Insurance Claims Step by Step Process – Part 3

of the Insurance claim on this property.  This is going to be more work than I thought.  When I last posted I had an insurance check and was ready to go get it endorsed, deposit the check and get started on this project.  I should have known it wouldn’t be that easy.   The insurance company said they found a match. They are suppose to send me a report in the mail to show me where they found the siding match.  It’s now Monday and I haven’t got that in the mail yet.  I am starting to realize that insurance claims much like the short sale process takes a lot of time.   I felt like I was ready to wrap this up, and now I am realizing it’s just getting going.  Here is the dilemma:  The check is made out to the ABC lender and made out in my name.  I figured I’d get their endorsement(signature or stamp) on the back of the check, and they’d mail it back and I’d just deposit it and write a check to the contractor to get started on the roof and siding.  If only it was that easy.

Insurance Claims Lender Part

The lender said, “you send in the check endorsed, send in your insurance claim inspection paperwork, send back our insurance paperwork package with contractor info, etc and we’ll deposit the money on our end and pay you 1/3 upfront, and then when you are 95-100% done with everything pay the remaining left due to be paid in full.  The problem with this is that it takes so long to do everything by mail and to wait on checks, etc.  What incentive does anyone have to move quickly except for me?   I can save some time by receiving faxes on the current items I am waiting for by mail then faxing them back, but I still have to overnight the check, get them a pre-paid envelope so they’ll send it back right away, but they still have to wait on the processing of that check.   Once I get that 1/3 back from them, I can pay the contractor with that money and tell him to get started.  Let’s analyze this situation now, why it becomes a dilemma.   You see the insurance company likes to do what they call call “depreciate” the parts of your house, such as siding, roofing, etc.  So if it’s a 10 year old roof, and most roofs are 20 year roofs, than they consider it 50% depreciated.  I can’t say every insurance company does it this way, it’s just my experience.   Basically the insurance company comes up with a total claim and total replacement cost if you have that type of insurance.   They “less out” (subtract) that depreciated % out from your total claim to be paid at completion.   Let’s say I started with a $7800 total claim and got paid $6000 for now.  Take that $6000 check and send it into the lender where they will return a check for $2000 (1/3 of total loss). Let’s say that actual cost of labor and supplies for the contractor is the $7800 out of pocket for materials, sub-contractors and time(profit).  That means $2000 is paid up front out of $7800.  Did you see how that’s just over 25% of the total loss and cost?  That’s not even enough money to cover materials, or shingles on the job.  Herein lies the problem.

Why would a lender move quickly, they don’t seem to move that fast.  Why would the insurance company move quickly, they have to pay money, who is quick to pay money?   The contractor’s situation is they are pretty busy fixing houses, and collecting money and waiting on insurance money takes forever, so a contractor isn’t eager to put up their own time or extra money upfront waiting on the lenders and the process.  If they have enough jobs going on, it can really make money tight with that much money going out and the waiting game.  So it comes down to the homeowner going through the work.  What to know the added situation?  It’s a twinhome.  The other owner’s insurance company was much more easy to work with on getting the siding covered, but he has to do what I do, and I am limited to the same siding, welcome to twinhome ownership!  I’ll let you know how this goes later on if it becomes interesting.  I’ll post later on how this entire process progresses, I’ll I know is I need to move quickly or closing in the next 11 days!  Now imagine if you have to do this on 10 rental properties, think of the time investment involved.

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