|
5 Things to Understand About Homeowners Insurance
1. Look for exclusions to coverage. For example,
most insurance policies do not cover flood or earthquake damage as a
standard item. These coverages must be bought separately.
2. Look for dollar limitations on claims. Even if you are covered
for a risk, there may a limit on how much the insurer will pay. For
example, many policies limit the amount paid for stolen jewelry unless
items are insured separately.
3. Understand replacement cost. If your home is destroyed you’ll
receive money to replace it only to the maximum of your coverage, so be
sure your insurance is sufficient. This means that if your home is
insured for $150,000 and it costs $180,000 to replace it, you will only
receive $150,000.
4. Understand actual cash value. If you choose not to replace your
home when it’s destroyed, you’ll receive replacement cost, less
depreciation. This is called actual cash value.
5. Understand liability. Generally, your homeowners insurance
covers you for accidents that happen to other people on your property,
including medical care, court costs, and awards by the court. However,
there is usually an upper limit to the amount of coverage provided. Be
sure that it’s sufficient if you have significant assets.
10 Questions
to Ask Your Condo Board
Before you buy, contact the condo board with the following questions. In
the process, you will learn how responsive—and organized—its members
are.
1. What percentage of units is owner-occupied? What percentage is
tenant-occupied? Generally, the higher the percentage of owner-occupied
units, the more marketable the units will be at resale. This ratio can
also affect a lender’s decision to give you a loan to purchase the
property. Lenders typically require a larger down payment for units in
mostly tenant occupied developments.
2. What covenants, bylaws, and restrictions govern the property?
What grandfather clauses are in place? You may find, for instance, that
those who buy a property after a certain date cannot rent out their
units, but buyers who bought earlier can. Ask for a copy of the bylaws
to determine if you can live within them. And have an attorney review
property docs, including the master deed, for you.
3. How much does the association keep in reserve? How is that
money being invested?
4. Are association assessments keeping pace with the annual rate
of inflation? Smart boards raise assessments a certain percentage each
year to build reserves to fund future repairs. To determine if the
assessment is reasonable, compare the rate to others in the area.
5. What does and doesn’t the assessment cover—common area
maintenance, recreational facilities, trash collection, snow removal?
6. What special assessments have been mandated in the past five
years? How much was each owner responsible for? Some special assessments
are unavoidable. But repeated, expensive assessments could be a red flag
about the condition of the building or the board’s fiscal policy.
7. How much turnover occurs in the building?
8. Is the project in litigation? If the builders or homeowners are
involved in a lawsuit, reserves can be depleted quickly.
9. Is the developer reputable? Find out what other projects the
developer has built and visit one if you can. Ask residents about their
perceptions. Request an engineer’s report for developments that have
been reconverted from other uses to determine what shape the building is
in. If the roof, windows, and bricks are not in good repair, they become
your problem once you buy.
10. Are multiple associations involved in the property? In very
large developments, umbrella associations, as well as the smaller
association into which you are buying, may require separate assessments.
10 Steps to
Prepare for Homeownership
1. Decide how much home you can afford. Generally, you can afford
a home equal in value to between two and three times your gross income.
2. Develop a wish list of what you would like your home to have. Then
prioritize the features on your list.
3. Select three or four neighborhoods you would like to live in.
Consider items such as schools, recreational facilities, area expansion
plans, and safety.
4. Determine if you have enough saved to cover your down payment and
closing costs. Closing costs, including taxes, attorney’s fee, and
transfer fees average between 2 percent and 7 percent of the home price.
5. Get your credit in order. Obtain a copy of your credit report.
6. Determine how large a mortgage you can qualify for. Also, explore
different loans options and decide what is best for you.
7. Organize all the documentation a lender will need to pre-approve you
for a loan.
8. Do research to determine if you qualify for any special mortgage or
down payment-assistance programs.
9. Calculate the costs of homeownership, including property taxes,
insurance, maintenance, and association fees, if applicable.
10. Find an experienced REALTOR® who can help you through the
process.
10
Ways to Lower Your Homeowners Insurance Costs
1. Raise your deductible. If you can afford to pay more toward a
loss that occurs, your premiums will be lower.
2. Buy your homeowners and auto policies from the same company. You’ll
usually qualify for a discount. But make sure that the savings really
yields the lowest price.
3. Make your home less susceptible to damage. Keep roofs and drains in
good repair. Retrofit your house to protect against natural disasters
common to your area.
4. Keep your home safer. Install smoke detectors, burglar alarms, and
dead-bolt locks. All of these will usually qualify for a discount.
5. Be sure you insure your house for the correct amount. Remember,
you’re covering replacement cost, not market value.
6. Ask about other discounts. For example, retirees who are home more
than working people may qualify for a discount on theft insurance.
7. Stay with the same insurer. Especially in today’s tight insurance
market, your current vendor is more likely to give you a good price.
8. See if you belong to any groups—associations, alumni groups—that
offer lower insurance rates.
9. Review your policy limits and the value of your home and possessions
annually. Some items depreciate and may not need as much coverage.
10. See if there’s a government-backed insurance plan. In some
high-risk areas, such as the coasts, federal or state governments may
back plans to lower rates. Ask your agent.
10
Questions to Ask a Home Inspector
What are your qualifications? Are you a member of the American
Association of Home Inspectors?
Do you have a current license? Inspectors are not required to be
licensed in every state.
How many inspections of properties such as this do you do each year?
Do you have a list of past clients I can contact?
Do you carry professional errors and omission insurance? May I have a
copy of the policy?
Do you provide any guarantees of your work?
What specifically will the inspection cover?
What type of report will I receive after the inspection?
How long will the inspection take and how long will it take to receive
the report?
How much will the inspection cost?
5 Things
to Understand About Title Insurance
1. It protects your ownership right to your home both from
fraudulent claims against your ownership and from mistakes made in
earlier sales, such as mistake in the spelling of a person’s name or an
inaccurate description of the property.
2. It’s a one-time cost usually based on the price of the property.
3. It’s usually paid for by the sellers.
4. There are both lender title policies, which protect the lender, and
owner title policies, which protect you. The lender will probably
require a lender policy.
5. Discounts on premiums are sometimes available if the home has
been bought within only a few years since not as much work is required
to check the title. Ask the title company if this discount is available.
Common Closing
Costs for Buyers
The lender
must disclose a good faith estimate of all settlement costs. A check to
cover your closing costs will probably have to be a cashier’s check. The
title company or other entity conducting the closing will tell you the
required amount for:
 Down
payment
Loan
origination fees
Points,
or loan discount fees, you pay to receive a lower interest rate
Appraisal
fee
Credit
report
Private
mortgage insurance premium
Insurance
escrow for homeowners insurance, if being paid as part of the mortgage
Property
tax escrow, if being paid as part of the mortgage. Lenders keep funds
for taxes and insurance in escrow accounts as they are paid with the
mortgage, then pay the insurance or taxes for you.
Deed
recording fees
Title
insurance policy premiums
Survey
Inspection fees—building inspection, termites, etc.
Notary
fees
Prorations for your share of costs, such as utility bills and property
taxes
A note about prorations: Because
such costs are usually paid on either a monthly or a yearly basis, you
might have to pay a bill for services used by the sellers before they
moved. Proration is a way for the sellers to pay you back or for you to
pay them for bills they may have paid in advance. For example, the gas
company usually sends a bill each month for the gas used during the
previous month. But assume you buy the home on the 6th of the month. You
would owe the gas company for only the days from the 6th to the end for
the month. The seller would owe for the first five days. The bill would
be prorated for the number of days in the month, and then each person
would be responsible for the days of his or her ownership.
How
Comprehensive Is Your Home Warranty?
| Check
your home warranty policy to see which of the following items
are covered. Also check to see if the policy covers the full
replacement cost of an item. |
Plumbing
Electrical Systems
Water Heater
Furnace
Heating Ducts
Water Pump |
Dishwasher
Stove/Cooktop/Ovens
Microwave
Refrigerator
Washer/Dryer
Swimming Pool (may be optional) |
How High Tech Is Your
Home?
If the latest technology or entertainment options are important in your
new home, add the following questions to your buyer’s checklist.
Are there enough jacks in every room for cable TV and high-speed
Internet hookups?
Are there enough telephone extensions or jacks?
Is the home pre-wired for a home theater or multi-room audio and video?
Does the home have a local area network for linking computers?
Does the home already have wiring for DSL or other high-speed Internet
connection?
Does the home have multi-zoning heating and cooling controls with
programmable thermostats?
Does the home have multi-room lighting controls, window-covering
controls, or other home automation features?
Is the home wired with multi-purpose in-wall wiring that allows for
reconfigurations to update services as technology changes?
The Pros and Cons
of Condos
Condominiums and townhouses offer an affordable option to single-family
homes in most areas. But consider these facts before you buy...
Storage. Some condos have storage
lockers, but usually there are no attics or basements to store
belongings.
Outdoor space. Yards and outdoor
areas are usually smaller in condos, so if you like to garden or
entertain outdoors, this may not be a good fit. However, if you hate
yard work, this may be the perfect option for you.
Amenities. Many condo properties
have swimming pools, fitness centers, and other facilities that would be
very expensive in a single-family home.
Maintenance. Many condos have onsite
maintenance personnel to care for common areas, do repairs in your unit,
and let in workers when you’re not home.
Security. Many condos have keyed
entries and or even door attendants. Plus, you’ll be closer to other
people in case of an emergency.
Reserve funds and association fees.
Although fees generally help pay for amenities and provide savings for
future repairs, you will have to pay the fees agreed to by the condo
board, whether or not you’re interested in the amenity or not.
Resale. The ease of selling your
unit is more dependent on what else is for sale in your building, since
units are usually fairly similar. Single-family homes usually are more
individual.
Freedom. Although you have a vote,
the rules of the condo association can affect your ability to use your
property. For example, some condos prohibit home-based businesses.
Others prohibit pets. Read the covenants, restrictions, and bylaws of
the condo carefully before you make an offer.
Proximity. You’re much closer to
your neighbors in a condo or townhome. If possible, try to meet your
closest prospective neighbors before making a decision.
What Not to
Overlook on a Final Walk-through
Be sure that:
Repairs
you’ve requested have been made. Obtain copies of paid bills and any
related warranties.
All items
that were included in the sale price—draperies, lighting fixtures—are
still there.
Screens
and storm windows are in place or stored.
All
appliances are operating.
Intercom,
doorbell, and alarm are operational.
Hot water
heater is working.
HVAC is
working.
No plants
or shrubs have been removed from the yard.
Garage
door opener and other remotes are available.
Instruction books and warranties on appliances and fixtures are there.
All
personal items of the sellers and all debris have been removed.
What Your Home
Inspection Should Cover
Siding:
Look for dents or buckling
Foundations: Look for cracks or
water seepage
Exterior Brick: Look for cracked
bricks or mortar pulling away from bricks
Insulation: Look for condition,
adequate rating for climate
Doors and Windows: Look for loose or
tight fits, condition of locks, condition of weather-stripping
Roof: Look for age, conditions of
flashing, pooling water, buckled shingles, or loose gutters and
downspouts
Ceilings, walls, and moldings: Look
for loose pieces, drywall that is pulling away
Porch/Deck: Loose railings or step,
rot
Electrical: Look for condition of
fuse box/circuit breakers, number of outlets in each room
Plumbing: Look for poor water
pressure, banging pipes, rust spots or corrosion that indicate leaks,
sufficient insulation
Water Heater: Look for age, size
adequate for house, speed of recovery, energy rating
Furnace/Air Conditioning: Look for
age, energy rating; Furnaces are rated by annual fuel utilization
efficiency; the higher the rating, the lower your fuel costs. However,
other factors such as payback period and other operating costs, such as
electricity to operate motors.
Garage: Look for exterior in good
repair; condition of floor—cracks, stains, etc.; condition of door
mechanism
Basement: Look for water leakage,
musty smell
Attic: Look for adequate
ventilation, water leaks from roof
Septic Tanks (if applicable):
Adequate absorption field capacity for the percolation rate in your area
and the size of your family
Driveways/Sidewalks: Look for
cracks, heaving pavement, crumbling near edges, stains
|
