Umbrella insurance a wise choice for realty investors

DEAR BOB: Thanksfor your recent suggestion that homeowners and realty investors with a networth over $1 million can save money with an excess coverage “umbrellaliability” policy for $2 million or $3 million at very low cost. However,when I contacted my insurance agent about getting an umbrella policy, he said Imust first form an LLC (limited liability company) to hold title to myinvestment properties. I called several other insurers and they do not requireholding title to investment properties in an LLC. However, they all require Igive them my homeowner’s, auto insurance and investment property insurance.What is your opinion of LLCs? –Charles G.

DEAR CHARLES: Manyreal estate investors hold title to their investment properties in an LLC tolimit their liability. An LLC offers the benefits of a corporation without thedisadvantages. Consult a local real estate attorney to discuss the LLC pros andcons.

Purchase Bob Bruss reports online.

But I have neverheard of an insurance company requiring an investor to form an LLC to obtain anumbrella liability insurance policy.

Yes, you shouldhave all your insurance policies with the same insurer. That prevents disputesbetween insurers in the event of a major liability loss, such as yournegligence in a car crash or rental property negligence.


DEAR BOB: I amtrying to sell my house. The first buyer made a decent purchase offer, which Iaccepted. But it contained a contingency clause for the buyer’s approval of aprofessional inspection report. My listing agent said this is very common.However, after the report was obtained, the buyer “rejected” italthough it included only a few minor problems, which I agreed to correct at myexpense. They cost me around $350. But the buyer still rejected the report andinsists I let him out of the sale. Considering buyers are few and far between,do I have to let him out of the contract and refund his $10,000 earnest moneydeposit? –Vern W.

DEAR VERN: Allcontracts include an implied good faith and fair dealing clause even if it isnot expressly stated. If you agreed to and actually made and paid for therepairs recommended by the professional inspector’s report, your buyer has nojustification to reject that report.

However, as apractical matter, if the first buyer absolutely refuses to proceed with thepurchase, that ties you up without a release from the first sales contract. Isuggest you consult a local real estate attorney to discuss your alternatives.

Please be awarethat the first buyer will probably sue you for refund of the $10,000 althoughhe legally is probably not entitled to receive it.


DEAR BOB: What isthe difference between a condominium and a townhome? Are all townhomestwo-story and attached? –Vin F.

DEAR VIN: Mosttownhomes are part of a homeowner’s association, just like condominums. Butmany townhomes are in PUDs (planned unit developments) where each townhomeowner owns the land beneath their unit. Townhomes come in many shapes andsizes, one or two story, attached or detached.

The new RobertBruss special report, “The 20 Essential Questions Smart Home Buyers MustAsk to Avoid Overpaying in a Buyer’s Market,” is now available for $5 fromRobert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at1-800-736-1736 or instant delivery at for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center

Copyright 2006Inman News

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