California condo - what happens after earthquake?

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deniseB
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California condo - what happens after earthquake?

Post by deniseB » Mon Jun 04, 2018 8:53 pm

My HOA does not carry earthquake coverage. I am considering whether to buy coverage for my unit through the CEA.

The insurance agent recommends that individuals NOT buy their own coverage when the building has none. I am skeptical about this advice.

I am trying to imagine the scenario where there is major damage to the building. I'm guessing a lot of owners would walk away from their mortgages, leaving the banks as owners. Then what? The property is in San Francisco and the land alone is valuable. Repairs and/or rebuilding would happen eventually, but managed by whom and paid for by whom? Would the banks hold onto their units or unload them - and who would buy them?

I don't have a mortgage. I can't walk away. I'm also retired and not in a position to absorb a huge loss.

I thought that by buying my own policy with 100k of loss assessment coverage and 100k of loss of use, at least I could maintain ownership and not lose a fortune in living expenses. Am I missing something?

I'm going to call the agent back and get her to explain her recommendation, but meanwhile I'm still trying to imagine how this would play out.

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JoMoney
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Re: California condo - what happens after earthquake?

Post by JoMoney » Mon Jun 04, 2018 9:01 pm

I'm just guessing here, but if you have individual insurance on the building it would seem to me to complicate the matter since it's usually the association that's responsible for the structure, and you can't rebuild a single piece of a multi-unit condo. It might also complicate getting FEMA assistance in the event of assistance being offered in a disaster.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

stlutz
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Re: California condo - what happens after earthquake?

Post by stlutz » Mon Jun 04, 2018 9:10 pm

A google search came up with a different opinion than you received:

http://www.latimes.com/business/la-fi-a ... story.html

deniseB
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Re: California condo - what happens after earthquake?

Post by deniseB » Mon Jun 04, 2018 9:19 pm

Thanks for the link - very interesting.

boglerdude
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Re: California condo - what happens after earthquake?

Post by boglerdude » Tue Jun 05, 2018 3:51 am

Some owners lost all equity when their HOA couldnt afford to rebuild after Northridge.

Ive been meaning to ask the CEA about loss of use, but I assume it only pays for each month you cant live there because of reconstruction. Would be nice if it paid out the full 100k if your HOA decides not to rebuild and sells the lot.

If your building is vulnerable construction (old/soft story/brick) or on vulnerable ground (landfill/liquefaction area) you might want to sell.

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Watty
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Re: California condo - what happens after earthquake?

Post by Watty » Tue Jun 05, 2018 5:21 am

A bit different situation but I know someone that had a beachfront condo on the gulf coast that was destroyed by Hurricane Ivan not long after they bought it. It is a bit of a convoluted soap opera but it turned out that the condo association did not have adequate insurance so the place is still just a concrete slab about 14 years later. They have been making their mortgage payment for 14 years

There have been multiple lawsuits and problems with the HOA board and even getting a quorum for a vote is a problem. Being on the HOA board can be difficult in normal times. It didn't help that the 2008 financial crisis was a few years later but they tried to sell it several time but getting everyone to agree is difficult and in order to sell it many of the owners would apparently need to pay off the difference in their mortgage balance.

There is not really any resolution in sight.

deniseB
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Re: California condo - what happens after earthquake?

Post by deniseB » Tue Jun 05, 2018 3:06 pm

Biggest mistake of my life was paying cash for the condo instead of taking out the largest mortgage I could. No one ever suggested to me that it would be earthquake protection to do so and I didn't realize it until years later. Now I have $800k at risk. I'm getting really freaked.

Advice to everyone: if you live in a non-recourse state and face any kind of non-covered risk then seriously consider NOT paying off your mortgage!

Adding to my anxiety is that I don't trust the insurance agents. In speaking to them about issues other than earthquake I'm getting inconsistent answers. And I've been trying unsuccessfully all week to get a copy of my HOA's policy - they keep sending me one-page summaries instead of the whole policy.

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