Uninsurable Property
Candlefocus EditorThe FHA will not provide insurance on these properties due to the risks associated with them. Much of the costs associated with repairs and the worth of the property are uncertain, making it too great of a risk for the FHA to assume. Without the assurance that the loans would be protected in the event of a total loss, the FHA will decline any involvement with the property.
Individuals who are interested in such properties are advised to connect with private insurance companies who are willing to assume the risk. However, due to the likelihood of added risk, many insurance companies will charge specialized premiums for coverage.
In addition to requiring repairs and the higher premium, some insurance companies may require additional assurances from the buyer prior to granting coverage. This could include requiring a restoration plan to be drawn up or for the buyer to carry out inspections and tests prior to any steps being taken towards repairing the property.
Uninsurable properties should not be seen as undesirable. In fact, many investors and homebuyers recognize the profit potential in salvaging and restoring neglected properties. While it’s recommended that caution is taken when considering an uninsurable property, those that are willing to take on the added risk can reap great rewards.