Upgrade Your Home, Insurance Policy Before Spring Storms Hit

Mother Nature's forces of wind, water and hail account for more than half of all homeowners insurance losses.


Standard homeowners and renters policies cover the damage wreaked by wind, hail, falling water or wind-driven rain, but not from rising water from any source, including a sewer or drain backup or sump-pump failure. The cost can be substantial: Mother Nature's forces of wind, water and hail accounted for more than half of all homeowners insurance losses between 2009 and 2013, with an average claim amount of $7,610, according to the Insurance Information Institute.


If you live in a federally designated flood zone, or if your house could be flooded by melting snow, an overflowing creek, or water or mud running down a steep hill, you can buy flood insurance from the National Flood Insurance Program (www.floodsmart.gov) by calling your insurance agent. The program covers homes for up to $250,000 of the cost to rebuild and insures contents for up to $100,000. The average premium is $700 per year, but rates depend on a home’s features and location.

Prevention pays. You can take steps to minimize the risk. Visually inspect your roof for damage, clean your gutters, and attach extensions to downspouts and regrade soil to divert water away from your home’s foundation. Test your sump pump and recharge its battery.


To avoid coming home and finding that a deluge has created a sodden (or worse, moldy) mess, install a remote alarm system, such as the Samsung Smart-Things Hub (about $300 with five water-leak sensors). It will notify you when the sensors—-placed where leaks or overflow are most likely to occur—detect water. Home insurers usually offer their biggest discount for a combination of approved protective devices, which may include a water-leak detection system. State Farm offers discounts of 10% on the ADT Pulse home-monitoring system ($636 a year) and the Comfort and Control Kit for the Iris by Lowe’s smart-home system ($339). Plus, State Farm offers customers a premium discount of up to 10% to 15% for the ADT system and up to 2% to 7% for the Iris.

If your home (or neighbors' homes) experience sewer backups, hire a plumber to install a sewer-backflow valve ($600 to $1,400) to keep pure nastiness from backing up through toilets and drainpipes into your home. The valve allows waste to flow out but closes when the flow reverses. You can also add, say, $5,000 of sewer-backup coverage to your homeowners policy for about $50 annually.

Fortify your home. Your roof is your home’s first line of defense against the elements. When it's time to replace it, strengthen it. You can install impact-resistant shingles that are rated for superior resistance to hail damage, and you may earn a premium discount.


Four coastal states—Alabama, Georgia, Mississippi and North Carolina—require insurers to give homeowners a premium discount of 5% to 35% for retrofitting a roof to meet the “Fortified” standards of hurricane resistance developed by the Insurance Institute for Business & Home Safety (see www.smarthomeamerica.org). Florida, Louisiana, South Carolina and Texas have similar programs.

Also consider storm shutters ($9 to $30 per square foot of openings) or impact-resistant windows ($50 to $70 per square foot). Florida requires insurers to discount premiums by 35% to 44% for storm shutters that meet code.

Wherever you live, check with your insurance agent or state department of insurance to learn about incentives for preventing storm damage.

source: kiplinger.com

Do Pets Reduce Your Home’s Value?

For years, Americans’ love of pets has turned many a renter into homeowner. “No pets allowed” was a standard clause in rental contracts until recently, when many landlords realized they could attract and keep tenants happy if they were willing to put up with cats and small pooches.

A recent survey by website Apartments.com found that 72 percent of renters surveyed said they are pet owners, a big jump from 43 percent in 2012.

Ultimately, though, there’s no place like a fireplace, a back yard, a nearby dog park, and a friendly suburban street for man’s best friend. But while a house can mean big things for your furry family members, in recent years the evidence has been mounting that pets—and specifically their by-products—can cost their owners big time when the time comes to sell or refinance.

Cats vs. condos

A cat owner’s condo reportedly sold for up to $30,000 less than it should have because of damage caused by the pets, a real estate agent told a national magazine two years ago. A Boston-based real estate agent was recently quoted to effect that pet hair and pet stink can do major damage to a home’s resale value. The agent specifically mentioned another condo that sold for $20,000 or $30,000 less than it should have because of cats.

Appraisal Institute, a professional association of real estate appraisers, weighed in with a news release two years ago, suggesting that bad neighbors including homeowners with annoying pets can significantly reduce nearby property values.

Get on your knees and pray

Said one blogger on a real estate site: “Basically, if you are ever faced with trying to sell a home and own a pet or two, you should ship off Fido to a kennel, fumigate your house and then get on your knees and pray potential buyers can’t detect any stray pet scents.”

Appraisers also say that the mere fact a pet is resident is no reason to penalize the homeowner.  It’s understandable, however, that permanent scents, deep scratch marks on the floor or doors, lawns pitted with brown pee spot and buried bones, or other lasting signs of animal damage would be a bummer to buyers and thereby a reason to chop a few hundred or even a thousand off a home’s value.

Pet haters forget that 47 percent of households own at least one dog and 46 percent own at least one cat, according to the American Human Society. This means for every potential buyer turned off by Fido’s claw marks on the door, there’s another who will opt for the home with a pet door in the kitchen and a fenced backyard.

Custom-built dog runs

Just as landlords are accommodating pet owners for purely financial reasons, there’s a silver lining awaiting homeowners who have made their properties pet-friendly. A survey conducted four years ago by Move Inc., operator of Realtor.com, found that many homeowners are rewarding their dogs with custom-built doghouses, deluxe dog runs, custom “doggy-doors,” pet-friendly landscaping, private patios with personal fire hydrants, and other features that add value to their master’s property with many buyers.

At the time, Realtor.com listed a Victorian dog house that matched a $10,995,000 California home, a heated doghouse with a deluxe dog run adjoining a $520,000 listing in Idaho, and a secluded cottage built just for dogs with a $524,000 house in Illinois.

“Pets have become important members of the family, and their needs are often high on the list of must-haves for many buyers, sometimes even higher than priorities of the two-legged members of the family,” says, Eileen Healy at Prudential Rocky Mountain Realtors in Colorado. “Calling out features or local pet-friendly amenities can make or break a buyer’s interest in a particular property.”

source: totalmortgage.com

Are Single Family Rentals Still a Good Investment?

With discount-priced foreclosures drying up, are single family rentals still such a good investment?

The foreclosure floods over past four years created unprecedented opportunities for investors to buy homes for a song, rehab them, and either resell or rent them out. Some four million homes switched from owner-occupancy to rentals during that period—that’s nearly homes as many as total sold in America each year.


The market is changing

Those days are clearly over. The flow of foreclosures and short sales has dried up, accounting for only 10 percent of the market. Today investors are buying only about 14 percent of residential sales, down from 25 percent in 2009. Yet new investors are still entering the single family rental market and about 14 million homes are now rentals.

The reason can be summed up in two words, “cash flow.” Few investments deliver two ways to profit, but the attraction of single family rentals is that they deliver monthly rent while they appreciate in value like other residential properties.

Today’s market dynamics are a good example of why millions of investors are sticking with their rentals despite the changing market. Though the days of quick profits from flipping are over, the appreciation side of the equation is still strong. Those investors who bought in during the housing crash have done very well, realizing 20 to 30 percent appreciation. Their profits are being augmented by the nationwide shortage of affordable starter homes, which is pushing prices in lower tiers up faster than any other segment of the market. Most rentals are two bedrooms or smaller.

The best news for investors is on the rental side

Rents are soaring and vacancy rates declining, making it easy for landlords to keep their properties rented, and their rental income is even outpacing inflation. In the nation’s hottest real estate markets—Denver, Dallas, San Francisco, San Jose—rents are rising fastest, keeping pace with home price appreciation. Thus, there’s little incentive for renters to buy. Even in moderate markets, Millennials are creating extraordinary demand for rentals.

It’s easier than ever for investors to add a rental property to their portfolio. Companies like Memphis Invest and HomeUnion provide turn-key service to investors, locating and buying properties, arranging financing, and managing.

“There are an increasing number of renters in the U.S. We believe this increasing demand for residential rental space will enable SFR investments to continue producing high yields,” says HomeUnion CEO Don Ganguly.

What does the future hold?

The rental boom’s days may be numbered, though. A corresponding boom in apartment construction is underway, adding 300,000 to 400,000 new units to the rental inventory each year, most in markets popular with Millennials. The flood of new apartments is expected to slow rent growth to 2 or 3 percent per annum in the next two years, but as long as occupancy rates remain favorable, investors in single family rentals should continue to do well.

source: totalmortgage.com

5 Things Every Renter Should Know Before Buying

Buying a home can be financially rewarding, but it also has its challenges. Many renters can’t wait for the day when they’re able to get the keys to their own house. Ownership can provide a sense of stability, giving you full control to decorate and remodel as you like. But before buying, it’s important to know exactly what you’re getting into. Some people start the homebuying process with rose-colored glasses, or they feel the experience will be far better than renting—and sometimes, it is. At the same time, you need to be realistic and understand that buying might be more expensive and time-consuming than renting.

1. Profits aren’t guaranteed

Some people buy a home because they’re tired of wasting money on rent. Rather than put money in a landlord’s hand each month, they purchase a home to build their own net worth. Unfortunately, there’s no guarantee that buying a home will be financially beneficial.

If you purchase at the right time, your property may appreciate a little each year, which increases your equity, and you can earn a profit when you’re ready to sell. But sometimes, home prices go backwards. Rather than appreciate, property values depreciate. In a bad market, you could end up owing more than you paid for the house. And if you sell before home prices recover, you can lose money and pay out-of-pocket to sell the property.

2. Maintaining a yard takes time and money

If you lived in an apartment before buying a house, your landlord’s maintenance department likely handled the landscaping. As a homeowner, you’re responsible for your exterior, which involves mowing your lawn, pulling weeds, seeding, and fertilizing. Maybe you always dreamed of having a beautifully landscaped yard, but it takes money to maintain an outdoor masterpiece. You’ll also sacrifice your free time. According to the Bureau of Labor Statistics, the average American spends about 1 1/2 hours a week maintaining their lawns and gardens — but as a newbie, it might take you longer.

3. You might pay more for utilities

If you’re moving from an apartment to a single-family home, anticipate an increase in monthly utilities. The amount you pay for electricity depends largely on the size of the property. And if your apartment was smaller than your new home, you can realistically pay an extra $20-$30 every month. You’ll also pay more for utilities if your new home has natural gas, whereas your apartment was electric. Plus, homeownership means paying your own water and sanitation bills.

4. Your mortgage may slightly increase from year to year

Some people purchase a home because they’re tired of yearly rent increases. However, just because you buy a home with a fixed-rate mortgage doesn’t mean your mortgage payment will never change. Your property taxes can increase, which can increase the monthly payment a little each year, and if you file a claim with your homeowner’s insurance, your agency may raise your rate. Since both of these expenses are included in your mortgage payment, any increase or decrease affects your monthly payment.

5. Homeownership can slow your savings efforts

Saving money might be a priority, just know that buying a house can slow your efforts. Ownership can be financially beneficial in the long run, but in the beginning, you’ll drain your savings account buying the property, plus there’s ongoing repairs and maintenance which can cut into your disposable income.

If you’re ready to own your own place, buying can be rewarding and satisfying, but there are things you should know before you even think about starting the process. If you know what you’re getting into, you won’t have unrealistic expectations or be caught off guard.

source: totalmortgage.com

When Rent-To-Own is the Way to Go

If you’re not familiar with the rent-to-own structure, it’s for good reason.

When the housing market was booming, these options were few and far between. But with the market now moving more cautiously you may see more and more opportunities as a buyer and a seller.

First, let’s take a quick rundown of the basics
If you’re a seller thinking about turning your home into a rent-to-sell property, you first need to set a fixed rent and sale price. These should be negotiable, just like normal home prices, but keep in mind that once that agreement is signed, the sale price is locked into place for the length of the rental term, regardless of how the market changes.

There are a few other special differences. In addition to the rent, the renter is going to have to pay an upfront option fee, which will be put toward the down payment if the renter decides to buy the house and kept by the seller if the renter moves on.  On top of that, the renter will also have to pay a rent premium, or an amount in addition to the rent that will go toward the down payment.

The term of the rental agreement tends to be 1 to 5 years, at the end of which the renter has the option of buying the home at the agreed upon price with the down payment partially funded.

The Positives

If done right, this sort of deal can prove beneficial to both sellers and renters.

Rent-to-own can be a great plan B for sellers having a hard time getting a bite on their property. Houses still aren’t selling as fast as they did pre-2007, and if you’ve already moved into a new home, there’s a good chance you’ll be stuck paying two mortgages. A rent-to-own agreement could easily keep you above water for now and net you a sale later down the road.

Renters (slash potential buyers) benefit too. If you don’t have a great credit score, the rental period gives you time to build it up. Similarly, if you don’t have the funds saved up for a down payment, rent-to-own can be a smart way to put money toward one.

…and the Negatives

No surprises here—there are potential downsides for both the seller and the renter.

If you’re the seller, you have to abide by the contract even if the value of your home rises, or if someone makes an offer to buy it out right. If the renter backs out, you’re also back to square one, and potentially stuck with mortgage payments on a second house.

On the renter end, making a late rent payment often voids the option fee for that month, which will take a chunk out of your eventual down payment if you’re late a few times a year. If you decide not to buy the house, you won’t be able to get your option fee back, which means you may be out thousands of dollars.

There have also been cases of less-than-legit sellers offering rent-to-own options on houses under foreclosure. In this scenario, the bank gets the home and the renter is out their option fee and premium. Know what you’re getting into, and there should be no reason why both buyer and seller don’t benefit.

source: totalmortgage.com

Why Renters Need Insurance

The majority of Americans who rent an apartment or home don't have renter's insurance, according to a new survey released by InsuranceQuotes.com. That's because many say that their apartment building has good security and mistakenly believe that their landlord's policy will provide the coverage they need. Those surveyed also thought that renter's insurance was a lot more expensive than it really is.


Actually, any insurance a landlord may have will cover only the structure, not tenants' belongings. Even if a building is in a safe area and has a security system, there's still the risk of disasters such as fire or water damage from a leak. Without a renter's insurance policy, any damage to a tenant's property wouldn't be covered. The good news is that this coverage is quite inexpensive.



The average annual cost of renter's insurance is just $185 per year, according to the National Association of Insurance Commissioners. So that works out to just a littler more than $15 a month, which is a small price to pay for coverage against losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm and water damage (not including floods). If your home or apartment is damaged by a covered event and you have to live somewhere else, most policies will reimburse you the difference between your additional living expenses and normal living expenses. Plus, renter's insurance helps cover legal costs if you're taken to court because someone is injured at your residence. The primary reason that renter's insurance is less expensive than homeowner's insurance is because it just covers belongings -- not a dwelling, says Laura Adams, senior insurance analyst at InsuranceQuotes.com.

Adams says that renters should shop for policies based on the specific amount of coverage needed. So you need to take inventory of what you have and determine a value for your belongings. You can get either a replacement-cost policy, which will pay to replace your possessions up to the policy's dollar limit, or a cash-value policy, which will pay only what the items are worth when stolen or damaged. You should expect to pay about 10% more for replacement-cost coverage, according to the Insurance Information Institute.




If you have expensive jewelry, collectibles or art, consider adding a floater to your policy to provide more coverage. Standard policies offer only a limited amount of coverage for these items. You'll need receipts or appraisals for items to be covered by the floater. And Adams says that if you have a high net worth or the likelihood of getting involved in a lawsuit, consider increasing the standard liability coverage,which is usually $100,000, or getting a separate personal umbrella policy (see Why You Should Have Umbrella Liability Insurance).

When shopping for policies, get quotes from several companies. You can compare costs at Web sites such as NetQuote.com and InsWeb.com. Make sure that the primary cost factors are equivalent when you compare policies or as close as possible so that you have an apples-to-apples comparison, Adams says. These include the types of coverage you buy, the amount coverage you buy and the deductible (the amount you pay out of pocket before insurance kicks in), she says.

Also ask about discounts. For example, you might have to pay less if you have a security system, smoke detectors and deadbolt locks. Insurers also offer discounts to customers who have multiple policies with them, have good credit or are 55 or older. So be sure to ask about ways to lower your premium.

Price is certainly an important factor, Adams says. However, the value of choosing a reputable and service-oriented insurer shouldn’t be overlooked. See Find Out How Insurers Handle Claims for advice on checking a company's complaint record.

source:  kiplinger.com