Selling a fire damaged house in Arkansas

Arkansas is unusual here. Under Ark. Code Ann. 23-88-101, when there is a total loss by fire, the property insurance policy is treated as a liquidated demand against the insurance company for the full amount stated in the policy, or the full amount it charged premium on. You do not argue about the dwelling's value. The policy amount is the number.

The limits are just as important as the rule, and they are strict. It applies to a total loss, meaning all of the insured property, not a badly damaged house that can be repaired. It does not reach personal property or detached and appurtenant structures, so contents and a separate garage are settled the ordinary way. It does not apply to flood or earthquake policies. And it fixes the amount owed on a covered loss; it does not decide whether the loss was covered.

Arkansas sets minimum standards for how your insurance company handles the claim. It must acknowledge the claim within fifteen working days. After it receives properly executed proof of loss, it has fifteen working days to accept or deny, or to tell you in writing why it needs longer, with an update every forty-five days after that. Once the file is processed and closed, payment goes out within ten working days. Those are your insurance company's deadlines, not ours.

Two things worth knowing. These are minimum standards, and the state treats violating them as an unfair practice when it happens often enough to be a general business practice, so a single missed date is not automatically a violation. And a fire claim can legitimately run longer than a hail claim: where there is a reasonable basis supported by specific information to suspect arson, the accept-or-deny window is replaced by a reasonable time following a full investigation.

One rule works in your favor and is easy to miss. Under Ark. Code Ann. 23-79-126, the insurance company must furnish proof-of-loss forms within twenty days after you report the loss. If it does not, the proof-of-loss requirement is waived. Separately, Arkansas gives the rule teeth: where a company fails to pay within the time the policy specifies after demand is made, Ark. Code Ann. 23-79-208 provides twelve percent damages plus reasonable attorney's fees, and on a homeowner's policy the right to fees alone reaches further. That takes a demand and a lawsuit, so it is a backstop, not a plan.

One more thing specific to Arkansas: the Arkansas Insurance Department states that public adjusters are prohibited from adjusting claims here. If someone knocks on your door offering to handle your claim for a share of it, that is your signal to call the department. You do not pay the adjuster who comes from your insurance company; their salary is paid by the insurer.

The check for the house itself will generally name you and your mortgage company together, because most mortgage agreements require it. The contents check is normally made out to you. Your servicer then releases the building money in stages: some up front so you can hire a contractor, more as the work progresses, and the balance after a final inspection.

What happens if you do not repair depends on your loan, and this is where general advice goes wrong. On a VA-guaranteed loan the rule is that insurance proceeds go to restoring the property or to the loan balance. On a conventional loan the servicer generally follows that same path. On an FHA loan the servicer may apply the proceeds to your balance only in narrower circumstances, such as when the money exceeds the cost of repairs or is not enough to complete them and you cannot cover the difference. Ask your servicer's loss draft department in writing before you decide anything.

With replacement cost coverage, the usual pattern is a partial payment first and the rest once the property has actually been repaired. That holdback is the depreciation, and it is recoverable only by doing the work.

The Arkansas Insurance Department spells out what happens if you decide not to repair: you can submit a claim for the actual cash value of the damaged building, and you then have six months from the date of that payment, or from a final judgment, whichever is later, to make a replacement cost claim. That six-month limit applies when you, not the company, elect to take actual cash value. Check your own policy, because this describes typical policy language rather than a statute. Our guide on roof replacement costs explains the difference between actual cash value and replacement cost in more detail.

You can sell a house with the fire claim still open. Nothing in Arkansas law makes you finish the claim first. Nothing in Arkansas law decides who keeps the claim afterward either, so that part comes down to the contract you and the buyer sign. Settle it in writing before you sign anything.

Here is what Arkansas law does settle. The fire fixed a money claim against your insurance company on the day it happened. Under Ark. Code Ann. 23-79-104, a property policy cannot be enforced except for the benefit of someone with a real financial stake in the house, and the statute names two moments when that stake has to exist: when the policy took effect, and when the loss happened. You owned the house when it burned, so a later sale does not, on its own, end your right to the claim. What the statute does not do is promise you a number. How much the policy owes is still a policy question.

Handing the claim to someone else is a separate question, and it is not yours alone to answer. Most policies say the policy cannot be assigned without the company's written consent, and Ark. Code Ann. 23-79-124 says a policy is assignable or not as its own terms provide. Arkansas courts have read an old consent clause narrowly where the loss had already happened, but no Arkansas decision covers a buyer who had no stake in the house when it burned. So if the claim is meant to go with the house, get your insurance company's written agreement before you count on it.

Three things this does not settle, and each one can move real money. First, who keeps the claim is a contract term, so write it in either way and have the buyer sign it. Second, if you still owe on the house, the building money runs through your servicer, and how much it can hold comes from your own loan papers rather than from any Arkansas rule. Ask your servicer's loss draft department in writing. Third, keeping the claim is not the same as keeping every dollar of it. If your policy pays replacement cost, the held back depreciation is recoverable only by doing the work, which the section above on actual cash value explains.

Arkansas has a statewide code. The Arkansas Fire Prevention Code, 2021 Edition took effect January 1, 2023, and its third volume is the residential code that governs a house. Local jurisdictions enforce it, and they may adopt more stringent regulations, so your city can ask for more than the state minimum but not less.

Two rules answer the question people actually ask. Repairs, alterations and additions have to meet the requirements for new work, without forcing the rest of the house to comply, and the work must not leave the structure less compliant than it was. So no, repairing a fire-damaged room does not trigger a rebuild of the whole house to current code. And not every repair needs a permit: ordinary repairs are exempt, but that exemption stops at cutting away a wall or partition, removing or cutting a structural beam or load-bearing support, or changing a required means of egress. Fire damage frequently crosses exactly those lines, which is why permits usually do come into it.

Permit rules are local. In Little Rock, applications run through the Building Codes Division at 723 West Markham, and separate permits are required for electrical, gas, plumbing and mechanical work. Every other city in Central Arkansas runs its own building department, so call the one where the house sits rather than assuming a shared procedure.

One cost most people do not expect: insurance usually does not pay to bring an older house up to current code. The Arkansas Insurance Department says so plainly, unless you bought a building code endorsement. That gap is often the number that decides rebuild versus sell.

Arkansas is a buyer beware state and no law requires you to fill out a condition form, which our guide on Arkansas seller disclosure rules covers in full. There is no Arkansas statute making fire history off limits either, the way the law does for a death in the house. What is different about fire is evidence rather than law: a fire leaves a fire department report, an insurance claim file, permit records and repair invoices. So silence is one thing, but if you are asked, or if you fill out a form, your answer has to match a record that exists.

On taxes, two rules matter. Insurance money above what the house cost you is a gain, not automatically tax-free. But the destruction of a main home is treated as a sale for the federal home-sale exclusion, so many owners owe nothing at all; our guide on taxes when you sell a house in Arkansas explains that exclusion. The loss side is narrower than people expect. Personal casualty losses are deductible only when attributable to a declared disaster, and beginning with tax years after 2025 that includes state-declared disasters as well as federally declared ones. A single house fire is usually neither. Take your own numbers to a tax professional.

Arkansas law lets cities of the first and second class and incorporated towns order a building removed or razed when the council considers it dilapidated, unsafe, unsanitary, or detrimental to the public welfare, and the statute requires each city to set the manner by ordinance. There is no statewide notice period written into it, which means the process genuinely depends on where the house sits. Your city's code office can tell you what its ordinance requires.

Do not confuse this with the weed and rubbish rules that apply to an untended lot, which are a different statute with a different notice process and which our page on selling a vacant house covers. A razing order is about the structure.