Prorations and Insurance Claims History-Why are these important?

TAX PRORATIONS

The purchase contract will instruct the escrow officer to prorate the real property tax liability. The seller will be liable to pay the taxes for the portion of the year that the seller owns the property, and the buyer is liable to pay the real property taxes for the portion of the year the buyer owns the property.

Calculating Prorations

Taxes are prorated by the escrow officer based on a calendar month (using the exact amount of days in any month). On the settlement statement provided by the escrow officer, the sellers would have a credit to their account if they prepaid the current year’s property taxes. The taxes that are prorated are based on the assessed value of the home at the time escrow closes. It is possible that the assessed value will change during the period of time between close of escrow and the date when the taxes are due.

ASSESSMENT LIEN PRORATIONS

If, as of the close of escrow date, the assessments and fees associated with the real property have already been paid by the seller, the seller is entitled to a partial reimbursement of those funds. In essence, any prepaid items, such as insurance, homeowner’s association fees and other items will be prorated and credited to the seller. Assessment liens other than homeowner’s association assessments would normally be prorated and assumed by the buyers, unless they are of specific benefit to the sellers and not the property itself.

INSURANCE CLAIMS HISTORY

In most real estate purchase contracts, the seller will agree to provide the buyer with a written five-year insurance claims history for the premises (or a claims history for the amount of time the seller has owned the property). This claims history should be in the form of a letter from the insurance company, insurance support organization (such as Comprehensive Loss Underwriting Exchange), a consumer report organization. The purpose of this form is to show the buyer what types of hazard insurance claims may have been filed on behalf of the property.

This is especially important is a major claim has been filed.

• If there was a major claim filed and building permits have been pulled-are the permits closed?
• If the Seller received a check for example-for the roof replacement-Was this work done?  If not perhaps this would complicate future insurance claims.

If there was a fire, are there any structual issues that are not easily seen?

If the Seller self insures, then the Buyer will need a letter signed by the Seller stating that there have not been any major losses.

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Hope thatyour day is a GREAT one!

Linda

602-688-9279