Imagine you've found your dream home in Los Angeles. The palm trees are swaying, the sun is shining, and you're ready to make an offer. But there's a catch that might just burst your California dream bubble — skyrocketing insurance rates.
Or perhaps, you've attracted the perfect buyer for your home but now the deal is threatened by them discovering the insurance bill is much higher than they anticipated. Can they afford to buy your house after all?
It's not the most glamorous topic, but insurance is becoming a major player in LA's real estate scene. Let's break down how this often-overlooked expense is affecting both buyers and sellers in the City of Angels.
For Buyers: The Sticker Shock is Real
If you're house hunting in LA, you might want to sit down for this. Homeowners in Los Angeles are facing significantly higher insurance costs compared to last year, with increases ranging from 7% to 30% or more, depending on the insurer and property type. And if you think you won't be affected unless you're in a fire zone? Think again.
What does this mean if you're a buyer?
- You might end up with less house for your money. That extra $500 or more per month for insurance could push you over your budget. And this doesn't only apply to your personal budget i.e. what you'd like to spend per month, but the top dollar amount a bank will loan you to buy the home in the first place.
- Some areas are becoming "insurance deserts." In high-risk fire zones like Pacific Palisades, traditional insurers are backing out, leaving homeowners scrambling for coverage.
What can you do about it?
- Run your numbers and adjust your expectations if necessary. Do this as early as possible.
- Shop extensively for rates, making sure to talk to insurance brokers outside of the big box companies.
- Don't get left behind, consider areas & homes you may have overlooked.
For Sellers: It's Not Just About Curb Appeal Anymore
If you're thinking of putting your LA home on the market you need to get ahead of any roadblocks to make sure that rising insurance costs don't throw a wrench in your plans:
What does this mean if you're a seller?
- Buyers are more cautious. They're not just looking at your gorgeous kitchen remodel - they're asking about insurance rates too.
- You might need to adjust your asking price. If insurance costs in your area are particularly high, you may need to lower your expectations to attract buyers.
What can you do about it?
- Consider offering a credit towards the buyer's first year of insurance premiums.
- Obtain and share multiple insurance quotes for the property to help potential buyers understand their options.
- Draw attention to existing security systems, smart home devices, or other safety features that may qualify for insurance discounts
The Big Picture: LA's Housing Market in Flux
This insurance shake-up is having some serious ripple effects across LA and areas once considered desirable might see property values stagnate or even drop if insurance becomes too costly or hard to obtain. Conversely, areas which were once considered outliers may attract new interest from buyers.
So, what's an Angeleno to do? Whether you're buying or selling, it's crucial to factor insurance costs into your plans. Get quotes early, understand your options, and be prepared to adjust your expectations.
LA's real estate market has weathered challenges before and with some savvy planning and a realistic outlook, you'll still be able to carry out your real estate plans. Don't hesitate to reach out if you need expert advice on navigating these changes or my recommendations for some fantastic insurance brokers.
See you soon...
P.S. Does this make you think about changing up your real estate plans? Give me a call, and we'll strategize how to get you where you want to be!
👇💖 Check Out This Week's Homes 💖👇
Also, if you think someone else would enjoy this newsletter — pass it along!
Or if you received this newsletter from someone, and you want to keep getting it...
