For those unfamiliar with the acronym, REO (Real Estate Owned) is a term used for property owned by a lender or investor that has not sold at a foreclosure auction. It can be vacant land, single family homes, apartment buildings, and more. Properties go into the foreclosure process when the holder of the loan has not made payments and has defaulted on the mortgage owed.
When the bank owns the property, they attempt to sell it by listing it with a real estate agent. They are usually sold “as is” and may need extensive work or even demolition, based on their condition. This can be a great benefit to those investors looking for low-cost properties to add to their portfolios.
Real estate owned (REO) property coverage is designed to provide investors, trustees, and lenders with broad insurance protection coverage.
While your property is in the process of being rehabbed or up for sale, it must be covered by insurance. For many investors, determining the right REO insurance coverage can be a complex and frustrating task. There are numerous policy options to choose from that impact not only the cost of the policies, but also the coverage that protects you from circumstances that can arise over the time you own the property.
Why is insurance on REO properties unique?
The risks and conditions associated with REO properties are much different than those of the typical owner-occupied single-family home. In addition to basic coverage, there are specific options available to protect you as the REO property owner. Just like all insurance policies, there are coverage limits and deductibles that apply to each incident, or peril.
Coverage for a vacant property
Vacant houses are easy to spot. The yard and landscaping may be neglected or the house generally unkempt. The longer it remains vacant, the higher the risk.
A property may be unoccupied for many weeks or months for several reasons, including a protracted escrow period or slowdowns in your local rental market. Some REO properties are obviously vacant, and therefore more vulnerable to damage or break-ins. You should be sure to obtain unoccupied property insurance for your REO property to protect yourself from these hazards.
Damages from natural disasters
You see it on the news all the time—devastating floods, earthquakes, and storm level winds. You can be protected against losses caused by natural disasters, but it’s important to read and understand all the details in this type of coverage.
Water damage can be incurred for other reasons than heavy rains. It’s an important yet subtle distinction to understand. For example, if a water heater has a slow leak and has damaged the carpet, baseboard, drywall, etc., it may not be a coverable incident. If the damage was caused by a suddenly burst pipe, it may be covered by property insurance.
Injuries on your REO property
Unlike typical owner-occupied homes, a vacant property may be entered by any number of workers, real-estate agents, or even trespassers. This is significant because if any of them become injured, they may sue you as the property owner. The right REO property insurance can protect you from potentially devastating expenses such as legal fees, settlements, and more.
Asset protection or investors
The Noel Selewski Agency’s REO Property coverage program provides investors, lenders, and trustees with competitively priced, wide ranging insurance protection coverage. This may include REO properties, foreclosures, and properties you’ve purchased and are now in the process being rehabbed.
You want to protect your property portfolio, reduce any potential risks, and find a trusted partner you can trust. The Noel Selewski Agency has long-standing relationships with the leading insurance carriers, and their knowledge of these companies and their REO products enables them to create the right REO insurance solution to meet your needs.
Insure REO for replacement value
When deciding on insurance for an REO property, remember to insure it for its replacement value and not for the price at which it was purchased. An REO bought for $50,000 and then extensively rehabbed and repaired needs to be insured at its current replacement value. In addition to the time and work invested in upgrading the property, include any property appreciation in the value.
What deductible should I pick?
In Colorado, deductibles vary by type and amount of coverage required. An important thing to remember is that the lower your deductible, the more you may have to pay in insurance premiums. Most specialists recommend you make this decision based on your own unique situation. For example, if you are an established and successful REO property owner, a ten-thousand-dollar loss may be inconvenient, but for someone just starting out, it could be devastating to their portfolio. Just as you have to keep contingency funds for unforeseen repairs, it’s also critical to keep some liquid assets handy to use when needed.
Insuring your present to protect your future
The Noel Selewski Agency in Colorado is known for its specialists in REO insurance and for helping clients find the right amount and types of coverage best for each one. Its independent agents have years of experience working with these unique properties and can answer any questions you may have.
Contact one of our independent agents today to discuss the best property insurance in Colorado for you: