12 Oct Is REO Insurance Only for Lenders?
Homebuyers, bankers and other real estate associates are usually familiar with most of the insurance policies available for various properties. From homeowner’s insurance to hazard coverage, every property must have a policy to cover any damages that might occur over the years. However, real-estate owned (REO) properties, are normally vacant and vulnerable to theft and vandalism. Although many people might believe that REO insurance is only available to lenders, there are other property administrators that can also utilize this type of coverage.
REO Insurance and the Lender Majority
Typically, REO policies are meant to be held by banking lenders. If a home is foreclosed or abandoned, for example, the property is technically owned by the bank until a proper buyer can be found. Lenders use this insurance type to cover any damages that occur between owners. Those damages can easily be fixed for a potential buyer using the REO coverage while reducing further costs to the lender itself.
Protecting an Investor’s Finances
If an investor purchases a home to sell in the near future, he or she won’t be living at the property at all. Instead of being obligated to pay for force placed insurance as directed by the lender, investors can use REO coverage as an alternative. Damages within the home are quickly fixed with this insurance coverage, so investors can sell the property whenever they deem necessary.
The Trustee Situation
A property could be temporarily held by a trustee until the actual owners can take over the deed, such as minors inheriting real estate. There’s no need to pay for force placed insurance because REO coverage will keep the property in prime shape. In fact, the trustees could hold the property under REO for several years if necessary.
Loan Servicer Consideration
Another temporary REO insurance application is for loan servicers. A property could be between owners, such as during escrow, for example. REO coverage simply covers any incurred damages during these periods to protect owners from additional repair costs.
Consumers shouldn’t be confused between the terms force placed insurance and REO insurance. Force placed policies are actually used by lenders when homeowners are actively living in the home. Lenders place this coverage on the property to fully protect it from possible damages, such as flood or fire. In the end, all of the insurance available in the marketplace today is meant to protect the structure and its investors.