Selling your home? Have a roof older than 15 years? That might be a problem, according to a new trend noted by Pittsburgh real estate agents
"Tyler and Haley Panella were thrilled to buy their first home in Beechview — until they hit a major roadblock. They couldn’t obtain an insurance policy.
Two different insurance companies refused to cover the $223,000 house unless its aging roof was replaced.
“We couldn’t afford to put a down payment down on the house and buy a new roof all at once,” Ms. Panella, 27, said. “If we couldn’t figure something out with the seller, we couldn’t move forward with buying the home.”
Across the Pittsburgh region, real estate agents are sounding the alarm about a growing trend. Over the past year, buyers have been getting more pushback from insurance companies during the underwriting process, adding requirements before approving the coverage.
And homes with older roofs appear to be a prime target.
“It’s just a nightmare to get your sales closed right now,” said Kay Barchetti, a Compass Realty agent whose office is in Bakery Square.?“There’s a lot of people if they don’t put a new roof on, they can’t sell their house.”
She said a recent transaction involving a $650,000 house in Allison Park almost didn’t close.?
“The insurance company and the bank wanted all kinds of details on this roof,” Ms. Barchetti said. “The house is only 9 years old and it was built by a million-dollar home builder.
“They tortured us,” she said. “We still had to go through hoops.”
Insurers are getting stricter
The issue is part of a larger trend reshaping the insurance landscape in the U.S., and it’s driven by the skyrocketing cost of claims.
The Insurance Information Institute in New York reports that the average cost of claims per insured home has been climbing faster than inflation, creating a ripple effect that’s hitting the affordability and availability of coverage.
“If your roof is over 20 years old when you apply for home or business insurance, most companies will require it to pass an inspection,” the Insurance Information Institute said. “Other insurers may decline to write new policies for homes or businesses with older roofs.”
State Farm Insurance Co., Pennsylvania’s largest insurer, declined to comment for this story. Media representatives for Erie Insurance, based in Erie, could not be reached for comment. Pennsylvania Insurance Department officials also had no comment.
Natural disasters like wind and hailstorms have been pounding homes and businesses across the country with increasing intensity and frequency, damaging millions of properties. Add in rising repair costs, lawsuits that pile up after catastrophes and fraudulent claims, and you’ve got an industry scrambling.
Nationwide, insurers lost $79 billion in 2023 due natural catastrophes such as storms, flooding, droughts, heat waves and wildfires, according to the Insurance Information Institute.
“It’s not to say the roofing industry is to blame, but the system is set up now so that if you can show your roof has been damaged by hail, then you may be entitled to a new roof,” said Trent Cotney, a lawyer for Adams & Reese in Tampa who serves as general counsel for the National Roofing Contractors Association.
He said Florida — the?epicenter for insurance-related roofing issues — enacted a law a couple of years ago, which other parts of the nation can probably anticipate coming to their areas.
“Insurers can’t deny coverage solely based on the age of a roof if it’s under 15 years old,” Mr. Cotney said. “If it’s 15 years or older, the homeowner can get an inspector to certify that the roof has at least five years left. If that happens, the insurer has to provide coverage.”
Barrett Hahn, publisher of Roofer magazine in Durham, N.C., said insurance companies deal with a lot of deception regarding hail damage.
“Insurance companies are taking a beating on hail-damaged roofs,” Mr. Hahn said. “People are out there trying to scam insurance companies by saying they have hail-damaged roofs when they’re actually not.
“The way [companies] get around it is to require newer roofs,” he said.
And insurers are taking a close look at where they provide coverage, the Insurance Information Institute said. Some are reducing coverage for homes that require costly upgrades — such as roof replacements — before they agree to issue a policy. Other companies are pulling out of markets prone to severe weather, leaving homeowners with fewer and pricier options.
Major insurance companies have been pulling out of disaster prone areas like Florida and California. Pennsylvania does not appear especially vulnerable to losing insurers at this point.
“These days, the insurance industry is trying as much as possible to do the best underwriting and to get into risk that they know what kind of risk it is,” said Etti Baranoff, a professor of insurance and finance at Virginia Commonwealth University.
“It’s across the board everywhere right now,” she said. “They are not just jacking up prices. You’re talking about reduction in availability and affordability. It’s both. It’s not just the premiums. It’s also the availability of it.”
So the mounting cost of rebuilding after recent natural disasters — whether it’s floods in Missouri, hurricanes in the Gulf states or the recent catastrophic wildfires in California — doesn’t just affect those areas. It ripples across the nation, driving up premiums for homeowners everywhere, she said.
“It’s a huge pool,” Ms. Baranoff said. “The whole country is a huge pool and then you have pools within pools. So, you spread the risk.”
’It’s getting harder and harder for buyers’
Over the past year, real estate agent Laurie Kiss has watched deal after deal come to the brink of failure — not because of financing or appraisals, but because the buyers had trouble securing homeowners insurance.
“We have been having lots of issues insurance-wise, but specifically on the roofs,” said Ms. Kiss, owner of a ReMax real estate office in Irwin.
Mortgage companies require buyers to obtain insurance before closing.
The solution? Ms. Kiss now adds an insurance contingency to her buyers’ agreements. The clause allows buyers to walk away from a deal and get their deposit back if they can’t secure an insurance policy or if the quoted premiums are far higher than expected.
She said 15 years seems to be around the age of a roof where insurance companies start giving buyers a hassle.
“It’s crazy because most roofs now are made with 30-year shingles,” she said. “But here we are at 15 years having issues.
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“We haven’t gone as far as not being able to close yet because typically your buyer has shopped around and found a company that will cover it. But it’s getting harder and harder for buyers.”
Ben Hess, the owner of a ReMax brokerage in Ross, ran into the problem recently while selling a house he owned in Etna. He said insurance companies that the buyer had contacted were requiring Mr. Hess to show proof that the roof was installed within the past 20 years.
“Most people don’t leave their receipts laying around for 20 years,” Mr. Hess said.
“[Insurers] are not interested in a new policy being written on anything with a roof over 15 years of age.”
There is another option, although it has drawbacks.
Some major insurers offer insurance through a specialty line carrier, which only covers the home’s actual cash value (ACV) rather than a traditional policy, which covers the replacement cost value (RCV). Actual cash value means depreciation is factored into the final payout and may be less than the replacement cost value.
Mr. Hess said his buyer ultimately was able to get insurance, but had to go the non-traditional route — buying an actual cash value policy.
“He will look into adding a roof to the house in the coming years, but he will live with what he has now from an insurance prospective,” Mr. Hess said.
A win for everyone
Dina Castillo had to dig deeper into her negotiation toolbox when insurance companies flatly refused to cover the house that her clients — the Panellas — wanted to buy unless the roof was replaced.
“These buyers had no extra cash,” Ms. Castillo said.
Walking away felt like their only option.
But Ms. Castillo approached the seller and made another pitch.
Could the seller front the $15,000 for a brand new roof if the buyers increased their purchase price by $8,000 — allowing them to finance their portion of the roof cost into the mortgage?
Those involved saw it as a win for everyone. The seller got his full asking price. The Panellas bought their first home with a new roof without having to drain themselves financially.
“It’s crazy because there was nothing really wrong with the roof, but because of the age, they were going to deny us coverage,” Ms. Panella said.?“Now we have a new roof though. That’s an awesome thing to have moving in.”
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3 周Great insights, Todd! It's crucial for prospective homebuyers to be aware of these trends in insurance requirements. Thank you for shedding light on this important issue in the real estate market.