In the wealthy community of Woodside, nestled in the hills of Silicon Valley, a sharp rise in insurance costs is making potential homebuyers think twice before making a move. To navigate this challenging landscape, some real estate agents are stepping up as insurance advisors, aiding clients in understanding the insurance premiums associated with properties they’re eyeing prior to submitting any offers.
According to a report from the San Jose Mercury News, Cara Gamble, an agent with The Agency in Danville, has taken a proactive approach to checking insurance rates for her clients. “It’s crucial to know if buyers can afford the insurance costs associated with a home before they put in an offer,” Gamble asserts. She has witnessed firsthand how several potential buyers decided against making offers after realizing that the insurance premiums were just too high.
Scott Hayes, another agent operating in Woodside, has observed a noticeable drop in the number of prospective buyers over the past year. He attributes this decline to the fact that, in high wildfire risk areas, many buyers find themselves limited to the costly FAIR Plan insurance, which is mandated by the state and managed by private insurers. “Living in this desirable area comes with a catch—you have to accept this type of insurance,” Hayes elaborates.
The situation has been exacerbated by many private insurance companies issuing non-renewal notices to homeowners throughout California, resulting in a staggering rise in FAIR Plan policies from 126,709 to 350,000. Hayes emphasizes that the unpredictability of insurance costs is significantly dampening people’s desire to purchase homes. “Why waste time looking at properties if you know you can’t afford the insurance?” he questions.
Despite these challenges, Hayes highlights that none of his clients have pulled out of contracts due to insurance concerns, as he takes the initiative to check FAIR Plan prices ahead of time. For example, he notes that the annual insurance premium for a $2 million home in Woodside can range from $15,000 to $20,000.
Meanwhile, the demand for homes in the Bay Area remains robust, which discourages buyers from using “contingency clauses” that would allow them to back out of deals based on insurance expenses, for fear of being dismissed by sellers. Melody Johnson, another agent at The Agency in Danville, maintains an updated list of insurance companies still offering policies, ready to help clients secure price quotes.
Johnson points out that many major insurance companies have ceased writing new policies, leaving only smaller, lesser-known firms willing to provide coverage.
