You’ve probably heard about it: several big insurance companies have stopped writing homeowner’s insurance policies in California due to wildfire risk.

Those who continue to offer coverage limit the number of new policies they will write each month, and all the carriers are getting more picky around what they will insure. Older roofs, knob-and-tube wiring, and certain trees too close to the house are all reasons companies deny or restrict coverage on new policies. This leaves folks to turn to the state insurance program, CalFair, which is now getting 10,000 applications a day.

Insurance is not a new problem to many homeowners in the East Bay. High fire areas like the Oakland/Berkeley hills, Orinda and Moraga have found it difficult to get insurance coverage for years now. But the problem is getting worse and spreading.

When I meet with new homebuyers, insurance is often one the first topics we discuss. It can impact where you want to buy. For example, when a homebuyer wants to live in the Montclair area of Oakland, we dig into details of what that means in terms of both safety and costs for homeowners insurance. We get an estimate from an insurance broker when a client is interested in potentially writing an offer. An increasing number of transactions are falling apart at the last minute because agents are not having these conversations in advance.          

This is not just about higher insurance premiums that homebuyers, especially first-time homebuyers, will need to pay. It can also impact buyers’ ability to qualify for a loan. When buyers are pre-approved, lenders make certain assumptions about how much insurance will cost. If the home a buyer ends up in contract to buy has a higher insurance bill than the lender assumed, that could impact the debt to income ratio and potentially disqualify them for the loan. If this isn’t caught before the buyer gets their offer accepted, they could find themselves in escrow scrambling to find a different loan product.                                                                    

Buyers need to know if they can get insurance, how much it will cost, and whether the lender will accept it whenever they submit an offer. Writing offers with a contingency for insurance is a growing reality here in the East Bay. 

Sellers need to be aware of these potential deal breakers too. If your house has knob-and-tube wiring, you should consider upgrading it. If your electrical panel is Federal Pacific, you might want to install a new one. Landscaping will need to include tree trimming. These are sellers’ issues too, because if buyers can’t get affordable insurance, they can’t get a loan to buy a home.

It is more important than ever to work with a local agent who will talk you through all aspects of buying or selling a home, not just pricing, paint colors, and staging. The stakes have just gotten higher.