SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : Mish's Global Economic Trend Analysis
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: CalculatedRisk who wrote (12552)9/30/2004 2:12:45 PM
From: mishedlo  Read Replies (2) of 116555
 
Check out this post from FFO on the FOOL

I've never posted here before but maybe some folks who read this board would be interested in a personal observation.

My wife works for a very reputable insurance brokerage. Here is the scenario she reports is now happening with more than 1/2 of the new home purchases she sees.

1. Client calls up to inform them that they are buying a new house and will need a new homeowners policy. (They do a dozens or so of these a week)

2. The broker gets quotes from some of the major underwriters based on the last inspection of the house and the description of the house from the title bureau.

3. The bank calls the broker to confirm that the house is fully insured as a condition of closing.

4. The replacement cost of the house is dramatically less than the mortgage. (minus the value of the land) Sometimes as much as %30 -%40 less!

In an extreme example, a house purchased for $300,000 could be completely rebuilt by the insurance company for $150,000. Since the insurer is covering the value of the house, not the price of the house they could not find an reputable insurer who would insure the house for more than $150,000. It just wasn't worth it.

5. This freaks out the bank trying to loan the money. If the house burns down, the owner will be left with $150,000 check and $300,000 mortgage to pay.

6. Most cases are less dramatic and the bank usually 'works something out' with the homeowner.

I don't know how strong of an indicator this is, but I think it's very interesting. Any know how to confirm if my wife's experience is typical? (That the gap is truly widening between replacement value of homes and value of mortgage)

FFO
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2026 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News