BUYERS - Please remember the insurance deadline in your purchase contract!

The Colorado Real Estate contract is probably one of the most detailed contracts in the United States. The dates and deadlines are very specific. Dale and I live by these dates and find them to be quite helpful! 

In a recent sales meeting, the topic of Property Insurance Deadline was brought up. This is a deadline that, often times is ignored until the last minute of a transaction. This is a very important deadline that can have serious waterfall consequences when not handled properly. Anne Heinz with Englewood Mortgage offered an insightful story that caused Dale and I to think this is a topic that merits a blog - Sotheby's also blogged about Property Insurance in one of their recent blog post. 

In the Colorado Real Estate contract, the Property Insurance Deadline is not highlighted as much as it maybe should be. With the hail damage that has occurred in Colorado over the years, we are seeing roofs that have suffered damage and not been replaced. 

The contract specifically reads: “Insurability. Buyer shall have the right to review and object to the availability, terms and conditions of premium for property insurance (Property Insurance). Buyer shall have the Right to Terminate under § 25.1, on or before Property Insurance Objection Deadline (§ 3), based on any unsatisfactory provision of the Property Insurance, in Buyer’s sole subjective discretion.”

Clearly, the buyer has the right to object if the Property Insurance available is unacceptable to Buyer. Additionally, if the property is simply uninsurable (due to a roof needing full replacement), the Buyer will be unable to obtain a loan, given that property insurance is a basic requirement by the lender to fund the loan! Often times this deadline falls just before (or on) the date of the Loan Conditions Deadline and can end being detrimental the successful closing of a transaction. It is our recommendation that the Property Insurance be discussed and dealt with at the time of Inspection, just in case there is an issue with the property's condition that needs to be addressed.

A recent scenario -
The buyer had a roof inspection. Two inspectors said that the roof was acceptable. The buyer had waited to get insurance and the insurance deadline had passed. The chosen insurance company along with 15 other insurance companies declined to insure the home due to the roof.

There was some back and forth between buyer and seller questioning if the buyer get out of the contract as the insurance deadline had passed. Loan conditions had also passed. This created quite a stir that could have been avoided had the buyer looked into obtaining insurance prior to the insurance deadline. The buyer hired an attorney and the attorney said that the buyer could get out of the contract on loan conditions even though the date had passed.

After many hours of work by all parties involved, the transaction did close with a new roof on the property prior to closing. Having insurance lined up in advance would have been a “heads-up” to everyone involved in the transaction that there was a problem and while it may not have been easy, it would have made for an easier situation.

Ann Heinz 
Senior Loan Officer
(303) 263-4003
License #100027008 NMLS#360599 englewoodmortgage.com