Main Line Homes Blog

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Why you need to keep your insurance coverage in place till settlement!

Recently the night before Memorial Day I woke to the sound of an engine groaning up the hill outside my home. Not expecting my garbage to be collected on Memorial Day I had not put it out. The room was fairly light and without looking at my clock I thought they are coming and sprang out of bed to grab the trash and get it to the curb before I missed them. But...I was greeted instead by a fire engine lights flashing coming up the hill outside my home, as i looked along the road I was greeted by this...

                                  fire trucks

No wonder it was bright in my room. As I walked along the road I wondered whose home was in trouble. We had had a severe storm that night with thunder and lightning right over our neighborhood that shook our home. We had a home that was for sale on our road, it had been bought by a builder and completely rehabbed and extended. It was also under contract and one of the fire police said it was this home that had caught fire. As I reached the home I could see firemen from five different companies fighting a fire that had engulfed the whole house.

                                Berwyn fire                                            house alight

Standing watching I realized the owners were right there and as we talked and offered them condolences they mentioned that the house was sold, which I knew, but that it was supposed to settle in two days time. What happens now they asked. Not being their agent I said they needed to call the agent right away and this was covered in the agreement of sale. It seemed that a lightning strike hit a tree travelled underground and hit the electrical line going into the house causing a fire in the basement whcih caught the wood floors and by the time anyone saw it the fire had completely engulfed the home. It was so hot the siding on the home next door melted and the garage doors buckled.

So what does the PA Agreement of Sale say happens in this case. Paragraph 21 covers Maintenance & Loss of Risk. Sub-paragraph A covers that the seller will maintain the property and grounds in the present condition, normal wear and tear excepted. Sub-paragraph B covers if any appliance or sytem fails. Sub-paragraph C is the important one in this instance; Seller bears the risk of loss from fire or other casualties until settlement. If any property included in this sale is destroyed and not replaced, Buyer will: (1) Accept the property in its then current condition together with the proceeds of any insurance recovery obtainable by Seller, OR (2) Terminate this Agreement by written notice to Seller, with all deposit monies returned to Buyer according to the terms of paragraph 30 of this Agreement.

What happened, I do not know, but remember to make sure your insurance coverage goes right up to and even beyond settlement in case some event causes the settlement to be delayed, postponed or an event like this even voided.

All that was left was a small piece of the front wall in front of the garage, everything else was consumed by the fire.

                                                                        fire

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Comments

Wow. That is awful for everyone.  I hope that everyone is ok. 

With most lenders, you are required to have home owner's insurance on the property until the loan is paid in full.  This is a great example why.

Posted by Ann Guy (NA) almost 11 years ago
Nick & Trudy, this is a grim reminder of how things can turn in a moment.  Nice consumer update.  great post.
Posted by Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375, Real Estate Services You can Trust! (Flexit Realty "Flexible Home Selling Solutions") almost 11 years ago
As a former firefighter myself, I can attest to the fact that this type of occurence is tragic, to be sure, and underscores the issues you mentioned in the agreement of sale contract, but also points out the importance of smoke detectors and sprinkler systems.  If the buyers do take the insurance proceeds, and build a new home, I think they will probably consider a spinkler system...
Posted by Rich Schiffer, Referral Agent, e-PRO almost 11 years ago

This was a real tragedy for the owners as well as the buyers.  It is a valuable lesson for stagers as well.  I had staged this house a few weeks prior to the fire.  The house had sold relatively quickly (I think in part due to staging!) and I had just removed the furniture and accessories the prior week. Even though I was the lucky one, it lead me to review my business insurance policy and rental agreement in detail to see if my inventory is covered in such an event.  Take a close look at yours.  Freak things can and do happen.    

Posted by Linda Sticklin (Home Staging & Organizing) almost 11 years ago

Can you cancel your insurance early while still having an open mortgage?

Just a question.

Posted by Rob Robinson- Lehigh Valley PA (Bertrum Settlements (Title & Abstract)) almost 11 years ago

Good point Linda, I am pleased you were not impacted by this.

Rob although insurance companies should not remove coverage for an open mortgage, it can happen. If a settlement is delayed because it is dry, no  oney transferring, and you have notified your insurance company of the settlement date it may get cancelled. sometimes also I think they just may not ask the right questions such as is the mortgage still open. So yes, it can happen.

Posted by Nick & Trudy Vandekar, 610-203-4543, Tredyffrin Easttown Realtors, Philly Main Line (Long & Foster Real Estate Inc 610-225-7400) almost 11 years ago
Excellent post! Thanks!
Posted by Carmen Franceschino, ABR, SRES, CRS (RE/MAX Town & Country) over 10 years ago

Good educational post for consumers.  Glad to see it on localism.

I'm sure it was a sad day for the owners.  We can only hope that they did in fact keep the insurance coverage in place.

Posted by Erby Crofutt, The Central Kentucky Home Inspector, Lexington KY (B4 U Close Home Inspections&Radon Testing (www.b4uclose.com)) over 10 years ago

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