By Stan Sauerwein
More of the onus to be a good risk has been put on homeowners who want to buy and that trend is likely to continue in the future.
As the result of a 'Practice Point' advisory issued by the Real Estate Council of BC (RECBC) in 2002, the Council has started touting a 'Fire/Property Insurance Clause' in purchase offers. According to Rosemary Barnes, chair of the RECBC, the council's advice is becoming more prevalent on offers and she predicts it will soon be common practice. "We're seeing it more and more often."
Obtaining property insurance has typically not been addressed until after the subject clauses have been removed from an offer. The Council advised realtors to have buyers confirm that the property and the buyer qualify for insurance coverage as a condition of an offer. It was a prudent principle that put risk remediation on sellers, but when wildfires clamped a temporary brake on underwriting in the B.C. Interior and on Vancouver Island, homebuyers discovered it was one clause that couldn't be removed from an offer. To realtors' surprise, if the home had a wood stove, old wiring, substandard electrical service, an aged roof or galvanized pipe, the clause was blamed for delaying purchases for weeks and realtors asked "why"?
The Insurance Bureau responded by reminding realtors that home insurance, "is not a maintenance contract, yet we often have consumers who, after suffering damage due to neglected maintenance, expect their insurance policy to respond." Maintenance risks may not have resulted in cancellation or non-renewal in the past, but the Bureau warned those days are long gone. "There is no question that, from an insurance perspective, there is now more responsibility on consumers to look after maintenance issues on their own before they can get insurance."
Barnes says the clause is still the Council's advice despite any purchase delays it may cause. Realtors have learned the likelihood a buyer won't be able to find an insurer is remote, "unless it is really a bad news situation," and it reduces claims or possible litigation after a purchase.
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