Home Sales in California at Risk as Homeowners’ Insurance Crisis Emerges – Orange County Register

After an extensive two-year search, Elaine L. finally discovered her dream home at the Canyon View Condominiums complex in Portola Hills. However, her excitement quickly turned to heartbreak when her mortgage application was denied due to the condo seller’s association failing to provide the necessary insurance coverage. Despite spending $2,000 on loan application fees, Elaine was forced to walk away from the sale.

The listing agent, Gaelyn Goldsworthy of Bullock Russell, was just as shocked as Elaine to learn of the insurance shortage. The association had $9 million in coverage, while the lender required $46 million. This lack of insurance coverage has become a widespread issue, affecting not only buyers and sellers, but also existing policyholders who are facing cancellations and price spikes. It’s a troubling situation that demands attention and action.

As a mortgage broker, I recently came across numerous complaints about insurance-related issues on the social media platform, Nextdoor. Many homeowners shared stories of being dropped by their insurance carriers or facing significant premium increases. To gather more information, I reached out to Cal Fire, who informed me that they are in the process of adopting new fire hazard severity zones. However, these changes have not yet occurred, so why are homeowners in south Orange County receiving cancellation notices and paying more for new policies?

According to Cal Fire, insurers have their own risk and hazard models, which often result in inadequate insurance premiums for California homeowners. The increasing risk of natural disasters, exacerbated by factors like global warming, has made insuring properties in the state more expensive and challenging. As a result, companies like State Farm and Allstate have ceased writing new policies in California. The situation is dire, and if not addressed, it could have serious implications for the housing market and homeowners’ financial stability.

To mitigate these issues, I believe it is crucial for buyers to request an insurance pre-approval or pre-qualification letter from the seller before committing to a property. This step can help avoid costly transaction fees and potential disappointments down the line. Furthermore, it is essential for insurance carriers, regulators like the Insurance Commissioner, and other stakeholders to address these challenges promptly and find sustainable solutions. Otherwise, homeowners will continue to bear the brunt of the insurance crisis through higher premiums, canceled policies, and limited housing options.

It’s time to take action and protect the interests of California homeowners. We cannot allow this crisis to persist, jeopardizing the financial well-being of individuals and the stability of our housing market.

Jeff Lazerson is a mortgage broker dedicated to helping homeowners navigate the challenges of the insurance crisis. For any inquiries, contact him at 949-334-2424 or [email protected].