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I wonder what they do with all those vacant houses which have been foreclosed on and just sitting there waiting for a claim to happen. Vacant dwelling policies cost a lot for a reason.
Vacant Dwelling policies do cost a lot… but I think that is fair. As the legnth of vacancy goes on,,, the building becomes more of a burden for the owner, it becomes more of a pain to maintain. Also, as the lenght of time of the vacancy grows, the owner simply looses more and more money. As a result, there is a pretty high moral hazard. Another reason is that vacant buildings are attractive nuisances. Finally, I submit one more factor to you… most carriers will not write a vacant building. Typically you have to place in the E&S or Specialty Markets. That should illustrate that it is a unique, all be it more common, risk. So, in other words, the premium should be high.
Perhaps that is why many of these houses go on a foreclosure sale and the buyers can pick them up for a song. I have an investor client that has bought many nice homes for less than half the normal market price and he just rents them out. When the market returns and prices go back up, he then will sell them for a tidy profit. Capitalism at work.
MGIC sells mortgage insurance not property. That is why they are incurring losses as more foreclosures happen. Read carefully people.
Thanks for the comment OldMan. Yes, I did read the article carefully. That said, you know how comments go… the first comment seemed to indicated that vacant building policies were too expensive. I commented about the comment… and here we are now commenting on your comment that the comments don’t make sense.
Honestly, I read the Comments almost every time I read an article. In my opinion, the comments section is the best. I sometimes learn something. I enjoy watching the comment section expand and build off of the main article. In other words, I could read an article about hot dogs, and end up reading about mustard in the comments. But to me, what matters is that people are engaged in an intellectual conversation. In the end, I think its A-OK we are off topic a bit.
Gee, I wonder why we have a foreclosure problem in this country. We know that Freddie Mac and Fannie Mae have a spotless record. Barney Frank said they were sound and didn’t need any more regulation. Hmm! Sub prime mortgages and foreclosures. Seems like I have heard about that somewhere.