You Don’t Have to Spend the Insurance Money on Repairs
One of the biggest misconceptions we hear from Clarksville homeowners is: “I have to use the insurance money to fix the house, right?”
The answer is generally no. In most cases, the insurance claim payment is compensation for the loss of value to your asset. It is your money. You are not legally obligated to use it to rebuild the same structure (unless your mortgage lender dictates otherwise, which we will discuss). This opens up a powerful strategy we call “Check and Sell.”
How the Strategy Works
- File the Claim: You get a full assessment from your insurance adjuster.
- Negotiate the Payout: You ensure the payout covers the true cost of the damage (Actual Cash Value or Replacement Cost, depending on your policy).
- Keep the Cash: You deposit the settlement check.
- Sell the Property: You sell the damaged property to a cash buyer like Integrity House Buyers.
- The Result: You combine the insurance cash + the house sale cash to move into a new, turnkey home in a different neighborhood.
The Mortgage Lender Hurdle
There is one catch: If you have a mortgage, the bank is named on the insurance check. They want to ensure their collateral (the house) is protected. They may try to hold the funds in escrow to ensure repairs are made.
However, if you pay off the mortgage, they don’t care.
- The Integrity House Buyers Solution: Since we buy with cash, our purchase funds can pay off your remaining mortgage balance at closing. Once the mortgage is satisfied, the bank releases their claim on the insurance proceeds, allowing you to keep the remaining insurance money free and clear.
Tennessee Disclosure Laws (The Legal Side)
Whether you fix the house or sell it as-is, you must navigate Tennessee’s disclosure laws. Under Tenn. Code Ann. § 66-5-210, sellers must provide a Residential Property Condition Disclosure form.
- Question 14 specifically asks about “Property or structural damage from fire, earthquake, floods…”
- The Risk of Hiding It: If you paint over smoke damage and don’t disclose it, you are opening yourself up to a massive lawsuit for fraud.
- Selling As-Is Exemption: However, if you sell to an investor like Integrity House Buyers, we typically agree to an “As-Is” purchase where we waive the standard disclosure requirements because we are professionals who know what we are buying. We assume the risk, protecting you from future legal liability.
The “Loss of Use” Bonus
Don’t forget the “Loss of Use” portion of your policy. If your home is uninhabitable, your insurer pays for your rent. If you sell the house, this coverage typically ends once you no longer own the property. It is important to time the sale so that you have your next permanent housing lined up effectively.
Conclusion: A Cleaner Break
Navigating insurance adjusters and contractors is a full-time job. The “Check and Sell” strategy allows you to liquidate the equity, keep the insurance settlement, and avoid the headache of managing a construction site.
Check out this Article: Selling a Fire-Damaged House in Clarksville