Insurance in the USVI

 Yes, insurance here is expensive because of hurricanes and possible flooding from such storms as find their way in to the Atlantic. The “replacement cost” on the appraisal is what the insurance companies look at when they decide what to charge you.  The appraisal does not go by square footage alone.  Other factors are what the house is constructed of and if it has hurricane shutters and clips.  When purchasing a home, the appraisal will have this information.  It will also have the three different ways the home was valued.    With a concrete, shutterd three unit home the insurance will be over $10k/yr.  Ouch!  That breaks down to about $850/month.  That is on top of the mortgage and taxes.  The different insurance companies do have slightly different rates, so shop and compare.

The bank will require flood insurance for beachfront, waterfront, and low laying areas, or a flood certificate if your home is not in a flood zone.  If you have rental apartments, I would suggest obtaining liability insurance.   Liability insurance does not cost much extra and it is well worth it.


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Closing on property, The Appraisal

Every time a lending institution thinks about lending you money, they want an expert opinion that what they are lending the money for is worth the amount they are lending you.  Welcome to the appraisal process.

The appraiser goes to the property to give their opinion on what they saw.  They take measurements of the rooms, rates the condition of the property, states what the house was constructed of, takes in to consideration the area, etc.  Then they research what other properties are listed for and the sale price of recently sold properties in the area.  In their opinion, the house in question was a two unit property with an accessory room (an extra bedroom outside the two units) and it was undervalued.  In other words, the buyer was getting a good deal! 

At first the bank said we were good to go.  The buyer turned in all requested paperwork.  The buyer was going to get a good rate on the mortgage, and I helped them look for potential renters.  Then the bank said they couldn’t get a traditional 30yr mortgage because the house was not zoned for three units.  Fannie Mae had rejected them.  Even after explaining that the third unit was just a bedroom, showing them pictures of the unit, and pointing out that even the appraiser said it was just a bedroom with an exterior door they said Fannie Mae said no. They suggested a thirty year amortized, ten year renewable in house mortgage.  Oh, and the loan would be considered commercial property.  This means that the buyers would have to come up with a 25% – 30% down payment (instead of 5%-20%) for a ten year mortgage with payments as if it were a thirty year mortgage, but at the end of the ten years they would either have to pay the mortgage in full or “renew” the mortgage at whatever the prevailing rate was.  The difference between this financing and a traditional ten year balloon mortgage is that if the bank lets them renew there are no closing costs.  This information comes when we have been under contract for almost 90 days and they cannot back out because of financing since the contract states they have 30 days to secure a loan.  MAKE SURE YOU HAVE A COMMITMENT LETTER FROM THE BANK!

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Closing on property…encroachments

Let me start by saying, buying a home here is the same process as buying one in the states.  Oh wait, but it is not.  

As far as I can remember, the lending institutions here need all the same information, they just go about collecting and organizing it differently.  There are a few additional requirements (like hurricane insurance) that were not required in other states I have lived in.  My customer and I have been under contract since February 14th, 2008 to purchase a lovely two unit home on St Thomas.  Today is September 21st and we still do not have a closing date.  Now it is not all the banks fault because there have been some changes and the seller has been slow (very slow) about some items, but I do believe if the banks here had more of an interest in doing things in a timely manner, this would not be taking quite so long. 

The first problem was that the property had three encroachments.  This means that a part of a structure (building, fence, driveway, etc) from one property is actually on another property.  Every time a home or lot of land is purchased in the USVI, a surveyor must go to the property and map the boundries.  According to the original builder of this house, everything was built two feet within the properties boundries, however the current surveyor has said that this is not true, so the present owner of the house has to “cure the encroachments” prior to closing.  Normally a lending institution will not lend you money if someone else can lay a claim on part of the land they are funding.  The present owner of this house was fully aware of the encroachments before listing the property.  In the contract it states that the owner has 60 days from notification to cure encroachments or leins against the property.  The encroachments were supposedly cured and resurveyed by August 15, 2008. 

My buyer could have (in retrospect should have )backed out of the contract after the 60 days.  The problem was that there was not a alot of choice in that price range, they really liked the house, and they could see a lot of potential for improving the property.

So, the next issue… the banks take on the appraisal.

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