When it comes to buying or selling a home in Florida, the details of the contract often take center stage. However, there’s another critical element that can significantly impact both buyers and sellers: Insurance. The NABOR (Naples Area Board of Realtors) contract advises buyers to consult with insurance professionals prior to executing a contract, but do they? It’s equally important for sellers to check with their insurance agents to minimize risks caused by contractual maintenance obligations.

Why Both Parties Need to Review Insurance Before Signing an Offer

The bottom line is simple: both parties need to review their insurance options before signing an offer or during their due-diligence period. Below are some of the most common insurance issues that buyers and sellers should be aware of:

1. Roof Age

The age of the roof can significantly limit insurance options. In some cases, insurance may be unavailable or much more expensive. The current considerations regarding roof age are:

  • Tile roof: 20 years
  • Shingle roof: 10 years
  • Metal roof: 25 years

It’s important to note that these age limits are subject to change without notice. Buyers and sellers should stay informed about the latest requirements to avoid surprises.

2. Polybutylene Pipes

Homes with polybutylene pipes are limited to two or three insurance options that will either exclude or limit water coverage. The caveat is that the underwriter will only write the policy if all other details of the home and the buyer meet their guidelines. This can be a significant issue for homes built during the period when polybutylene pipes were commonly used.

3. Prior Claims

Prior claims within the last five years can limit the buyer’s insurance options depending on the age, circumstances, or repairs related to those claims. These can be claims on the property being purchased or the buyer’s own claims made on other properties. Furthermore, the failure to disclose a prior claim can create an issue of fact regarding “latent material defects,” as highlighted by the case of Lorber vs. Passick, 327 So 3d 297 (2021).

4. Hot Water Heater

Insurance carriers typically want hot water heaters to be under 15 years old. In fact, carriers are now doing inspections prior to renewals, not just when you first buy the property. This means that a seemingly small detail like the age of a hot water heater can have a significant impact on insurance availability and cost.

What Buyers and Sellers Need to Know

Notably, these issues are NOT considered defects under NABOR and FR/BAR contracts. There is often a significant difference between what the contract covers and what the insurance underwriter requires. For example, limited roof life is considered a cosmetic issue under both contracts.

By looking into insurance coverages, you can avoid unpleasant surprises and ensure that buyers and sellers are fully informed about the potential insurance implications of their purchase or sale.

Conclusion

In the complex world of real estate transactions, insurance considerations are often overlooked but are incredibly important. Both buyers and sellers should review their insurance options and requirements before signing a contract. By doing so, they can avoid potential pitfalls and ensure a smoother, more informed transaction. As a real estate professional, my customers rely on my guidance, so we make sure to highlight these issues early in the process.

If you're in the market to buy or sell your home in Southwest Florida, give me a call for assistance. I can do a market comparison and determine a fair and reasonable listing price, both with and without renovations. I can also identify properties best suited for your needs and negotiate a purchase price that fits your budget. Discover more at www.NaplesPropertyPreview.com or call Susan Sanderson at 239-821-2370