How can buyers score a victory when old home features electrical, insurance woes

Question: We bought an older home. We must apply for final loan approval with an insurance binder quote. That is a problem. The insurance broker cannot provide a quote. The insurance broker wrote today, “For a home built in the 1940s, there is a high chance there is active knob & tube (electrical wiring) if there haven’t been any updates. All carriers will not write on a home with an active knob & tube (electrical wiring) unless it’s going to be removed and replaced within the short time frame after the closing of escrow.”  

The home inspection report confirms an original electrical system, including the central and sub-electrical panels. It is the type of panel with screw-in tubes.  

That is not all.  

The home has longtime tenants who use it as a storage facility. The husband is a hoarder. Together, their five cars take up all the designated parking spaces in back. 

We do not mind upgrading the electrical system, but how? We would have to replace the electrical soon after taking ownership, and with this current tenant occupied, how can we proceed? 

Answer: In the 1960s, homeowners and their electricians frequently replaced fuse boxes from the 1940s with problematic electrical panel brands, such as Zinsco, Federal Pacific, Sylvania, et cetera. These problematic electrical panel brands are similar to what I likened to Ralph Nadar’s consumer-protection campaign and subsequent book “Unsafe at Any Speed: The Designed-In Dangers of the American Automobile.”

Upgrading the electrical would include removing and replacing the fuse boxes with electrical panels and updating knob-and-tube wiring with grounded modern-day electrical wires.

Acquiring hazard insurance will require a licensed electrician to remove and replace the 1940s electrical within the first 30, 60 or 90 days of your ownership.

You could work with your insurance broker, the seller(s) and their real estate agents to extend the escrow to accommodate the updates. For instance:

1. The sellers give a 60-day notice to the longtime tenants.
2. The sellers extend the closing of escrow by at least 60 days.
3. Ensure in writing that the sellers will make sure the property is vacant before closing the sale.
4. An empty building gives workers and building inspectors free access.
5. An empty parking area will accommodate the vehicles of the electrical workers.
6. Get the approved electrical permit for the electrical upgrade underway; the department might approve the permit by your ownership date.
7. Complete the hiring and scheduling of an electrician contractor.
8. Be ready to start work once you do take ownership.

Lastly, make sure the insurance company only wants the electrical upgraded. Nowadays, securing insurance for a home is as tricky as buying one.

For Housing Market Data in your area, visit Pat’s webpage for trends here. Do you have questions about home selling or buying? Full-service Realtor Pat Kapowich is a Certified Trust and Probate Specialist, Certified Real Estate Brokerage Manager, and career-long consumer protection advocate.

Realtor Pat Kapowich, Kapowich Real Estate is based in his hometown of Sunnyvale, California.
Office: 408-245-7700; Broker# 00979413