Working with my buyer, who paid cash for a home in Round Rock TX and did not get his homeowners set up until the day of closing. Since he was paying cash he was in no hurry to do before closing.
Well what happened is the national insurance data base showed a $16,000 water damage claim that was not disclosed fully by the seller. Turns out the hot water heater busted and there was 1" of water in the main floor.
Later after several attempts to get the information on $16,000 of water damaged that was in the Insurance data base from just last October, one year ago. Seller wrote a email explaining after the sale and closing, that the entire first floor was damaged by hot water heat that busted and all the floors had to be stripped, and dried out.
The seller indicated he got a check for $10,000 so he could do what he need to replace floors. What he does is buys wood floors at a do it yourself store and does all the work himself with a helper. Then with the extra funds he saves he puts in new shutters and decorates the home that are unrelated to the insurance claim.
All sounds great right. Wrong!! Anytime there is a insurance claim with in 3 years the insurance company your working with to insure your new home wants to see that all the funds from any past insurance claims were spent on the repairs and they were done completely and correctly.
By the sellere doing this himself, the new buyer will be paying $1200 to $1300 more per year for homeowners on a 200k home, until the 3 year period expires. Or the seller has to come up with receipts that shows the $16,000 plus their deductible which is the amount that was required for the homeowner to pay upfront. Once they can provide the documents then the buyers insurance will be at a normal rate.
If you have any kind of insurance claim hire the work done by a professional get paid receipts and save them. NO cash deals when your using insurance funds to pay contractors. Make sure all funds for the repairs are accounted for in the claim and not used elsewhere's. Lesson learned on this one! Sellers always Disclose in detail any water damages.
Full disclosures will keep you out of court. If you as a seller ever have a question about if you should not or should you disclose something JUST DO IT! Disclosure is always the best and be as detailed as need so the buyers have a full understanding of the issues and you can always attach a additional page, receipts and copies of claims as needed to your sellers disclosure, date it and sign it!
If your unsure ask a attorney what you should do, if you think you should not disclose something or hold back additional information get legal advise! Remember your Realtor is not a attorney in most cases. However there are some attorneys who do hold Real Estate licenses.
Moral of this story is get your insurance person to pull any past claim history during the inspection period. Could save allot of concerns after the sale.