Uninsured Foreclosure Home Burns Down, Homeowner Still Responsible

This could happen to you if you stop paying your homeowner insurance because you are in a foreclosure situation.

You are still the owner.

If a person owns a house, they are responsible for maintenance and they are liable for what happens on the premises.  The cost of paying for insurance coverage is much smaller than the cost of catastrophic loss.  It is important to avoid owning a house that is uninsured.

If a house is not insured and it burns to the ground, the owner is still responsible for removal of the debris and payment of the mortgage loan.  If someone is injured on the premises and the owner is at fault but does not have insurance coverage, the owner faces a costly challenge.

Frozen pipes are still your concern.

In wintertime, the owner is responsible for preventing damage from frozen pipes.  If the owner is unable or unwilling to pay for heat, then the house should be winterized.  If the owner is unable to pay for the cost of winterization, they should notify their mortgage lender immediately.  In many cases the mortgage lender will pay to winterize a house and add the cost to the principal balance.

Don’t let this happen to you.

 If the pipes burst from frozen water, then the insurance company might not pay to repair the property if the adjustor deems that the owner was negligent.  We knew of a case where owners facing foreclosure moved out of their house and stopped paying for electricity.  The house had electric heat.  When the pipes burst from freezing water, the house became flooded in multiple places inside.  The owners, believing that their insurance would pay to repair the house, hired contractors to make almost $10,000 in repairs.  When the insurance adjustor called the electric provider and found that the owners had shut off the electricity, the insurance company decided not to pay for any repairs due to owner negligence.  The contractors then sued the owner for payment.

Can’t afford insurance? Here’s an option.

If a homeowner cannot pay for insurance to cover their house, then they should notify their bank immediately.  Many banks will pay for what is known as forced placed insurance.  That insurance is generally more expensive than insurance that the owner could obtain through a normal provider.  The bank will add the cost of the insurance to the principal balance.

If a seller is under contract with a buyer, the seller is responsible for maintaining the property in its present condition until the closing.  If the pipes freeze before the sale, the owner will be responsible for repairing the property to the condition it was in before the damage.  Without insurance, the seller will be in an expensive situation.  If they fail to repair the property for the buyer, the buyer could sue the seller.  Therefore, it is imperative that a seller maintain homeowner’s insurance on their property.

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