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Old 09-23-2013, 05:35 PM   #1
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Insurance claim states we have to have a contractor and "rebuild".


So our basement (illegal apartment/inlaw) had a sewer backup so they came in and cleaned up and ripped everything out. Good because we were going to do this ourselves and put a nice family room in there instead but now that complicates things. Our mortgage company requires we send them the check and then they give it to us in installments after their inspected comes to verify we're rebuilding. We don't want to rebuild, well, we do just not what was there. Are they strict on this? I don't want to have a contractor for 90% of the stuff either which is frustrating but before they start the process we have to have a licensed contractor submit the plans and pricing.

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Old 09-23-2013, 06:50 PM   #2
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Insurance claim states we have to have a contractor and "rebuild".


I've never heard of such a thing. How did the mortgage company even find out? Unless there's something in your mortgage documents addressing this situation, it's none of their business. Besides, if the apartment was illegal, they shouldn't have used it (if they did) in determining the home's value for mortgage purposes. I'd politely tell them to kiss off.

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Old 09-23-2013, 07:20 PM   #3
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Insurance claim states we have to have a contractor and "rebuild".


If the insurance check is over a certain amount they have to put the mortgage company on it which means they have to endorse it and this their policy on endorsing checks. I guess I can see their point, they want to make sure the money is put back in the house (since it's theirs) and not on new cars/tvs. Still a big pain in the butt.
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Old 09-24-2013, 05:42 AM   #4
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Insurance claim states we have to have a contractor and "rebuild".


I'd venture this would also depend on how the place was appraised. If the value was determined based on the presence of the apartment, would rebuilding without it present a reduction? If so I could see where the bank would get picky.

I'd wonder about just where that money would 'go'. I'd certainly expect it to go against principal, not just as regular payments. Be SURE this happens.

When you have insurance there's a certain amount of going along with the process that you're obligated to accept. I'd start by contacting the state insurance commissioner and inquiring about situations like this. There may or may not be insurance regulations for/against you here.
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Old 09-24-2013, 06:52 PM   #5
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Insurance claim states we have to have a contractor and "rebuild".


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Old 09-25-2013, 12:54 PM   #6
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Insurance claim states we have to have a contractor and "rebuild".


I think you should cooperate with Mortgage Company and do whatever they want.
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Old 09-25-2013, 12:59 PM   #7
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Insurance claim states we have to have a contractor and "rebuild".


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Originally Posted by alexjoe View Post
I think you should cooperate with Mortgage Company and do whatever they want.
So I should be forced to overpay by hiring a contractor and rebuild something that I'm going to remove in a year or so when we redo this space? Seems asinine.
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Old 09-25-2013, 01:14 PM   #8
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Insurance claim states we have to have a contractor and "rebuild".



No you shouldn’t be forced but you can ask them any other possible solution or option so that your money and time can be saved.
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Old 09-25-2013, 01:24 PM   #9
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Insurance claim states we have to have a contractor and "rebuild".


Don't think they can force you to put in an illegal apartment.
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Old 09-25-2013, 02:22 PM   #10
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Insurance claim states we have to have a contractor and "rebuild".


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Don't think they can force you to put in an illegal apartment.
An excellent point. Do you have some sort of documentation from your local building/permit/zoning department that the apartment is indeed illegal?? If so, I think what happens will depend on why. I see two possibilities: 1. It's illegal because no permits or inspections were obtained; or 2. It's illegal because the neighborhood isn't zoned for apartments (in which case it could not legally be rebuilt).
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Old 09-25-2013, 02:23 PM   #11
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Insurance claim states we have to have a contractor and "rebuild".


No, it was sold with an "inlaw" but the neighbors told us they just rented it (which is illegal).
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Old 09-25-2013, 05:35 PM   #12
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Insurance claim states we have to have a contractor and "rebuild".


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No, it was sold with an "inlaw" but the neighbors told us they just rented it (which is illegal).
So, it was a legal apartment that was being illegally used. That does change things a bit. I suggest you get with your mortgage company and discuss with them what you want to do instead of rebuilding the apartment. If you don't like what they tell you, I guess you could always try to refinance with somebody else. Since you now have what is essentially an unfinished basement, your mortgage might even go down since the house is (theoretically) worth less.
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Old 09-25-2013, 06:47 PM   #13
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Insurance claim states we have to have a contractor and "rebuild".


Also, I just got the bill from the emergency service company. $5,900 for not even two days work (three guy for ~13 hours). Is it normal they charge such exorbitant rates? After seeing a breakdown of the bill it's clear they're charging at least $1500 for things that never even happened let alone ridiculous rates for other things.

This thread was more about is this usual for a mortgage company to do this? Like I said before I understand why but it seems silly that they require you to high a contractor and get three inspections for ~$15k worth of damage.
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Old 09-26-2013, 03:45 AM   #14
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Insurance claim states we have to have a contractor and "rebuild".


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Originally Posted by md2lgyk View Post
your mortgage might even go down since the house is (theoretically) worth less.
No, your mortgage is based on what your agreed terms were. Your mortgage isn't going to change unless it's renegotiated. Good luck with that idea...
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Old 09-26-2013, 05:40 AM   #15
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Insurance claim states we have to have a contractor and "rebuild".


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Originally Posted by wkearney99 View Post
No, your mortgage is based on what your agreed terms were. Your mortgage isn't going to change unless it's renegotiated. Good luck with that idea...
Uh, if the OP goes to a different lender to try to refi, the house will be reappraised by them. Should be worth less now.

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