"It is unfortunate that homeowners insurance is very difficult to obtain due to the current concern over mold. The industry is trying to make up for its losses due to several unrelated disasters in the recent past," said Dennis Byron of Silver Byron Estates in Los Gatos. "At one time, insurance companies made a profit on their investments and didn't need to look at the policyholder to be a profit center."

Since 1987, when the tax laws were changed, insurance companies took a big hit on their bottom line, explained Byron. "They now have to rely on the revenues from the individual policyholders for their income. If there are too many claims in one area, they have to make changes to make the bottom line work for them."

Byron's advice to policyholders it to "pick your claims wisely." "Don't make frivolous claims, and think long and hard about making a claim that involves water damage. That is a hot button with the insurance companies today," Byron said.

As insurance companies tightened their belts, many homeowners found out the hard way that a simple claim for a fence damaged in a storm could have an effect on the ability to get affordable property or homeowners insurance in the future.

Although a new law effective Jan. 1 provides some relief relating to simple inquiries that had become a factor in the insurance reporting process, there are still problems relating to obtaining property insurance at a reasonable cost.

Broker/owner Francine Nelson points to a new law backed by the California Association of Realtors that defines the type of customer contacts that may be reported as losses in a person's insurance claims history. The bill, AB 1049, prohibits an insurance company or agent from treating a customer inquiry as a loss in a loss history report received from a loss underwriting database or claim history information exchange program, if the insurer is informed by the applicant that the notice was only an inquiry, that the applicant did not intend to file a claim and there was no damage to the insured property.

The California Association of Realtors supported the bill because the organization believed it was unfair to stigmatize a person or a property in a loss database because of an inquiry or questions that did not amount to a claim. Additionally, both the California and National Association of Realtors, along with other industry groups, continue to work with the insurance industry and legislators to find a rational solution to the homeowners insurance problem.

Realtors have not only become advocates for their clients, but are also providing them with common-sense tips to address property insurance issues.

"Insurance remains a problem if prior claims have been made, so sellers are usually requested to fill out a form stating if they have made any claims or not," said Toby Vanderbeek of Intero Real Estate Services. "Insurance may be easier to obtain from an insurance company that the buyer already has ties to, like their auto insurance."

The affordability and availability of insurance affects both buyers and sellers. Since buyers will most likely obtain mortgage financing for the property, the lender will require that property insurance be in place to cover their interest in the property. If proof of insurance is not available at closing, the lender may refuse to release the funds and therefore delay or even stop the transaction, causing inconvenience and additional costs to both the buyer and seller.

The insurability and claims record of both the buyer and the property offered by the seller become factors in the quest for insurance. A number of items can affect the availability and cost of homeowners insurance on a property, including past claims filed on the property in the previous five years, a poor insurance credit score of the potential buyer, past claims filed by the buyer on other properties, and the physical characteristics of the property as well as its location.

Realtors recommend sellers review insurance claims history on their property prior to receiving offers on the property. Ordering a Comprehensive Loss Underwriting Exchange or C.L.U.E. report is one way to find out what claims data the insurance industry will consider. Realtors also caution homeowners not to use a homeowners insurance policy like a home warranty policy and to save any claims for catastrophic events instead of making claims for small items based on wear and tear. Disclosing the information early in the process will allow enough time to explore other options or insurance alternatives well in advance of closing.

For buyers, the new trend is to get prequalified to obtain insurance, much like qualifying for a mortgage loan. Buyers need to understand their insurability factor and explore insurance options to find out what insurance alternatives are available. The next step involves determining the property's insurability by reviewing any disclosures provided by the seller. Depending on the buyer's and property's combined risk profile, options for insurance might range from many to few and affordable to costly.

Realtors believe one way to circumvent the insurance dilemma is to anticipate any problems by taking a proactive approach and making sure to start early in the process. A Realtor can provide information and resources to help both buyers and sellers analyze their homeowners and property insurance options.