Sub 2-Wrap-Owner Finance- Insurance Question

[jdegray29]

I have a property that I bought as a sub 2, then did a wrap on it that I have owner financed.
How do you handle the insurance in this case.  I still have to insure the structure to cover my loan but the new homeowner needs to be covered also. 
Should I have the original owner add me to her policy and then tell the new owners to get their own policy.  Can you have two policies on the same home?

[MichaelQuarles]

Good to meet you

You'll get two answers...

The first is keep the policy in place from the original borrower and take a new policy out by the buyer and make you the loss payee on the wrap...

Some advise this because of fear of he DOSC.

The other mind frame is to cancel the first policy and have a  single policy for the wrap naming you and the lender as loss payees...

Which I would do..

The issue is do you fear the loan being called when the lender finds out that title has transferred away from the borrower. Assuming there is a DOSC?

Ask yourself this question... Does a bank want another Foreclosure in a market where they have enough especially when your wrap is performing...


Good luck

Michael

[chunkoftheearth]

how's it?

writting here from Toronto, Ontario Canada.

Michael is right.  No matter which way you go, as long as the note is performing, chances are the lender isn't going to call the note due.  That said, they do have that option available to them, and this whole thing is something that you ABSOLUTELY need to make the original seller aware of.  The way I usually convey it to homeowners is basically they have nothing really to lose doing the Sub2 with me, because when you think about it if you the investor deem the deal a Sub2, it's probably because they are in financial trouble, or there isn't much equity but a low payment.  Anyway, that's the DOS blurb.

As for insurance, Michael is right again.  I certainly would try getting added onto the existing insurance as an "additional insured".  One thing that I've found however (at least up here in Toronto Canada) is that just about every insurer I've touched base with won't add me on (or my trust rather).  So I then had to call up my local insurance broker who would use an alternate insurance company.  This cost can be up to an additional 15% or more than the current homeowner is paying per month.  So that then might impact the way in which you can sell it on the exit meaning rent-to-own, cash discounted or whatever. 

Also I get my tenant buyers to get their own contents insurance. 

Anyway, my 0.02

chunkoftheearth

[Rob in Atlanta]

Good and accurate response from Mike!  I think you can call several insurance carriers and find some agent and company who will work with you.  I have had much luck with 'the good hands people' for my wraps and sub 2 deals.  I also use them with 'owner financing' on cars, boats, mobile homes, and business equipment.  Plenty of insurance companies...just find one who will work with these types of transactions.

Make certain on your wraps that the underlying mortgage company is named the 1st loss payee and you are named the 2nd loss payee to secure your equitable interest in the wrap.

Rob

[furnishedowner]

I am just selling a house now where I went to my insurance agent and added the buyers name to the OLT policy (landlord policy).  The policy already insured $11,500 in personal property which was sold with the house, so there is both fire and personal property coverage.

So the existing lender stays on as first loss payee, and seller and buyer as insured of record.  Does anyone see any problem with this?

Furnishedowner