Selling a Fire-Damaged House in Chicago

Where an owner of a fire-damaged Chicago house starts

A fire leaves an owner with three separate problems at once: a building that may not be safe or lawful to occupy, an insurance claim that has its own process and its own timetable, and a decision about what to do with the property. They interact, and the order matters. Sorting the insurance before deciding the outcome usually produces a better result than the reverse.

This article is part of our guide to selling a house as-is in Chicago. We buy houses in this condition, so read the last section knowing that. Everything before it is the process.

The building: permits and the city

Repair after a fire is construction, and construction in Chicago needs permits. Depending on the damage that can mean structural, electrical, plumbing and mechanical work, each with its own permit and its own inspections. The Chicago Department of Buildings permits page sets out the permit types and how one is applied for.

Three things owners run into:

• The building may be posted or restricted. A structure the city considers unsafe can be placarded, and that is a matter for the department rather than for the owner's judgment.
• The scope grows once it is opened. What was visible from the sidewalk is usually less than what a contractor finds behind the wall. Smoke and water travel further than fire.
• Unpermitted repair makes everything worse. Work done without a permit on a building the city has already looked at is the version of this that ends in a hearing. Our guide to Chicago building code violations covers how the enforcement side works.

If you want to know what has been permitted on the address in the past, the city publishes every issued permit as a dataset on its data portal, which is searchable by address in the browser and free to use.

The insurance claim

This is where the money is, and it is the part an owner has the most influence over.

Practical points, none of which is insurance advice:

• Document everything before anything is removed. Photographs, video, an inventory. Once a mitigation crew has been through, the evidence is gone.
• Read what the policy actually covers, including whether it pays replacement cost or actual cash value, and what it says about the building being unoccupied afterwards. That last clause surprises people.
• Keep every receipt, including for somewhere to stay if the policy covers it.
• Understand who the adjuster works for. The insurer's adjuster works for the insurer. A public adjuster works for the policyholder, for a fee, and is licensed.
• Do not sign an assignment of the claim to a contractor without an attorney reading it first.
• The insurer's offer is an opening position, and a claim can be disputed.

The Illinois Department of Insurance helps consumers with insurance problems and takes complaints about how a claim was handled; its consumer pages are the place to start, and a coverage dispute is a question for an attorney.

One more, because it decides what a sale looks like: find out whether the insurance proceeds follow the property or the owner. A mortgage holder usually has an interest in the claim money, and that affects everything downstream.

The three realistic ways out

Repair it and keep it. Best outcome when the insurance covers the work, the owner can carry the property through the rebuild and has the appetite to manage contractors and inspections. The cost is time and attention rather than money.

Repair it and sell it on the open market. The strongest number on paper, and it requires the work to be finished, the permits closed out and the property to present as a repaired house rather than a project. The risk is that the rebuild runs over and the owner is carrying the property throughout.

Sell it as it stands. Lower number, no rebuild, no contractors, no permit closeouts. The buyer takes on the work and prices accordingly. This is the option that exists specifically because the other two require capacity an owner may not have.

The honest comparison is between the net of each, not the headline. A rebuild that nets more on paper can net less after the carrying costs and a claim that settles for less than the estimate. Our guide on how cash home buyers calculate an offer shows how the as-is number is put together so you can check it against your own arithmetic.

What to do this week

1. Secure the building. An unsecured fire-damaged structure attracts a second set of problems, including city attention.
2. Open the claim and write down the claim number.
3. Photograph everything, then photograph it again.
4. Ask the Department of Buildings what is on the address, including anything posted after the fire.
5. Tell the mortgage servicer. They have an interest in the property and in the claim, and they find out anyway.
6. Keep the insurance in force. A policy that lapses on a damaged, unoccupied building is very hard to replace.

For a property outside the city, the permits and the enforcement run through the municipality instead, and our page on selling a house in Cook County covers where those local steps sit.

Frequently asked questions

Can a fire-damaged house be sold before the insurance claim is settled?

It can, and how the claim is handled at a sale is a matter for the policy, the mortgage holder and the contract rather than something with one answer. Ask your insurer who the proceeds belong to, and have an attorney read any contract that touches the claim before you sign it.

Do I have to disclose the fire to a buyer?

Illinois sellers have disclosure obligations, and a fire in the building's history is exactly the sort of thing a buyer and their attorney will ask about. Selling as-is is about the condition being accepted, not about the condition being concealed. Ask your attorney what your disclosure requires.

Is it worth repairing first?

It depends on what the insurance pays, what a contractor will actually charge, how long the rebuild takes and whether you can carry the property in the meantime. Get a written repair estimate and an as-is figure, put them side by side, and subtract the carrying costs from the repair route before deciding.

If selling as it stands is one of the paths you are weighing

Selling a house as it stands to a private buyer is one option among several. Repairing and keeping it, or repairing and listing it, are both real, and the right answer depends on the claim and on numbers only you have.

Fair Value Investments is a private buyer. We buy houses in Chicago as-is, fire damage included, for our own account. Our page on how we price a house walks through the arithmetic behind a figure so you can check it. Take it to a contractor, an agent and an attorney and compare.

About this article: it is general information written by a home buyer, not by a lawyer or a housing counselor. Fair Value Investments (a d/b/a of Probate Professionals of America, LLC) is a private real-estate investor and home buyer purchasing property for our own account. We are not a licensed real estate broker, not a law firm, not a lender, and not a government agency, and nothing here is legal, tax, or financial advice. Any offer is made at our discretion after we evaluate the property; a cash offer, if made, may be below market value. You are free to consult your own attorney, tax advisor, or a licensed real-estate professional before deciding. There is no fee to receive an offer and no obligation to accept.