HOW LAPSED HOUSE INSURNCE COST A VENDOR $250K & 2 HOUSES

This is a tale of how a vendor cost himself $250.000, a house settlement, a 10% deposit and financial ruin by letting his house insurance lapse by a couple of weeks.

In 2013 my company was engaged to prepare a McMansion for sale in a NorthWestern Melbourne suburb, the home was huge and well presented, even though the house was huge the brief was rather straight forward, update the colour scheme, dress the gardens and property itself.The owners were a beautiful hardworking immigrant family, they were polite and open to presenting the home to capture the imagination of mainstream fashion.

We completed the work 6 weeks before the auction and it sold for more than what they expected, and that was the last I thought I’d hear from them, the selling agent and the home.

The Frenzied Call

About 90 days later I received a anxiety driven phone call, it was the selling agent in a state of panic asking could I get to the house ASAP, I asked what’s up? his response didn’t make sense, “Peter the house has fallen over”, I asked him what the hell does that mean, he just repeated himself and asked could I get there quickly.

, “Peter the house has fallen over”

Steve sales agent

Disaster

I arrived within the hour and there was Steve “not his real name” ashen faced, he said come inside quickly, as I walked inside it looked like a bomb had gone off, in fact the house was completely flooded with water coming through the first story ceiling, down the stairs and the ground floor ceiling had collapsed.

I went outside switched of the mains and carefully walked upstairs to see if I could find the source of the water, I first went to the ensuite, then the main bathroom with toilet and I couldnt see the source of the leak, there was a third water closet and it was there is discovered the problem.

Cheap parts expensive problem

I noticed the problem straight away, there was a missing Bidet, where it was in the wall it had been removed and the pipe hadn”t been capped to prevent leakage. It turns out the Vendor had removed it after the sale to take to their new home.

He dutifully switched the mains off before removing it and didnt think another thing about it, amongst other issues the bidet is a chattel of the property and when it was sold it didn’t belong to him.

The 1 in 1 million chance

So how did the mains get switched on? Just as luck would have it pavement grinding was being done by the council and either them or their contractor needed water supply, so they connected their hose into the front tap, realising there was no water they switched on the mains and went about their work.

Once the work was completed the tap was switched off but not the mains, and as best estimates we beleive the water ran in the home for 7-10 days, unfortuanately it wasn’t obvious from the street.

Settlement

We had big issues as the house was supposed to settle within days and the new owners were coming over this particular day for final inspection, I told Steve what the problem was and he was frantic, he kept saying “what are we gonna do”?

He had been trying to ring the buyers and vendor to no availe, at 11am this morning the new owners arrived with the sight of our vehicles up the driveway, Steve ran out to great them and it didn’t sound good, they made their way inside and the buyer angrily exclaimed “I want my F-ing deposit back i’m not settling”, they then left the home.

“I want my F-ing deposit back i’m not settling”

Purchaser

Flood & Disaster Works

Before we can begin works we need authority from the owners and insurance assesors, finally Steve got through to the owner and he came with his wife early afternoon, they looked shellshocked. I took over from Steve and said Alec “not his real name” I need your insurers details, certificate of currency and authority to begin preliminary works.

He asked why can’t I just start? I require payment for the preliminary works and the assesor is required before and structural works begin, I need to know I’ve got authority and will get paid.

He then angrily quipped I don’t want you to do it, I’ll find a big company, and so my time ended there.

Steve called me that evening and told me another well known company arrived and they asked the same things, Alec wanted the work started and sort things out later, this company declined the offer.

Lapsed Insurance

Alec after moving into his new home and paying 2 lots of house and contents insurance had decided with only a few weeks left to settlement would cancel the policy and save the money, after all what could go wrong.

That decision cost him and his family dearly, not only did the house not settle, he had to return the 10% deposit on the sale of his home. The agents commission and marketing fees still required payment, not to mention his house required extensive rebuilding.

With 2 weeks left he cancelled his insurance what could go wrong

Worst of all in the long run because of his dire financial situation it cost him new family home.

Penny wise Pound foolish

My mums Irish and she had almost to contradictory words of wisdom, “Look after the pennies and the pounds will take care of themself”, meaning spend money wisely, “Penny wise Pound Foolish” means don’t scrimp in the areas that save cents that in the end cost you dollars.

The cost of 2 weeks more insurance might’ve been $200 and the cost of a new Bidet is $52 at Bunnings, so saving $252.00 had at last count cost him $250.000 not including the loss of sale and his new home.

Over the years we have seen many home owners either under insure, let their insurance lapse through neglect or cancel.

Flood work, structural repair or damage by fire are all expensive items that can go from $10’s of thousands to $100’s of thousands quickly.

You can avoid embarrassment and financial ruin by simply having a competent insurance broker manage your affairs.

Peter Karaoglanis is the Principal Presentation Strategist at Rent Sell Buy Move and has 30 years experience in management of commercial properties and sales and marketing management of Landmark Homes.