Unfortunately for everyone involved, foreclosures happen, and it’s often banks and financial institutions that lend the funds that get left holding the bag. They are not only left without the income from the re-payment of the loan, but they then have a property that is worth less than what was owed previously to the lender. Financial institutions can try to sell the property at auction, but they often go unsold. At this point, these properties get classified as Real Estate Owned (REO).
The lender can then try to sell the property in the market, usually at a discounted price than the property is actually worth, since it’s usually not in good condition. The reason these properties are often not in good condition is that they’ve been unoccupied for an extended period of time. Unoccupied properties are ripe for vandalism, damage, theft, and a whole host of other issues. With no one monitoring the condition of the property on a regular basis, it can come into disrepair, which can drive the selling price down. This is where unoccupied property insurance can help.
REO insurance provided coverage for the property while it’s unoccupied. It can often be purchased only for the exact period that the property is owned by the policy-holder, so that it can be discontinued once the home is sold and it is no longer the responsibility of the financial institution. This coverage can extend to theft, damage, terrorism, weather damage, and natural disasters. This means that instead of trying to sell a damaged property at a discounted price, the policy holder can take care of any issues as they arise to keep the property’s value high.
It’s still important to prepare the home for the time that it won’t be occupied. Taking precautions like turning off the water, cleaning the vents, and boarding up the windows will go a long way to keeping the home safe and secure while minimizing damage. It may be a good idea to hire property specialists to maintain the property by mowing grass, trimming bushes, and shovelling snow. This will not only keep the property looking good, it will also be a deterrent to potential squatters and mean that someone can check on the property regularly.
REO insurance is essential for financial institutions that find themselves with property that is costing them money and is unoccupied. The best way to recoup the losses incurred on foreclosed property is to sell it at as high a price as possible, and unoccupied property insurance can help.