Most Californians Have Insufficient Insurance Coverage

Owning real estate has inherent risks. From burglary to floods and fires, your possessions or your home itself could be damaged substantially by forces outside of your control. Fortunately, we have insurance to deal with those exact circumstances. In fact, when we handle an escrow for a real estate transaction involving a lender, the buyer is almost always required to get fire insurance (especially in California) before the purchase is allowed to go through. The lender (usually a bank) provides the buyer with the capital they need to purchase the property, so it makes sense that the lender would want to protect their investment in case of a disaster like a fire.

Over the past few weeks, many California home-owners were struck by tragedy when forest fires did damage to thousands of homes, some burned completely to the ground. In the aftermath, now that the fires have been contained, they have to figure out exactly how far their insurance coverage will get them since homeowners on average tend to be significantly underinsured. Insurance companies, like all other companies, are in business to make a profit. They don't want to pay any more money than they have to, so if you're one of the unfortunate Californians having to deal with this, you really need to be proactive.

Even if your home isn't in one of the current fire zones, you need to be vigilant for the future, because these forest fires have become an almost-yearly feature for Californians. Be careful with every document you sign regarding your insurance coverage. In order to maximize their profits, especially in a high-risk state like California, some insurers have been adding extra provisions to policies when customers come in for seemingly-routine renewals. The new provisions will often limit coverage for smoke damage (as opposed to damage from actual flames) or will set a short time limit within which a customer must report such damage.

One of the most common issues that homeowners run into is not being insured enough. Often, it's because of the rising costs of building materials. Now, insurers suggest that you get coverage for more than what you think you need. You can overapproximate material and labor costs, and some policies even let you include upgrades for changes to the house's wiring or for the cost of personal property, like televisions and computers. To get coverage for those products, though, you should take a video of your home and its contents, to provide proof to your insurance company if they try to give you a hard time about it.

Some insurance companies have decided to leave California entirely, stating that it's too expensive to provide insurance in an area so prone to wildfires. Others charge incredibly high rates, set exorbitantly expensive to make sure they can cover their costs in the case of a disastrous wildfire. One state-sponsored program, the California FAIR Plan, provides less costly coverage than most private companies, but will only provide up to $1.5 million in replacement costs, so you should think carefully about whether you would be sufficiently covered before you purchase such a plan.

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Find out more about us at www.sepulvedaescrow.net. Any Questions? Contact our Escrow Expert! Sepulveda Escrow Corporation (818) 838-1831. Follow our company on Facebook, Twitter, LinkedIn, and Google+.

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Natural Hazard Disclosures for Real Estate Transactions

One of the main purposes of using an escrow officer when moving forward with your real estate or business transaction is to make sure that both seller and buyer fulfill all of their requirements (both legal and contractual). The escrow officer holds onto all of the funds in the transaction until those requirements are met, at which point, the escrow officer is legally allowed to begin disbursement. One of those legal requirements that must be completed by the seller, at least for real estate transactions in California, is what is known as a natural hazard disclosure, or NHD. In general terms, this means that, before escrow can close, the seller must disclose any and all potential hazards related to the real estate property being sold.

In some cases, sellers will fill out the required documentation themselves, usually the Natural Hazard Disclosure Statement or on the Local Option Real Estate Transfer Disclosure Statement (if applicable), both of which allow the seller to outline all hazards in full. However, the vast majority of sellers elect instead to use a third-party service to prepare the disclosure statement. It is important to note that, even if a seller uses such a third-party, they are still legally responsible for any information that is not disclosed. So, if a seller wishes to use a third-party service, they should make sure to choose one that will deliver the required scope of information necessary.

Natural Hazard Disclosures need to have information regarding whether the property is located in an area that has a heightened risk of certain (usually significantly destructive) natural disasters. For example, the seller must disclose if the area is one of potential flooding and if it is located in Zone A or Zone V (specially-designated zones that have very high flood hazard). Additionally, the NHD will include whether the area has been designated as "high fire risk," or if it is within a designated wildland area. Finally (and perhaps most devastatingly, in California), the NHD must list if the property is in an area with heightened earthquake risk and if the property is located along a fault line.

So, now that you know what kind of information you need to disclose when selling real estate, make sure that you cover all of your bases before escrow closes. A recent analysis of several third-party NHD preparers discovered that several of the companies only included the major, state-mandated information, as outlined above. However, there are often local city or county regulations that require even more natural hazards to be disclosed. These additional disclosures can range from recent methane leakages to issues with hillside erosion or landslides. So, be careful when filling out your disclosure statement, and be even more careful if choosing a third-party. You don't want to be left without full legal and financial protection because of a couple of missing disclosures.

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Find out more about us at www.sepulvedaescrow.net. Any Questions? Contact our Escrow Expert! Sepulveda Escrow Corporation (818) 838-1831. Follow our company on Facebook, Twitter, LinkedIn, and Google+.

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