Insurance Payouts and Negotiating with Insurance Companies

Insurance Payouts and Negotiating with Insurance Companies

President | Loan Officer
Mike Meena
Published on January 21, 2025

Insurance Payouts and Negotiating with Insurance Companies

I hope this message finds you well and that you had a wonderful weekend! Over the weekend, I talked with a client who recently received $200,000 from their insurance company for a total loss of their property in the Altadena area. They had questions about whether they could buy another house and what would happen with their current property. Since this isn’t the first time I’ve been asked about this, explaining how this process works would be helpful.

 

Understanding Insurance Payouts

The $200,000 my client received was for their contents (personal belongings) and living expenses, not for the home’s structure. Here’s their situation:

  • The client owes $650,000 on their mortgage.
  • The property - including the lot - was worth $2,000,000 before the fire.
  • The house itself was about 2,200 square feet.

 

Negotiating with the Insurance Company

The next step for the client is to negotiate with the insurance company for the cost of rebuilding. The rebuild cost typically ranges from $400 to $450 per square foot. This means:

  • If the house is rebuilt at 2,200 square feet, the rebuild cost could total $880,000 to $990,000.
  • The insurance company will likely cover most of this, but the homeowner may need to pay the difference if they choose to upgrade or expand the home.

 

What Happens with the Lot Value?

If the client decides not to rebuild, here’s how the process might work:

  1. The insurance company assigns a value to the lot. In this case, let’s assume the lot is worth $1,000,000.
  2. The bank (mortgage lender) gets paid first. So, the $650,000 loan balance is paid off from the lot’s value.
  3. The remaining $350,000 goes to the homeowner, and they still own the lot free and clear.

 

Equity and Financial Scenarios

This client has significant equity in their property, so they have options. However, consider someone with a $1,600,000 loan instead. In that case:

  • The lot’s value ($1,000,000) wouldn’t cover the loan amount, leaving a remaining mortgage balance.
  • The homeowner would be paying a mortgage on a lot they can’t build on for 1 to 5 years while navigating the rebuild process.
  • I see this scenario causing many to go into foreclosure and back to the bank. I see this as people are about the now and don’t want to wait. They could try to sell the lot, but that will be steep competition, and we will see how that goes!  Remember, our clients love turnkey, and a complete rebuild is NEVER turnkey!

 

Key Takeaways

  1. Insurance Payouts: Understand what your insurance covers (contents, living expenses, rebuild costs).
  2. Rebuild Costs: Be prepared to negotiate and know the per-square-foot rebuilding costs in your area.
  3. Equity Matters: Your equity position significantly impacts your options. If you have high equity, you’re in a much better place than someone with little to no equity.
  4. Plan Ahead: If you’re in a high-risk area, review your insurance policy to ensure you’re adequately covered for replacement and rebuild costs.

 

I hope this helps clarify the process for anyone navigating a total loss or advising clients in similar situations. If you have any questions or need assistance with loan options for a rebuild or purchasing a new property, feel free to reach out! I will go in-depth on Thursday about how to qualify for a mortgage when you lose your home in a fire.

 

Please let me know if you have any questions or if a client needs my guidance. I’m just a call, text, or email away.

📞 Cell: 661-714-6258

TEXT: 661-714-6258

📞 Office: 661-260-2970 ext. 2222

📞 Direct Line: 661-291-2222

📧 Email: Mike@AugustaFinancial.com

2025 starts now!!! Please let me know if you would like to go over my latest marketing idea!

 

But wait, there’s more…

 

Interest Rates

Five incredible days in a row! Well, 4 out of 5! Interest rates have come down nicely, but we are still at a high point compared to where we were a few months ago! We will do a little bouncing before we get to where we are all happy!

 

  • We offer 12-day escrows for pre-approved buyers - Conventional/FHA/Jumbo/Bridge loans.
  • We provide loans in all states, so call me with anything you need.
  • Government Loans (FHA/VA/USDA) are in the 5’s and 6s.
  • Conventional loans up to $806,500 are in the 6s.
  • High Balance Loans from $806,501 to $1,209,750 are also in the 6’s and low 7’s.
  • Jumbo loans above $1,209,750 are in the 6’s and low 7’s.
  • Bank statement loans are available with 10% down again, with larger down payments in the 7’s.
  • Profit and Loss Statement loans require 20% down - no bank statements needed, only a profit and loss statement!
  • 0 down loans are available in the high 6s, with a minimum credit score of 620, up to $1,300,000.
  • Private Money lenders offer Hard Money Loans with 35% down.
  • No Ratio Loans require 30% down.
  • DSCR (Debt Service Coverage Ratio) loans are available with as little as 15% down.
  • Bridge Loans typically have an interest rate of 7.99% with limited fees, helping you get where you need to go!
  • 3/2/1 Buydowns, 2/1 Buydowns, and 1/0 Buydowns are available at great starting rates!

Please note that interest rates are subject to change without notice, and the information above reflects LA County Loan Limits.

 

**Good News for Condos:** Nothing new to report.

**Bad News for Condos:**

Canyon Park Carriage – Litigation! Roof stuff!!

Sonterra Condominiums – 15425 Sherman Way – one entity owns 61% of the condos. They are not eligible for conventional or Government financing!

 

For all other issues involving condos, please check MikeMeena.com. I will post updates here, but all the information on the naughty list is available on my website. Just go there and click about to find our most updated list.

Let me know if you hear anything new about condos or townhouses.

 

I am available every day if you need anything.

📞 Cell: 661-714-6258

TEXT: 661-714-6258

📞 Office: 661-260-2970 ext. 2222

📞 Direct Line: 661-291-2222

📧 Email: Mike@AugustaFinancial.com

 

Have a great day, and an even better tomorrow! Please call me when you have a client who needs to borrow!

President | Loan Officer
Mike Meena President | Loan Officer
Click to Call or Text:
(661) 714-6258

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