The other day a duplex owner facing a short sale confessed he didn’t think he’d be able to continue to make his mortgage payment.
He then asked if he couldn’t make the mortgage, did he need to bother with the insurance payment?
The answer, according to Frank Culbertson at Farmer’s Union Insurance, is yes.
While many duplex owners have their premiums escrowed as part of their monthly payment, some pay the insurance company directly.
According to Culbertson, several missed payments result in the insurance company notifying the lender. Guess what happens then?
Since the lender has a stake in the property, namely the money they lent toward its purchase, they would like their asset protected. And, by law, they have the right to buy insurance on the property, and they will.
These insurance premiums are typically at a rate three to four times higher than the rates the property owner was paying. And the cost of them is then passed on to the duplex owner.
So what does it matter if you can’t pay them back anyway?
Well, unless your Minneapolis duplex or duplexes are vacant, you still have tenants. Now let’s imagine there’s a fire where one or more of them is seriously injured while payments aren’t being made.
Do you think the tenant or his family will not pursue legal recourse simply because you were in the foreclosure process?
Personally? I’m not that optimistic.
And even though it’s possible you may not ultimately have any liability, your attorney will charge you to prove just that. Even if you’re broke.
Had you maintained your insurance policy, odds are, your policy would have covered the costs of attorney’s fees.
Just something to think about.