Easier Insurance and Lending for Straw Bale Homes

House InsuranceThe inclusion of straw bale construction in the 2015 International Residential Code (IRC) has made it easier to get insurance and lending for straw bale homes. It may not be as easy as getting insurance and lending on conventional homes yet, but we are making major headway. In recent conversations with insurance agents, it was made clear to me that because the technique is now included in the code books, it is often considered “automatically acceptable” to insurance agencies. Of course, this is not the case for every insurance company out there, but it is true for some.

Perhaps even more exciting is the potential for this approach to be used with other companies moving forward. For example, if an insurance agency tells you that they cannot insure a straw bale home, it is much easier to challenge them on their reasoning. After all, if the construction technique is code approved, and you are building to meet that code, it will be hard for them to state what grounds they have to deny insuring the home. Geico, AAA, and Unigaurd are examples of companies who have stated they will insure code approved straw bale homes. Give your local agents a call and see if they have the same approach.

Construction lending continues to be a challenge. Having just watched The Big Short, I may be biased in my assessment of the banking industry as a bit corrupt and focusing more on making money than on providing access to money for those who need it. Okay, now that I have that out of the way…let’s see what options are available to you to find funding for your straw bale build.

My first suggestion is to start with smaller, local banks and credit unions. They tend to appreciate keeping money in the community so your project may be right up their alley. If you don’t get a yes for your “straw bale home” with the first few lenders you approach, consider changing your language moving forward. As I mentioned in my last blog post, a new name for straw bale construction may be needed and that may be true in lending as well. Consider inquiring about building a “post and beam home with cellulose insulation.” Or perhaps a “reinforced cellulose block” home, or some other name. As you can see, the potential for immediate red flags is much lower this way. Just make sure the lender doesn’t have any exclusions or restrictions that would create issues for you once you start construction. You’ll also need to make sure your construction drawings reflect the same wording you use in your approach.

You may also want to push the “Green” aspect of your job and speak to the excellent carbon sequestration, healthy construction materials, energy efficiency, and overall environmentally responsible practices that make up your home. There is no doubt that green construction is important to a lot of communities and banks are getting on board as well. As an example, California’s Title 24 goes into effect on January 1, 2017 and requires all new residential construction be zero net energy homes by 2020. Straw bale construction is a great piece for assembling that puzzle. Get the banks excited about being a part of the future and not stuck in the past.

As with the insurance agencies, it is important to inform the lenders that the techniques you are using to build your home are code approved. If they push back against you, try to get them to explain why they cannot fund a code approved building. They won’t have much ground to stand on; however, that doesn’t mean they will agree to fund your project. It might mean that they will start to see the thin veil they are using to hide from funding your project start to slip away. Some banks to contact include Wells Fargo, US Bank, Citizens Bank, and PNC Bank.

For those of you who have been successful in acquiring insurance and/or funding, I hope you will share your bank and insurance contacts in the comments below. Let us know what worked, what didn’t and what advise you would offer to others.

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8 Responses to Easier Insurance and Lending for Straw Bale Homes

  1. Greg Vizzi Sun, May 22, 2016 at 6:56 am #

    Thanks Andrew! That’s good news for a lot of people. I have no doubt that this and the universal building code is in large part a result of your efforts to keep a high standard of straw building in all your work/workshops. Good job.

  2. "LeeRoy" Sun, May 22, 2016 at 9:34 am #

    My wife and I live in Northern Utah, and Goldenwest Credit Union, when asked a few months before the Straw Bake House codes thing came about, said they had no problem funding Straw Bale homes. We spoke with Genius Townsend, Mortgage Originator at their Main (HQ) branch in South Ogden, UT.

  3. Andrew Morrison
    Andrew Morrison Sun, May 22, 2016 at 12:38 pm #

    Thanks for the input!

  4. Andrew Morrison
    Andrew Morrison Sun, May 22, 2016 at 12:42 pm #

    Thanks Greg. I am sure that at some level I have had influence; however, I have to give props to the men and women who worked on the code approval directly, and continue to do so today. Martin Hammer and David Eisenberg are the two main movers on that front. Thanks goes to them and their team!

  5. Beau Sun, May 22, 2016 at 9:06 pm #

    I had a casual conversation with a lender at a party today, and got his input on lending for straw bale vs traditional. He said the most important things they would look at when lending-regardless of construction type-are equity, insurance, and whether they could sell it on the secondary market. If the comps support it, you’ve got some equity to back you up, and an insurance company will write a policy on it, it shouldn’t have any problems being resold on the market.

    When I asked about using specific verbiage in order to disguise the straw bale aspects of it, he didn’t seem to think that would be much of an issue so long as all those other key points were attractive. We’re going to keep putting out feelers before striking up a serious conversation with a lender we’d prefer to use.

  6. Andrew Morrison
    Andrew Morrison Mon, May 23, 2016 at 10:38 am #

    Hi Beau. Thanks for the input. You bring up another big issue: comparable sales. Because most straw bale homes are built as “forever homes,” there are not a lot of them available as comps. It can be very hard to find them because people simply don’t choose to sell them on the secondary market. Some appraisers will allow for other “alternative homes” such as log cabins, SIPs homes, rammed earth, etc. to be used as comps. Others actually add value to the home once they understand the “forever home” aspect of things as that is something rarely found in today’s housing markets.

    The verbiage change is more for the consumer than the lenders, from my perspective. It is about getting the technique in front of more people so that there is more exposure and more interest. If that helps the banks and insurance, that is great too, of course.

    Good luck finding the perfect lender. Hopefully you don’t have issues with comps on your end!

  7. Jan Mon, May 23, 2016 at 3:42 pm #

    Thanks for the information in regards to the insurance and I am glad that AAA is on the good guy side. We are about to finally move into our house after 5 1/2 years of finishing it. It is a long road but SO worth it.

  8. Andrew Morrison
    Andrew Morrison Tue, May 24, 2016 at 8:07 am #

    Yay Jan and Michael!!!!! Congratulations.

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