary insurance inspections complete will prevent unwarranted issues and surprises. To achieve an inspection report that is designed to protect both the seller and buyer, you must hire an inspector that understands both insurance and real estate transactions and can prepare expectations for all. If performed at time of listing, this report will not only act as a marketing tool but also help the seller prepare the home from a condition and property disclosure perspective.
Realtors managing the sellers and buyers expectations upfront, as they relate to insurance requirements will in most cases, remove the headaches, risks and delays down line, all of which lead to an easier closing transition.
On a positive note, Realtors can help clients maximize their insurance credits and discounts by providing the insurance agent with a Wind Mitigation Inspection. This in many cases, particularly for newer homes or homes with new roof coverings (2002 or newer) will result in additional insurance discounts, which may offset the additional cost of older home insurance. Discounts will vary, and depend on each home. We have witnessed insurance discounts on applicable homes from as low as $100 to as high as $1000 per year depending on the location and sustainability of the home in question. With each wind mitigation certification lasting 5 years these savings can be substantial. Discounts for each home will vary and homeowners should talk with their insurance agent and inspector on the benefits of having a wind mitigation inspection.
We can refer a qualified inspector for these inspections or you may choose your own. The insurance agent must receive a copy of the inspections for approval and to give the Wind Mitigation discount.