Questioni recently received hail damage to my car and the insurance company said it was a total loss. the lien holder sold my car to insurance company without even talking me. now he wants me to sign power of attorney and take my car. can he do that?
AnswerDear Donna,
SHORT ANSWER: The bank probably CAN do this, but the sales price has to be commercially reasonable. BUT, depending upon your answers regarding your equities, maybe you can work something out, as detailed for you below.
While your question is short, I am going to take a lot of extra time to answer it because there are a lot of different ways to go, depending upon factors such as your equity and the cost of repairs.
Do not sign the power of attorney UNTIL AND UNLESS you determine that it is in your interest to do so, or that the price the insurance company will pay is commercially reasonable. Here is why.
First, it is true that in most cases, the lien holder will have the right to "call" or repossess the collateral that secures its loan to you if either of the following should occur:
• Should you fall behind a certain amount in your payments or otherwise give evidence that you are insolvent of unable to pay; OR
• Should the collateral be severely damaged or subject to being destroyed.
Thus, from the bank's perspective, they did what they should have done to protect themselves and to get their loan paid down. They can repossess and sell the asset in a private sale, so long as the price is commercially reasonable. Do you know what they intend to do about any shortage or overage in money received from the sale? What was communicated to you about that?
Now, that is all fine and good when you have no or little equity in the asset. In other words, if you owed $16,000, and the actual cash value was around that amount, what have you lost? The problem comes when the actual cash value is $16,000 and you only owe $5,500. You then have to get creative to protect your equity.
In that case, what business does the lien holder have to make a private repossession sale without notice to you? According to most contracts, they CAN do so, but the sale amount has to be commercially reasonable. In this case, most banks would give you a chance to bid on the sale as well. Thus, you can find out what the insurance company is going to pay, and you can match that amount. In this case, it seems to me you can do one of three things, depending upon three conditions.
Here are the conditions to consider:
• What is your equity in the vehicle? Are you going to owe a deficiency balance to the bank? Will they pay you the excess they receive above the loan payoff?
• What is the damage to the car vis-à-vis the actual cash value?
• Can you make it economical to you to repair with USED and/or NON-Original Manufacturers Equipment (called "OEM") parts (and ignoring a couple cosmetic items), thus lowering the cost of the repairs and allowing you to retain the car (or to buy it back as salvage)? You would have to get the auto body shop to give you figures on this. For example, what if the car were "totaled" because the cost of repair was $13,000, but with USED and/or NON-OEM parts (and ignoring a couple of cosmetic items) the cost could be reduced to $6,000?
Here are your three choices, which will depend upon your answers to the three conditions above:
A.) Assuming you can still "undo" parts of the sale to your insurance company, SAVE YOUR CAR FROM BEING TOTALED BY REPAIRING WITH USED and/or NON-OEM PARTS and STIPULATING TO IGNORE SOME COSMETIC DAMAGE.
Before we get started, have you thought about keeping your car? Many times people have put a lot of money into maintenance OR EXPENSIVE REPAIRS (i.e. new transmission) in a high mileage vehicle, and they KNOW what they have will work as reliable transportation for them.
Have you considered whether or not YOU want your car "totaled"? Do you know whether or not the money you will receive will buy you anywhere near the same quality of transportation that you enjoy with your present vehicle
So, rather than taking the low offer of cash and trying to find a vehicle that will be reliable, they put the money into fixing the wreck with used parts, leaving aside cosmetic damage.
Ask what the body shop would charge to repair your vehicle with USED and/or NON-OEM parts. You can negotiate to leave some cosmetic damage showing to save money.
B.) If the insurance company still refuses to repair the car, and wants to total it, then ask your banker why you cannot "bid" versus the insurance company on the car. Make him tell you what they are going to pay for it, and tell him that THE AMOUNT OF HIS PRIVATE SALE TO THE INSURANCE COMPANY IS NOT COMMERCIALLY REASONABLE.
Tell him that you will contest his private sale, unless he allows your bid (at $100 more than the insurance company).
Out bid the insurance company, or BUY BACK CAR FROM INSURANCE COMPANY, REPAIR IT, RE-TITLE AND RE-LICENSE IT, AND KEEP IT. YOU GET YOUR EQUITY, LESS THE SALVAGE VALUE THAT YOU PAY TO BUY IT BACK AND THE COST OF REPAIRS PLUS INSPECTION AND RE-LICENSING COSTS.
Here is one way to get the insurance adjuster at her own game. Let's say that both you and the insurance adjuster figure that the actual cash value of your car (before the accident) at $16,000, but the insurance adjuster, after considering the latest documentation you have to offer, values it for salvage bidding at only $3,000 because the cost of repairs with the expensive parts is figured at $13,000.
NOW, if you were to pay that amount and then to set up the repairs to be done with USED and/or NON-OEM PARTS, and perhaps forgoing some of the strictly beauty finishing items, you could get repairs done for a lot less than the estimate given to the insurance company. Say, around $7,000.
You pay for the state patrol inspection and then the re-licensing through the Department of Licensing
You will have the auto body company authorized to repair with USED and/or NON-OEM PARTS, which in this case, will bring the cost of repairs down to $8,000. To that you will add the cost of inspection ($100) and re-licensing (say 8% sales tax times the salvage buy-back price of $3,000 PLUS the cost of repairs, equals $10,000, times our hypothetical sales tax rate of 8% equals $800).
In summary, you got $16,000 cash for the car, less $5,500 owed to the bank, leaving you with $10,500. You bought back the car for $3,000, and you hired the repairs done for $6,000. The state patrol inspection and the re-licensing costs of $990 were paid by you, and thus you ended up with your car back, in pretty good condition, and $ , and you paid out $700 plus $1,300 to get it repaired and ready for inspection and licensing, which are $100 and $160, respectively.
C.) Negotiate with your banker to ensure that the price to the insurance company is commercially reasonable. Arrange for no deficiency balance to be owing or if there is a surplus above your loan amount that the bank does not eat it up in fake fees.
Here is how to fight the actual cash value war. My favorite sites for valuation are www.Edmunds.com and www.autotrader.com. Use a distance of at least 300 miles. You can use information from local papers, advertising flyers, car dealerships, and the Internet.
Be aware that the prices shown are the "asking" price, not the actual cash value. If you have made major item replacements, above and beyond normal maintenance, you need to document them and include your receipts for all recent work done, tires added, etc. How about new tires or a new stereo system? Car Accidents: Totaled, Repair, Valuation, Your Rights http://www.settlementcentral.com/page0007.htm
I trust that my extra time here has produced some information that has been of value to you, and thus I would respectfully request that you take the time to locate the feedback form on this site and leave some feedback for me.
Best Wishes,
Dr. Settlement, J.D.
http://www.SettlementCentral.Com
