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If insurance company gives seller a check for damage roof will the mortgage company keep the check?

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House I want to buy is a short sale. The seller has not been making his payments. The roof is damaged and the seller has filed a claim with the insurance company. If the insurance company gives the seller a check for the roof damage, can the seller forward the check to the roofer for repairs or will the lien holder encumber the check and keep it?

asked August 11, 2011
Ron
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1 Answer

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In most instances, the insurance check is made out to both the lien holder and the seller. If the seller has not made a mortgage payment in recent months, the lien holder can attempt to hold the insurance claim check as hostage for debt repayment.

The best course of action is to contact the insurance company and ask for them to pay the roofing contractor directly. This will require a bit of coordination with the contractor and the insurance company, but it is well worth it to make sure the property gets repaired and the mortgage company doesn’t interfere with the work that is needed to be completed.

Sometimes, the lien holder will endorse the check and the insurance claim process can proceed naturally. But be careful not to endorse the check and then mail it to the lien holder – this is a short sale transaction, and the lien holder is looking to recover as much of their loss as possible. And with a roof, most buyers are going to want that home repair completed.

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