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What do you mean you won’t approve my mortgage if I don’t have homeowners' insurance?



Photo above - triple threat. Which will happen next: house tumbles into the sea; burns down from a natural gas link, or an earthquake splits it in half?

Normally, I diss California politicians as having the attention span of a butterfly, and only being concerned with the next election. But this time they might actually be onto something.

California is a unique place to buy a home in America. It may be the only place that has coastal erosion, wildfires, and earthquakes as existential risks. Sometimes all 3 on the same plot of land. State officials (and the Federal Government) are justifiably weary of providing emergency services to people who demand scenic views many miles away from the local fire department or dangling off some clifftop overlook.

Last year 13% of all California home sales were cancelled because the buyer was told “no, you can’t just say that you’ll take care of the insurance later”. See link below.

I would complain that this is a pain in the ass for people seeking affordable housing, but I doubt if Amazon baristas and Uber drivers are the ones angling for California’s ocean views and inland empire rural farm-ettes.

Lots of home insurers are fleeing California, because of the natural disaster hat trick. Those that remain are jacking up rates to the moon. Some analysts say there was a 40% insurance rate rise in the past 12 months alone. Wanna bet some existing homeowners are just going to let it lapse, and think about it later? In that case, those (evil) banks have the right to impose their own insurance coverage, at costs that probably far exceed what Duane the Database Administrator would be able to get on his own.

Whether you get socked with a bank insurance premium, or have your rates go up 40% annually and try to tough it out, the net result of this is going to be mortgage defaults, and evictions. Followed by lower prices on the vacant properties.

We saw this on the east coast in 2008, during the housing crisis. Prices plummeted, vacant homes, began to rot away, and were vandalized. Squatters moved in. None of these scenarios incent builders to construct NEW affordable housing, of course. But it’s an object lesson to overextended slicks who think they have a right to own top tier homes, German luxury cars, and dine out 5 nites a week without doing the math.

I’m just sayin’ . . .

There's a new deal-breaker in California real estate purchases
wildbill83 · 36-40, M
don't imagine many people that are looking for affordable housing are buying up beachfront property in commiefornia at $1,000,000+ per acre...🤔
Avectoijesuismoi · 31-35
@wildbill83 In the best spots it hits $ 3 500 000+ per acre if it were a million it would be highly affordable property in those Locations
wildbill83 · 36-40, M
@Avectoijesuismoi
if it were a million it would be highly affordable property

you and I have very different definitions of "affordable"...
Avectoijesuismoi · 31-35
@wildbill83 Affordable is like Normal it is a very subjective term,
What is affordable across the entire spectrum differs from one person to another with in all income ranges, you can in reality set what is "affordable" at any level and it would still be unaffordable to many others.
In reality it is a nonsense term, how do you define affordable is the price of the home $ 100 000, $ 500 000, $ 1 000 000 etc each will have some that can afford them all the way up $ infinity price level, equally each will have many more that can't afford within each bracket. So what actually is affordable.
joe438 · 61-69, M
Not that I’ve ever owned a house anything like that, but I’ve I owned in MA years ago had some issue with the insurance after a few years. The rates got screwed up and I was bill more than double. I called the company to fix it and while they were fixing it, it technically lapsed. The bank paid it, sent me a very nasty letter and added the amount to the mortgage. Once the ins co fixed the bill it all got unraveled. I get why the banks require the insurance- if something happens to the house, you’ll stop repaying the loan and the bank no longer has collateral.
SusanInFlorida · 31-35, F
@joe438 yes i wasn't criticizing the banks. i used the term "evil" as ironic hyperbole. since the financially unsophisticated respond to every problem by claiming "banks shouldn't be allowed to rip us off like this"
SunshineGirl · 36-40, F
I think that's pretty standard, or at least should be. If a building is uninsurable, this will have an impact on the value, so the loan you are about to take out may be unsustainable.
Carla · 61-69, F
Ive never purchased a home or a car that wasn't required by the bank to be insured.
SusanInFlorida · 31-35, F
@Carla yet we see people ALL THE TIME (especially here in florida) who let their homeowners insurance lapse, and now are screaming mad because they are "ruined" after a hurricane.
Carla · 61-69, F
@SusanInFlorida that is a "them" problem. What is bothersome to me, is my ho insurance is higher because of other states tragedies.
The idea of having an asset that large just to leave it to luck that it will be fine is terrible. And for many, unavoidable because it is unaffordable.
It's a tough situation all around. But, build in flood planes, sink hole areas, wetlands, etc., and this is what happens.
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SusanInFlorida · 31-35, F
@jshm2 the same people who let the insurance lapse on the mercedes or BMS 6 months after they accept delivery. people incapable of estimated for/protecting against risk.
Donotfolowme · 51-55, F
I read this long ago insurance isn't great in California

 
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