Selling a Fire Damaged House in Hurst, TX: Insurance, Disclosure and Repair Math

Selling a fire damaged house in Hurst usually starts while you are still on the phone with the insurance company. You have a claim to manage, a mortgage company that may want a say in where the insurance money goes, a disclosure form that asks about fire directly, and a choice between rebuilding and selling as-is. This post covers each of those in order, with the Texas law behind them. I work with House Buyers Texas, a company that buys houses in this condition, so read it knowing that, and check anything that matters against your own policy and your own lawyer.

What should you do first after a house fire, before deciding anything?

Protect the house from further damage and make a record before you throw anything away. Once the fire department releases the property, an open roof or broken windows let rain, animals and trespassers in, and new damage after the fire can become an argument over what the claim covers.

Your policy has a section that lists your duties after a loss. Read it before you start cleaning out. Then take photos and video of every room, including closets, the attic access and the inside of cabinets. Keep receipts for board-up, tarps, a hotel and anything else you pay for. Write down the claim number, the adjuster's name and the date of every call. That file is useful whether you rebuild or sell, because a buyer will ask what happened and what was paid.

How long does a Texas insurer have to handle a fire claim?

Texas sets deadlines in the Insurance Code, Chapter 542, Subchapter B, the prompt payment rules. Under Section 542.055, within 15 days after it receives notice of the claim, the insurer must acknowledge it, begin its investigation and ask you for the items, statements and forms it believes it will need (surplus lines insurers get 30 business days).

Under Section 542.056, once the insurer has everything it asked for to secure final proof of loss, it has 15 business days to tell you in writing whether it accepts or rejects the claim. If it has a reasonable basis to believe the loss resulted from arson, that window is 30 days. If it needs more time, it must tell you why within the same window, and then decide within 45 days of that notice. A rejection has to state the reasons. Under Section 542.057, once it tells you it will pay, it generally has five business days to pay.

Two details catch fire claimants off guard. First, Section 542.004 normally bars an insurer from requiring your federal tax returns to settle a claim, but a fire loss is one of the listed exceptions, so a request for returns on a fire claim is allowed. Second, if an insurer liable for the claim misses these rules, Section 542.060 adds interest on the claim amount and reasonable attorney's fees as damages. If your claim stalls, a written timeline of what you sent and when is what lets you use these rules.

Why is the mortgage company's name on the insurance check?

If you still owe on the house, the check for the building is often made out to you and your mortgage company together, and a check payable to two people jointly needs both of them to endorse it. Texas puts that rule in Business and Commerce Code Section 3.110(d): an instrument payable to two or more persons, not in the alternative, can be negotiated only by all of them. You cannot deposit it alone, and your bank will not let you.

What the lender does with its endorsement depends on your deed of trust and its servicer's process for insurance money after a loss. Your deed of trust has a section on property insurance; read it. Then call the servicer, ask for its loss-draft department, and ask for the process in writing: whether it holds the money and releases it in stages as repairs are done, what inspections it wants, and what it needs if you decide to sell instead of rebuild.

If you sell, the loan is paid off at closing. In a cash sale the title company uses the buyer's funds to pay off your loan and the other liens before you receive the rest. Settle in writing, before you sign a contract, who keeps any insurance money that has not been paid yet: you, the buyer, or a split. Put the answer in the contract, not in a text message.

Do you have to disclose a previous fire when selling a fire damaged house in Texas?

Yes, in most sales. Texas Property Code Section 5.008 requires the seller of a single-dwelling residential property to give the buyer a written Seller's Disclosure Notice. Item 4 of that notice asks whether you are aware of a list of conditions, and "Previous Fires" is one of them. The same notice asks about items in need of repair, known defects in walls, ceilings, floors, the roof and electrical systems, and previous structural or roof repair.

The notice is completed to the best of your belief and knowledge as of the date you sign it. If something is unknown to you, the statute says to indicate that on the notice. Section 5.008(e) exempts certain transfers, such as sales under a court order or a foreclosure sale, but a normal sale by the owner is not one of them. A fire is hard to hide from an inspector anyway; disclosing it plainly, with the claim file attached if you have it, keeps the sale from coming apart later.

Should you repair the house or sell it as-is?

Run both numbers on paper before you choose. The repair path is: what the house would sell for once it is fixed, minus the repair cost, minus what you pay while it sits (the mortgage payment, taxes, insurance, utilities and somewhere else to live), minus the cost of selling it. The as-is path is the as-is price, plus any insurance money you keep, minus your payoff. Whichever leaves you more, after the months it takes, is the better answer for you.

Get the repair number from a written contractor bid and the adjuster's estimate side by side, not from a guess. Ask the contractor what the bid includes beyond the visible burn: smoke odor treatment, ductwork, insulation, wiring behind the walls, and whether the city will require permits and inspections for the work. Ask the servicer how long its staged releases usually take, because that sets how long you carry the house.

Some owners rebuild because the claim covers most of the work and they want to stay. Others sell as-is because they have already moved, cannot carry two housing payments, or do not want to manage a rebuild. If you are weighing an as-is sale, House Buyers Texas explains how its we buy houses Hurst process works for homes in this condition. Get more than one offer, compare each against your repair math, and make sure the contract says who keeps the remaining insurance money.

This post is general information about Texas law and insurance claims, not legal or insurance advice. Statutes change; read the current text and talk to a Texas attorney or your agent about your own policy. The author works with House Buyers Texas.