What Every Homeowner Should Know About Home Insurance

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Insurance salespeople have one of the easiest sales jobs in the world: they’re selling fear. Selling an emotion is incredibly profitable, and fear is an incredibly strong emotion. However, a lot of times that fear is real, especially when it serves to protect one of the biggest investments you’ll ever make: your home.

Although no one likes to dwell on the “what ifs,” it’s important to protect yourself against the unexpected. Feeling the security that comes with knowing your home is insured is worth a lot more than a monthly payment.

Here are the basics Fox Business reports every homeowner should know about home insurance:

  1. Make sure you not only shop around for a policy, but for the best agent too. Insurance agents can help you get back on your feet after a disaster or make the situation feel even more impossible.
  2. A typical policy covers damage to your property and possessions in the event of theft, fire, or vandalism (even if the possessions are outside of the home) and provides liability coverage if someone is hurt on the property and sues. It also covers shelter costs, meaning if you’re displaced you won’t have to pay a lot of money out-of-pocket for your temporary residence.
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    A standard policy doesn’t cover earth movements (earthquakes, sinkholes, landslides), war, nuclear hazards, power failure, faulty zoning, government action, defective maintenance, bad workmanship, faulty repairs or flooding. In general, water damage from above (think rainwater or a burst pipe) is covered, while water from below (think flooding) isn’t.

  4. You may need to get supplemental coverage if the region you live in is prone to natural disasters like earthquakes, flooding, hurricanes or tornadoes.
  5. Understand the difference between market value and replacement cost. Before deciding which type of policy to purchase, understand what you’re paying for. Market value is how much a buyer would pay for your home in its current condition (after a natural disaster, fire, etc). Replacement cost plans cover the repair or replacement of your entire home.
  6. Reduce premiums by installing working smoke detectors, deadbolts, a burglar alarm system, a pool cover, and a fence around the pool. Reducing liability equals a reduced premium.
  7. Bundling your home insurance with other policies like your life or car insurance can also save you money.
  8. Make sure to take note of the time limits to report a claim. If something happens, make sure to get your claim in on time or else you risk being ineligible for benefits. Furthermore, waiting may make the problem worse.
  9. Keep records of all claims. Document everything that occurs during a loss to mitigate a claim being denied or not being paid in full. Save contracts, appraisals, and receipts and document phone calls.
  10. Keep an eye on your systems. Have routine check-ups done on major systems. If you’re able to make a smaller fix due to your early detection and prevent a bigger claim, your insurance company will most likely reward you.
  11. Note your policy’s limit on jewelry. Get an appraisal for how much your jewelry costs, and then consider buying a supplementary policy to cover what your home insurance doesn’t.
  12. When in doubt, file a claim. The worst that can happen is it gets denied. This best is that you get a new roof because of a windstorm and a few missing shingles. Don’t file frivolously though, only file claims you’re certain and on the fence about, because filing needlessly could lead to an increase in your premium.

Although thinking about everything that could go wrong with your home can be overwhelming, it’s necessary. Protecting your biggest investment is one of the best decisions you can make; after all, once a house becomes a home, it’s priceless.

 

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Matthew Perry’s Malibu Home for Sale

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Friends star Matthew Perry has decided it’s time to offload his Malibu estate. “The Pier House” at 3556 Sweetwater Mesa Road clocks in at $12,500,000 plus $325 a month for HOA dues. The four bedroom, five-and-a-half bathroom, four-plus car garage and 5,500 square foot beachside residence is truly swanky.

Matthew Perry’s Malibu Home for Sale Matthew Perry’s Malibu Home for Sale

Perry hasn’t only called this property home—it served as a sober living facility founded by the actor and called “the Perry House.” However, since the home is now on the market, the facility is expected to be relocated to Studio City according to the Los Angeles Times.

The home sits on nearly two-and-a-half acres in the celebrity-preferred, 24 hour guard-gated Serra Retreat and boasts walls of glass facing the Pacific Ocean, allowing for breathtaking beach views. Other incredible features of the estate include an expansive deck, swimming pool, telescoping doors, and intimate windowed alcoves.

Matthew Perry’s Malibu Home for Sale 4 Matthew Perry’s Malibu Home for Sale

With an interior featuring “a sharp and sophisticated blend of textures and colors,” the home offers every modern amenity. The top-floor, large master suite occupies an entire wing and offers a seating area with fireplace, his and her baths, and an incredible window seat overlooking the ocean. The interior also boasts a home theater, sleek designer kitchen with an additional prep area, and game room on the lower level.

Matthew Perry’s Malibu Home for Sale 3 Matthew Perry’s Malibu Home for Sale

The exterior of the home features the aforementioned heated pool, a Jacuzzi , fire-pit adjacent to the pool, built-in barbeque, garden area for outdoor entertaining, an open patio, and a sound system for both inside and outside. Sights that can be seen from the home include Catalina Island, the Malibu Pier (hence the nickname “The Pier House”), the Los Angeles city lights, and a panoramic coastline view.

The spectacular abode was built in 1981 and purchased by Perry in 2005 for $6,550,000. It was previously on the market for about five months from 2011 to 2012 for $13.5 million. The property is now going for $12.5 million and is co-listed by Mark Rutstein and Greg Holcomb of Partners Trust Real Estate Brokerage and Acquisitions and must be purchased as is.

 

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Most Common Regrets of the First Time Homebuyer [Infographic]

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Your first home will likely be the biggest investment you’ve ever made. The last thing you want is to regret something from the buying experience. There are all kinds of steps you could look back on with regret. Perhaps you’ll wish you negotiated more, or that you’d dreamed bigger, or that you’d simply known how much work really went into maintaining a house.

First Time Homebuyer Regrets1 Most Common Regrets of the First Time Homebuyer [Infographic]

Only one out of every five first-time homeowners report misgivings after closing, so the odds are in your favor that you’ll look back on the experience (and your new home) with nothing but satisfaction. Just in case, though, let’s take a moment to look at the regrets of the first time homebuyer to make sure you don’t make the same mistakes.

 

All of these stats are based upon the percentage of people who reported regrets after closing.

The most common source of remorse is that people outgrew their homes quickly and wish they’d purchased larger estates. 62% of those with regrets fit in this category.

34% wish they’d negotiated more or had found a better mortgage rate before signing on the dotted lines. On a similar note, 40% felt they’d paid too much or should have put more down. It’s hard to enjoy your new home when you feel like payments are slowly killing you.

38% were surprised by how much it costs to maintain a home, and a quarter of new homeowners found out after moving in that they didn’t like their neighbors/neighborhood.

24% have regrets related to their yard. Of that 24%, half wish they had a bigger yard and half wish their yard was easier to maintain.

Lastly, 17% dislike their parking situation.

Tips to Avoid Regret

Never get caught in a bidding war. This will trigger emotional decision making that can lead to overpaying and/or overlooking major shortcomings.

Have a short list of minimal requirements, but other than that, try to stay open minded. Don’t go in with a vision of owning a place just like your parents’ on your first house.

Drive through the neighborhood on a Friday night to really evaluate things like the parking situation, the neighbors’ etiquette, and so on.

 

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What No One Tells You About House Flipping

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The TV shows make it look so easy. You buy a dinky house, you do the repairs yourself, and you sell it for a 15k profit. The plan is foolproof!

However, the cameras often stop rolling before you see if the flip was actually a flop.

This is often the case with reality shows. As an example, we’ve discussed The Vanilla Ice Projectbefore. The show is entertaining and does a great job of showing how much elbow grease goes into a proper flip. However, the season ends with a renovated home and no actual buyers. If you track how much the properties actually sell for, it’s considerably below the initial asking price.

What makes flipping houses so tricky? Well, the obvious answer is the basic hidden costs that come with any kind of homeownership. Beyond that, there’s a principle misunderstanding in the industry that – if you can understand and utilize – will give you a clear edge in your market!

What No One Tells You About House Flipping BOLD What No One Tells You About House Flipping

Hidden Costs

  • Nearly a quarter of new homeowners were surprised by how high closing costs totaled. This can include the cost of getting a loan, escrow fees, courier fees, title policy, and document assembly,
  • Repairs come to an unexpected amount. For example, you could find out the foundation is rotting (often undetectable in an inspection) or there is mold that formerly went unnoticed.
  • Holding costs including HOA fees, property taxes, utilities, and any other costs that allow you to maintain the property while you’re fixing it up.
  • Realtor commissions
  • When you’re finally ready to sell, there may be some closing negotiations to make sure the buyer is ready to move in. It’s hard to predict how these will break down, but it could end up shaving a couple thousand off your profit.

Market Cap

Even if you manage your money effectively and somehow  avoid any surprises in the house flipping process, there’s still a strict limit to what you can expect in your profit.

This is what they don’t dare mention in your reality shows. It’s not sexy or lavish. It’s just a fact.

No matter what you do to a single family home, the comparable market analysis has the final say on the property value.

What this means is that there is a cap that the market places on your home value, no matter what you do to it! A 3 bed/3 bath single family home is still a 3-bed/3-bath single family home no matter what you do to it.  You could have the best landscaping, newest repairs, and a golden toilet. You’re neighborhood still determines what your home is worth more than anything you can do to it.

Obviously, market trends vary by zip code, so you will have to research for yourself what people are willing to pay for a home of your size in your area. If you need a resource to see how similar properties are valued in your area, MoveUp.com is a fantastic free resource.  If you’re looking for a solid number though, just know it’s unreasonable to expect more than 10% profit on your flip… regardless of how many times they’ve done it on HGTV.

When you take on your next renovation project, go in with a level head. Be prepared to put the work in, budget for those hidden costs of house flipping, and know that at the end of the day, you’re not the one setting the resale value. Your property is only worth however much someone is willing to pay for it.

Special thanks to Bigger Pockets and their podcast by Ben Leybovich for the inspiration for this article.

 

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What Everybody Ought to Know About a Home Appraisal

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home appraisal 200x300 What Everybody Ought to Know About a Home Appraisal

You’ve found the home that meets your needs and are ready to make an offer. Before you can actually get through the door, however, you have to go through the home appraisal. A home appraisal will determine how much the home in question is really worth. The worth or value of the property will in turn determine how much your lender is willing to give you to buy the home.

The What and The Why

In short, a home appraisal is the part of the mortgage process when a state-licensed and certified real estate appraiser determines the value of a property. This professional is an independent third party who can have no financial stake in the outcome of the appraisal. Lenders generally require a home appraisal if you are using the home as collateral for the loan. It ensures that the property is worth as much as the bank will be investing, and keeps buyers from overpaying for a home.

The How

A home appraisal is paid for by the buyer as a part of the home loan process at closing and costs around $300, depending on the price of the home. An appraisal notes and includes details including an estimate of how long it will take to sell the home, where the home is located, how the type of area it’s in will affect the value, how the property compares to three other similar properties in the area (comps), and any draw backs to the property (foundation, access, condition, etc). The appraiser will also look at lot size, square footage, the materials making up the interior of the home, fixtures, improvements made to the home, the foundation, exterior condition of the home, systems (air conditioning, sound system, security system), and outdoor features (pool, deck, etc). Check out this uniform residential appraisal report from Freddie Mac for a better idea.

The appraisal is normally carried out in three steps, including a physical visit to the home (a few hours), a comparison of the home to comparable properties in the area that have recently sold, and the creation of the report (all together taking about seven days).

Benefits of Landscaping 275x300 What Everybody Ought to Know About a Home Appraisal

If You’re the Seller

If you’re the home seller and want to make sure your home gets appraised for at least the amount it’s listed for, there are things you can do to positively impact the appraisal.

First off, clean your home or hire someone to do it for you. A clean, well-kept house tends to net a higher appraisal. Tend to the home’s exterior and up its curb appeal by pulling weeds, mowing the lawn, and touching up peeling paint. Make small improvements like fixing holes in the drywall or getting rid of unsightly stains in the carpet. If you can, provide the appraiser with a list of comparable homes that have recently sold. Although they will do this regardless, it’ll be nice for them to know you did your research before settling on a listing price. Lastly, provide the appraiser with a list of improvements and updates you’ve made to the home as well as a list of the positive aspects of your neighborhood (including new grocery stores, parks, schools, etc).

In Closing

Although there is no fixed expiration date on an appraisal, many lenders consider them outdated after six months. You are allowed to accompany the appraiser during the home appraisal and have the right to view a copy of the appraisal.

If you’re unhappy with the appraisal, most lenders have appeal procedures called “Reconsiderations of Value.” If you’re aware of home improvements or recent, comparable sales that were unavailable or weren’t considered by the appraiser, provide this information to your lender. If there were legitimate problems with the first appraisal, you can always obtain a second appraisal. Furthermore, lenders are required to report legitimate complaints.

Overall, home appraisals are normally carried out in a professional manner and provide added security to the buyer. If the appraisal comes out at a markedly lower price than the listing price, you may have dodged a bullet.

 

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