I’m considering buying real estate and have been provided with the building insurance contract of a property I might be interested in (Helvetia - Valais/Wallis - only the amount of the premiums and the insured amount, not the specific conditions applying to the contract).
Some cantons have mandatory insurance but Valais/Wallis has not, so I guess the answer to my question below is “it depends from policy to policy” but the insured amount indicated seems high to me, in relation with the age and related defects of the building (I would say it would be in line, though on the cheap side, for a new building).
For those of you who have experience having contracted such policy, how was the insured amount determined? Cost to rebuild anew? Cost to rebuild but with depreciation deducted? Whatever amount you decided to put on the form?
I’m preparing for the price negociations and want to be ready to counter the “but the building insurance policy says it is worth x amount” argument so any feedback will be greatly appreciated.
Edit: As things get more serious, I’m considering starting a journal of this real estate venture. What would make the most sense to you: repurposing this thread or starting a new one for it?
How should Wolverine proceed to share his real estate venture journal
- Repurpose this topic
- Start a new topic
I’m not sure my comment can help, but in ZH/AG the usual amounts I’ve seen in similar situations are even <50% of the property value (as valued by the banks, not asking price).
My guess here is that contracts were made a decade(s) ago and owners never had interest to re-evaluate to the cost of re-building or market value of the object. This in a bubble real estate market, so makes sense that housing prices balloon versus insurance premiums - and as matter of fact, nobody would ever care about that value in the negotiation, but only what the market is ready to pay / demand / bank evaluation.
They basically told us the value and we used that.
Thanks both. All data is useful, I’ll sort out what applies to my situation. I’m indeed not expecting that number to be a big valuation argument for the property but I’m trying to be as prepared as I can.
Different thought, if you can I would switch to an international player. Building insurance is to a large extent a long tail esrthquake insurance. If this materializes, all local insurers are bancrupt.
With a large, international company with strong brand (Axa, Allianz, Generali), you have the chance that they will not let their Swiss subsidary go bancrupt and that you get your money.
You don’t think that they are actually insured for that? That’s what reinsurance is for.
(And large disasters can also trigger some state support).
Once again, thanks for the inputs. As things are becoming more serious, I’m thinking of repurposing this thread to make it a journal of my real estate venture. The alternative would be to start another thread for it. Which one makes the most sense to you?
I’ve opened up a poll in the initial post.
Tagging the people who have already participated in this thread.
@lowyield @PhilMongoose @TeaGhost @nabalzbhf
You might also be able to find an online valuation and policy for the insurance. Or if you’re already talking to the seller ask him for the insurance certificate.
Thanks. The online search got me only the general terms of sale, which stated nothing about how the valuation was made.
I’m talking to the owner’s agent. The owner himself is a very elderly person apparently not very able to provide meaningful information or documents. His daughter, who seems to be handling this from the owner’s side of things, seems not to be very efficient either. Or maybe it is the agent who isn’t doing his best to provide all available information.
The house itself is pretty old with not much of a documented history so I’ve come to take lack of information as a baseline and just lower my projected bidding price each time I feel I’m facing uncertainty about the state of the property.
I am not sure if this is something you need to worry about.
The insurance coverage on our property in Valais is lower than the sale value. The policy covers site clearance and reconstruction but not the price of the land
I was worried about being under insured and asked my broker to increase the coverage - he did it and our premiums went up a bit. There was no independent valuation
As an update: I indeed haven’t needed to care for the number stated on the insurance policy at all. The property was listed for 350 kCHF with the possibility to add some parcels for 40 kCHF, I offered 200 kCHF and 20 kCHF respectively, with a good explanation as to why that was what it was worth in my opinion, the owner counter-offered with 300 kCHF all included, which was the number I was aiming for so we’re set to close on that number if all goes well.
Thanks all for your input. I may start a topic for the whole venture if I actually have things to talk about but this seems to be panning out to be a short and not very interesting read since there may not be many rounds of searching/negociations involved.