The Insurance Company Will Rat You Out!

Real Estate Agent with Cedar Rapids/Iowa City, IA KW Legacy Group S44645

As a followup to my post earlier this week regarding property disclosures, I got to thinking about the handful of transactions that turned south once the buyer realized that the seller had been less than forthcoming about the condition of the property.


In this case, it had severe consequences for the buyers in the first week of their ownership.


broken piggy bank

The buyers had a thorough inspection and the seller had disclosed that they had a few inches of water in the basement a few years prior to the sale.  They had filed an insurance claim and because the basement was unfinished, there was what the termed "minimal damage".  The insurance quote for the home seemed reasonable and the buyer confirmed that the seller had disclosed this insurance claim.


Fast forward to the week after the closing....the buyers had not moved in yet.  They were painting and replacing the flooring prior to moving in.  There had been a lot of rain and the buyers decided to go over to check on the house.  When they got there, there was almost a foot of water in the basement.  Resulting in the need for replacing the furnace and the water heater.  When they started talking the to the neighbors, they found out the real truth.  The basement had flooded more than once, that is why the seller had not finished it.


The buyers, frustrated, called me and I called the listing agent.  The listing agent talked to the seller and the seller sent their insurance claim paperwork to show that they had "fixed" the issue.  On that paperwork, it stated that the sellers had reported that the water in the basement was over 8 inches and the seller had claimed a loss in excess of $5000 in antiques and other belongings.  So the seller lied on the disclosure.  8 inches is not the same as "a few". And the seller had not "fixed" the issue, just replaced the parts in the furnace as the bare minimum and pocketed the rest of the insurance settlement.


The buyer paid to have the furnace and water heater replaced through their insurance, but that was not going to fix the underlying issue. After several estimate, the only solution was to have a second sump pit, tiling all the way around the house, and to add a backup sump pump with an alarm as well.  The cost of this remedy was about $4500 and would not be covered by the buyers insurance because it was a pre-existing condition that the seller's insurance had already paid out.  We sent a letter through a real estate attorney for the seller to pay to have this completed for the buyers.  After a few days, the seller agreed to pay the cost.  Especially since the attorney stated that the buyers could go after them for much more in court due to the disclosure indiscretion.  This was the one time where the insurance company record was able to validate that they sellers outright lied on their disclosure.  And the best part was that the seller did not realize that they were handing us the key to their own demise.  Like they didn't remember what the disclosure said at all.


No good comes from a lie.  Sometimes you can get away with it and make it to closing.  But if an insurance claim was filed, there is record of your claim that follows the house, not the person that filed the claim.  Better to disclose anything that you know.


Keep smiling!



Posted by


Karen Feltman, REALTOR®, ABR, AHS, CHMS,                                                                      CNE,CRS, e-Pro, green, GRI, SRES, TRC

Keller Williams Legacy Group

4850 Armar Drive SE Ste B

Cedar Rapids, Iowa 52403


Mobile  319-521-0701

Licensed in the State of Iowa

© 2010-2018 by Karen Feltman, Cedar Rapids/Iowa City Relocation Specialist 


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Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Karen Feltman, Interesting blog for sure that more of of us read and take notice to,  Can I reblog it in October?


Sep 07, 2018 09:26 AM #1
Debe Maxwell, CRS | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

I've had prior insurance claims show up when the property is researched by the insurance agent as well, Karen. If the work was done, that's one thing - not doing the recommended work is a whole other animal! Thankfully the sellers recognized that what the attorney was saying was true and ponied up the funds.

Congrats on hitting 500K points - FREEDOM!!

Sep 07, 2018 10:28 AM #2
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

Hi Karen Feltman that's what attorneys are for and the court system.... everyone will be part of that lawsuit.... and the ones with the deepest pockets will get hit hardest..... the listing agent and the seller.... real estate agents are always at the top with their E & O insurance....

congrats on hitting 500k.... onward and upward....

Sep 07, 2018 10:29 AM #3
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Karen --- be careful about lying,  no one can remember all those lies. Insurance claims are definitely scrutinized in California. 

Sep 07, 2018 10:34 AM #4
James Dray
Fathom Realty - Rogers, AR
Exceptional Agents, Outstanding Results

Afternoon Karen.

RATS! I came over to help you get over the 500K milestone. Looks like you're already there

Sep 07, 2018 11:18 AM #5
William Feela
Realtor, Whispering Pines Realty 651-674-5999 No.

Discosure is so important. It keeps you out of trouble If you disclose properly

Sep 07, 2018 11:57 AM #6
Kat Palmiotti
Grand Lux Realty, Monroe NY, 914-419-0270, - Monroe, NY
The House Kat

Congratulations on the 500K!

And it's true - full disclosure means tell the truth.

Sep 07, 2018 11:59 AM #7
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Thank you very much for sharing your experience and this story.

Sep 07, 2018 12:00 PM #8
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Congratulations on passing the 500,000 points milestone.

On to a million!

Sep 07, 2018 12:01 PM #9
Margaret Rome, Baltimore Maryland
HomeRome Realty 410-530-2400 - Pikesville, MD
Sell Your Home With Margaret Rome

A great big congratulations on reaching the 500,000 milestone. Way to go Karen Feltman 

Sep 07, 2018 04:31 PM #10
Harry Norman, REALTORS® - Atlanta, GA
Associate Broker


Sep 07, 2018 05:06 PM #11
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

The sellers probably thought they were disclosing (but fudging) about the water. Lying does no one any good. Better to disclose the defects fully than trying to skirt around the issue with cleverness Karen Feltman 

BTW...congratulation on making it to 500,000 points 

Sep 08, 2018 05:39 AM #12
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

I think if I had read the basement had a "few inches" of water I would have moved on to another house. 

Sep 08, 2018 02:55 PM #13
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

This is the classic E & O claim many Brokers are faced with when things get LEGAL !!!

Oct 07, 2018 07:16 AM #14
Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

Very interesting post Karen! Nobody can remember the lies they have told, and ultimately a lie about water will be found out! In our low coastal area we have two kinds of houses, those that have had water and those that will! The only way to keep water out of your home is to build it on stilts!

Oct 15, 2018 07:38 PM #15
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Karen Feltman

Relocation Specialist in Cedar Rapids, Iowa
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