This is long; I understand. It’s a detail account of our experience dealing with a catastrophic event and navigating the insurance process and tenants.

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Over the winter, I received a call from one of my tenants letting me know that water was pouring out of the house next door (that’s also ours). The tenants had turned off the heat… when it was 6 degrees for 3 days straight. The water heater is in the attic and a pipe cracked during the freeze. When it started to thaw, the constant water running filled up the house. Our property manager went to the house and found two inches of water throughout the entire house, along with a collapsed ceiling in the master bathroom. Over the next two days, the ceiling in the adjacent laundry room and the master bedroom also collapsed. 

We took immediate action on the water remediation process. The clean up company had to put several fans throughout the house and crawl space after sucking out the standing water. The next step was to purge the damaged drywall, insulation, cabinetry, flooring, etc. However, the tenant was in our way.

TENANT ACTION

The tenant’s renters insurance was responsible for removing their belongings. They created quite the speed bump, and the tenant’s items weren’t removed for 5 weeks. FIVE! The insurance company [supposedly] was requiring the use of a specific moving and storage company, who had no availability. Eventually, the tenant had the insurance company agree to them removing their own belongings to begin moving forward. They finally got their belongings out a week or so after that process started.

When we started going through the process of remediation, the tenant asked to speak with us over their concerns regarding mold. We refused because we have a property manager, and the relationship is between her and the tenant. We asked them to write us an email expressing their concerns, and we’d respond to that. They didn’t write the email. We told the property manager to relay the message that we want the house restored back to the condition (or better) that we kept the house in, and we have no expertise in this area, which is why we hired a remediation company to handle it, and I’m to trust that they do their jobs correctly to dry out the house. After that message, they didn’t push any further on the subject.

There was a nuance in the lease that if there was a catastrophic event, the tenant could choose to be let go from the lease agreement with 14 days; after that timeframe, they’re still considered responsible for the lease. The tenant read this and wrote us an email to enact it about 6 weeks after the event. Technically, we could have held them to their responsibility. However, there wouldn’t have been anything good to come from that. The tenant went from being understanding to quickly being nasty and unreasonable; it was best to cut ties.

We had told them not to turn off any electric (they were worried that water and electric don’t mix, so they shouldn’t keep the electric on; we shared that we need the house kept a reasonable temperature, so that’s not the right answer). However, they did turn off the electric shortly after that conversation. They ended up not getting their security deposit back to cover the utilities incurred and lost rent for their lack of payment through their notice. We also charged them for leaving the refrigerator in poor condition and us needing to get extra cleaning for that (which didn’t work and we ended up needing to replace it, but that wasn’t within enough time for us to know before the security deposit notification was due).

REMEDIATION CONTRACTOR

We hired a company to come out and dry out the space right away. I don’t know the details of this process because I trusted the company to know what needed to happen. They sucked up the water and put big fans throughout the house and crawl space to dry everything out. Their process was at least a week long.

They submitted their bill and dry logs to the insurance company for about $22k. The insurance company rejected their process and everything they did, and they agreed to pay out about $16k. The contractor balked at it, but we said we didn’t know how to help, and he had to speak to the insurance agent himself. They went back and forth for weeks. The contractor submitted a new invoice for $25k (why more than what it was originally?!). The insurance company eventually agreed to their $22k figure.

I tried to pay him in July for work done in January (that’s how long it took!). My bill pay system flagged the check because of the amount, but never told me. They claim it was quickly released and delivered as expected and on time, but the company never received it. I had my bank place a stop payment on it. Then I went to the bank to get a cashier’s check and mailed that to the company. That was 3 weeks ago, so I’m assuming he got the check since I haven’t heard from him.

REBUILD CONTRACTOR

We received three quotes for cleaning out the damage and rebuilding those parts of the house. None of the quotes were close to what the insurance adjuster gave us as an estimate. One of the three companies that gave us a quote asked to speak to our insurance company. They went through all the line items, and the insurance adjuster agreed to the contractor’s price for the work, which was about a $6k difference. 

The initial contract with this company required 50% of the estimate up front. However, we didn’t feel comfortable handing over $25k. I spoke to the contractor, and he agreed to three payments. Their first payment was allowed via credit card, so we were able to capture $340 worth of credit card rewards on that $17,000 purchase. The second $17,000 was due upon flooring completion, and it had to be paid via check. The final amount was due upon substantial completion.

I spoke to the contractor about the vinyl floor in the bathrooms, and he actually said they’d be willing to lay the luxury vinyl plank for the rest of the house through the bathrooms also. While I’m sure it cost them less to handle such a change, it was nice that he didn’t charge us for a contract adjustment.

Once the contract was executed, we had to pick out all the replacement things. This sounded overwhelming, but it was pretty straight forward! I only had to tell him the paint color I wanted, and then pick out the cabinets and flooring. I went with a white cabinet for the lowers in the kitchen and the bathrooms. The upper cabinets in the kitchen are a brown, but I wanted to “upgrade” where I could instead of trying to match the existing. I figure eventually the upgrades will come if we ever want to sell, so I may as well do it nicely now and only have to change a few things down the road.

There were a few more selections during the process – little things like knobs and light fixtures. Again, I chose nice light fixtures, even if they didn’t match the brass that was already in the house.

There were some hiccups along the way. They painted the house the wrong color. I specifically discussed changing the color from the what was there since the whole house was being painted. The original house was built with brown carpet and yellow walls. We kept it the same color all along because we didn’t want to go through the effort of changing it (cutting in, two coats, etc.). This was our chance to change it to the color we’re using on our houses to make it more consistent. With a grayish floor, it worked better to have a light green than a yellow anyway. They also threw away our bathroom vanity counter tops, so they had to replace those at no charge to us because they were supposed to be salvaged.

All in all, everything went well with the contractors.

OTHER REPAIR WORK

Our previous tenant had burned the kitchen countertop. We decided to just keep the burnt counter and re-rent it for the time being (we didn’t have a good amount of time to add another contractor into the mess we were cleaning up at that time). Well, with the bottom cabinets needing to be replaced, here was an opportunity to replace the counter. I asked the rebuild contractor what he could charge. He was going to charge over $2k to replace the two bathroom counters and the kitchen counter.

He made the mistake of giving me the link to the countertop he would use for the bathrooms. It was $119. He charged $221.50. He also had a labor charge, plus a 10% charge for overhead, plus a 10% charge for profit. Once I saw all those details, I was put off. We said we’d just keep the bathroom counters and sinks – they were cultured marble, so they were fine, just more yellow than white. Then his guys ended up throwing away our counters by accident, and we ended up getting new bathroom countertops and sinks anyway for no charge to us.

We asked our handyman if he could do kitchen counters. He was able to get the new countertop installed and the sink set for under $500.

INSURANCE COMPANY

Our insurance company was actually really difficult to work with. They were willing to hand out money, but they weren’t there to communicate. Several voicemails and emails were left unanswered. Sometimes we’d get a random email that would say “I put a check in the mail,” but mostly, we just kept making phone calls that went nowhere.

Depreciation

As someone who worked in finance, the term depreciation makes no sense to me. The insurance company kept about $6k of our total amount they agreed to pay on the estimate. Once all the work was completed, we provided receipts of the work, and they paid out the rest of the estimate.

Because we had the rebuild contractor not do some of the activities from the original estimate (the washer and dryer were thrown away, so they weren’t hooked back up), or we had our handyman handle some of the items because they weren’t getting done (hooking up the dishwasher), the final estimate was lower than the original amount. Then I included the invoice from our handyman for the work that he accomplished. The total between these two invoices ended up being more than the original estimate from the rebuild contractor, which I expected was our loss, but the insurance company actually paid out on it.

Lost Rent

The insurance policy covered the lost rent for our vacancy. They took our lease agreement, determined the per diem amount, and then agreed to cover until the work was completed. There was a disagreement on when the work would be completed (they took a date off some paperwork that we had never seen, while we were told by the rebuild contractor that he’d be done by April 20th). Once we got that sorted, they sent us a check to cover all of March and most of April. We were able to get the house rented at the end of April, so it was only truly considered vacant for 3 days of the year, which I find impressive.

Utilities

The tenant turned off the electricity about a week after the incident (although we told him not to). Luckily, I have a program set up where the utilities aren’t actually ever turned off, but they’re reverted back to my name. We submitted receipts to the insurance company, who agreed to pay the excess amount of charges due to the house being open to the elements (missing ceiling and insulation). Their calculation was based on an average of bill total. Mr. ODA is a math wizard and didn’t accept that. He performed a calculation that equated to an average daily use of electricity, along with separating out the bills by days (because one of the bills was half a month of normal activity and half with the house open). The insurance agent said he wasn’t going to fight us over $50, so he just sent it to us. It was an interesting statement, considering all the calculations Mr. ODA did was in the original submission, and he decided to do his own math instead of accepting what Mr. ODA had said in the original email (granted, looking back, he may have never even read the email because that was the norm).

The water was turned off at the street when the initial report of an issue came in. Once everything was dried out and we had the pipe repaired (a $350 activity caused tens of thousands of dollars worth of damage .. gosh), we needed the water turned back on. That was a horrific process with the City of Richmond that ended with me screaming at a lady on the phone in some random street in my neighborhood during a walk. In order to speak to the City, you have to wait on hold for at least an hour; you can’t schedule water to be turned on via an online account. So after waiting 90 minutes for the first time to get it scheduled and being told no one needed to be home, they showed up, no one was home, and they left. There was no notice. No phone call. No voicemail. No email. No note on the door that they were there and tried to get in touch with us. Nothing. I was livid. So I called again. I waited over an hour. Then the woman who answered was very much not helpful. The conversation went quite poorly. I yelled, she wouldn’t give me a supervisor. Horrific. I finally got a new time scheduled for days out (and their window was 8 am to 5 pm – a lot of anger for that). They unlocked whatever it was that needed to be unlocked and our contractor handled it from there because it was done so poorly in the scheduling sense.

NEW TENANT

We actually struggled to find a new tenant. We were able to list it while the final clean up was happening. We had a lot of interest, but not a lot of people qualified. A neighbor had watched the rebuild happen, and she wanted the house. She didn’t qualify. And instead of accepting that information (and we’re pretty lenient), she started threatening us for not selecting her. Our initial choice fell through – and that’s why you should always be nice. She may have been a runner up, but she squandered all opportunities because of the way she handled herself and treated us. The new tenant was able to move in at the end of April. At the time that she moved in, she had two jobs. Unfortunately, she was laid off unexpectedly in June from one of the jobs, so she has struggled to pay rent in July and August. I’m understanding, but I didn’t appreciate that we had to ask where the rest of rent was and she didn’t send the late fee. Again, I’m lenient and understanding, if you’re nice. We had another tenant say that she needed another week to pay August rent because sickness kept her out of work, and I had no problem with that and waived the late fee. She told me up front; I didn’t need to go asking questions and wait all day for a response.

The new tenant did complain upon move in that the house wasn’t clean. We knew that may be an issue. The contractor’s cleaners didn’t do a great job, but the house was generally clean. The new tenant did mention that there was just a little too much dirt from the renovation to be acceptable, so we hired a cleaner to come in and get it done. Other than that, we haven’t had any maintenance requests or complaints from her.

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For how big of an issue this was, I’m impressed by how easy it felt to come out the other side. We were lucky to have insurance cover lost rent and expenses, and they didn’t give us a hard time on nearly anything (we’re currently trying to manage a claim on our own how that is far from easy). We were able to re-rent the house for $150 more than it had been rented at. So while we had the house vacant and being worked on for 4 months, it really wasn’t too bad.