Best advice now for homebuyers and sellers

BY KIM CLARK, SUSIE POPPICK, V.L. HARTMANN, JEFF INGLES, SUSAN JOHNSON, AUSTIN KILHAM, AND CHRISTINE LEE

 

Top experts and Money readers share their smartest tips on everything from selling a home quickly and winning a bidding war to cutting your electricity bills and prospering as a landlord.

 

1. Sell quickly. Win a bidding war.

home fast
Underprice it from the start. If you list your home for at least 10% less than it's worth, you'll often sell it for 10% more.

 

Buyers notice a house that's underpriced: They'll take it by storm and drive up the price with a bidding war.

People worry that setting the price low will deter bidders. That's not the case. If you don't get competitive bids, you didn't truly underprice the house to begin with.
-- Barbara Corcoran, founder, real estate firm the Corcoran Group and panelist on ABC's "Shark Tank"

Win a bidding war
Go as high as the maximum price you'd ever be willing to pay -- if someone outbids you, you'll feel confident you gave it your best shot.

Sometimes it's not just about the money. Give the seller some breathing room too. Buyers often signal their interest by offering to close quickly, but that move might backfire in this market: If the sellers haven't found a new place yet, they may be unable to accept your offer.

 

Instead, propose a seller's residential lease. You close on the house quickly, then rent it back for 60 or 90 days. That gives the sellers a chance to look for a home in a non-panicked way -- and gets you the house you want.
-- Mary Beth Harrison, founder and realtor, Keller Williams Elite, Dallas

 

2. Tips for renters and landlords

Protect yourself as a renter

Your landlord or property management company can make or break your rental experience, so look online for negative reviews. Slow responses to maintenance calls and deceptive leasing practices, like advertisements for amenities that don't exist, are the most common complaints.

A first-time landlord is a slightly higher risk. Ask a lot of questions, including where he lives and who will respond to maintenance requests. Before you sign a lease, test everything -- appliances, windows, light switches. If anything needs to be fixed, make sure that's included in the rental agreement. And don't sign anything that holds you responsible for the building's exterior.

-- TJ Rubin, managing broker at Fulton Grace Realty, Chicago

Prosper as a landlord
Think like your worst-case tenant -- the one who'll never pay you a dime and never leave. These folks will take advantage of strict laws on when and why a tenant can be evicted. You need to know those laws just as well as they do.

Write your tenant lease to safeguard your rights, like setting community standards for noise, trash and other areas of possible neighborly nuisance. To protect yourself financially, put away a little money from the rent to cover potential legal costs.

-- Casey Edwards, long-time landlord and co-author of The Complete Idiot's Guide to Being a Smart Landlord

 

3.Cut needless expenses

Boost your energy efficiency
Start with changes that don't cost money, like closing and opening drapes. Switch off appliances you aren't using. Some TVs use more energy in the off mode than when they're on. Plug a TV into a power strip and turn it off.

-- Kateri Callahan, president of the Alliance to Save Energy

Take the drama out of a renovation
Don't walk blindly into a major renovation project. Know why you are remodeling, and define what you really need so you don't just pretty up a space that doesn't work for you.

And before you even contact a contractor or designer, take 25% of your renovation budget and sock it away. That way when your contractor finds water damage, you can fix the problem and move on without fighting about how much it's going to cost -- or what part of your plan you have to scrap to stay on budget.

-- Susan Solakian, consultant and author of The Homeowner's Guide to Managing a Renovation

 

4. Be prepared

Weather the next storm that hits
Because of changes insurers have made in recent years, you may have to shoulder a larger portion of your losses than in the past.

The more informed you are, the better your settlement will be. Don't wait for an insurer to estimate the replacement cost of your belongings: Make your own inventory, and tell the insurance company what you think it owes you.

Keep a journal of every conversation with your insurer. And keep binders with your receipts, estimates, and inventories. You have to be your own advocate.

-- Amy Bach, executive director of United Policyholders, an insurance consumer advocacy group

Learn to be handy
"Always Google a home project. You can save hundreds doing it yourself. I replaced the capacitor in my AC unit for $29 instead of paying the AC company $250."

-- From MONEY reader Adam Rubenstein, via Facebook

Homebuilders struggle to find workers

By Les Christie

The National Association of Home Builders reported that 46% of its members have fallen behind schedule on finishing projects because they can't find enough workers.

 

Sales of new homes are on a tear, but builders can't find enough workers to keep up with the demand.

After the housing bust, many workers left the building trade in droves, said Michael Fink, CEO of Leewood Real Estate Group in Trenton, N.J.

"A lot of our workers are immigrants and they went back to their home countries," he said. "Our subcontractors can't get people; they can't start on time; they can't get things done on time."

The National Association of Home Builders (NAHB) reported in March that 46% of its members say they have fallen behind schedule on finishing projects, 15% turned down jobs and 9% lost or canceled sales because they can't find enough workers.

That could have some big ramifications for the broader housing market. Housing starts fell sharply in April to 853,000 and experts project residential construction will grow by about 25% annually, according to the NAHB. At that pace, it could take more than four years to get back to early 2006 building levels, when housing starts peaked at 2.3 million, according to Census Bureau data.

 

The lack of new inventory will add pressure to home prices, which have already climbed by double-digit percentages. During the first quarter, home prices rose an average 10.2% -- the biggest gain since 2006, according to the Case-Shiller national home price index.

After the housing bust, construction fell off a cliff and many workers moved on to other occupations or they retired. With the supply of skilled workers short, subcontractors have had to raise wages.

The competition for workers has gotten so heated that some construction companies are even poaching workers off each others' job sites, according to Jan Maly, president of JM Maly, a construction company in the Houston area that builds high-rise condos, schools, hospitals and other commercial buildings.

 

Rival contractors may come right up to the job site to recruit, enticing workers with the promise of higher pay, he said. A concrete worker will quit working for one builder on a Monday, for example, and then show up the next day pouring foundation for another builder a few blocks away, he said.

"There's a lot of employee pilferage going on," he said. "It got so bad at the Exxon headquarters construction site [in The Woodlands, Texas] they had to put in rules not to go after other construction workers."

 

Maly said he finds workers by word of mouth, mostly through recommendations from other employees.

"It costs so much money to hire somebody, maybe $3,500 just to get them on board -- without counting the cost of training them," he said. "Once they're on the job site, you have to guard them."

Builders are trying to find a way to fix the problem. A lot of the skilled workers, like framers, aged out of the industry during the downturn. And since there was so little work for so many years, few young people entered the trade to replace them, said Tom Woods, a custom home builder in the Kansas City area.

"We've had to share a framing crew with another contractor," said Woods.

 

Some builders are turning to organizations like the Home Builders Institute, which is funded by the Department of Labor's Jobs Corps program to train displaced workers, at-risk youth, ex-offenders and military veterans in construction skills.

HBI trains about 13,000 workers a year and places 80% of them in jobs, but that's still not enough. About 2 million workers left the industry in the past five years, according to John Courson, the organization's president.

There are nearly 6 million workers in the construction trades and the Bureau of Labor Statistics projects that industry job growth will be faster than average between 2010 and 2020, at about 25% or more over the period.

Open house on this lovely 4 bed home this Sat, 29th in Anchorage!

Lovely inside and out. Large fenced backyard with RV parking.

This event will be hosted by Victoria Brink and you may call her at

907-351-9434. Please bring your friends and buyers.

 

202 Stewart Street

Anchorage, AK 99508

Price: $255,000

Gorgeous inside and out. Large fenced backyard with RV parking in the rear of home off of alley.

All new interior and exterior paint! This home has a kitchenette downstairs, family room,

large back deck, etc. This is a wonderful starter home.

OPEN HOUSE

 

SAT/6-29-13@1-4pm

We also have vacant lots available.

Brought to you by:

Les Bailey & Associates Real Estate Team

Keller Williams Alaska Group

Direct: 907-694-1234

Toll Free: 1-800-784-2912

www.LesBaileyAndAssociates.com

New Listing!!! Delightful and spacious home with open-concept floor plan in Eagle River!

New Listing!!! Delightful and spacious home with open-concept floor plan in Eagle River!

 

17333 Flintwood Place #86

Eagle River, AK 99577

Phone#: 907-694-1234

Price: $199,000

 

Just Listed

 

Property Type: Condo/Townhouse/Co-Op

• Bedrooms: 3; Total Baths: 2; Garage(s): 2
• Year Built: 2005; Sq. Feet: 1,532; Lot Size: 0.06
  • View: Beautiful Mountain Views
• Heat: Forced Air
  

See a quick tour of this condo below:

For more exciting features of this property, click here:

Delightful and roomy home with 'open concept' floor plan with vaulted ceilings,

great entertaining possibilities!

Fabulous location close to shopping, downtown Eagle River, and military bases!

Extra large 2 1/2 car garage which can actually fit 3 cars or room for toys!

Terrific end unit!

 

We also have vacant lots available.

Brought to you by:

Les Bailey & Associates Real Estate Team

Keller Williams Alaska Group

Direct: 907-694-1234

Toll Free: 1-800-784-2912

www.LesBaileyAndAssociates.com

5 Secret Stats that Matter to House Hunters

By Tara-Nicholle Nelson

 

 

There are some basic statistics that we all know buyers want (and/or need) to know, in every market climate. The average number of days a home stays on the market (DOM), average list price-to-sale price ratio: these and other stats are part of every good agent’s tutorial for understanding the market and making offers.

But today’s market – hot and heating, in most areas – presents some unique challenges to buyers. In turn, those challenges (e.g., multiple offers, super short DOM, way over-asking sales prices) give rise to buyers’ craving for a unique set of “statistics.”  These data points have the power to manage buyer expectations and help them quickly get up to speed on today’s market realities to ramp up to be successful more.

This knowledge will translate into fewer unsuccessful offers, fewer discouraged buyers who fall out of the process entirely, a higher close rate, and less of a time drain for you.

Here are some of the insider stats that house hunters desperately desire or need, in today’s market:

1.  The number of homes most of your buyers “lose” before they “win”

Have you ever taken up running?  If you just go out there cold, you might stop as soon as you feel the heart-pounding, chest cramping distress of the first minute or two on the track or trail.  But if you do the research first or talk to other runners, you’ll find out that everyone experiences those awful sensations and – more importantly – that they go away once you get through the first few moments of a run.

I call this “normalizing” the distresses and discomforts that so often derail people and frustrate them into giving up on an important life initiative. If you let buyers know that it’s normal for even smart, strategic, aggressive buyers to lose out on a few homes before they are the prevailing bidder in your market, it takes a little bit of the sting out of it. And that keeps them moving forward more quickly to make the next offer. It also scores you some credibility points for being the expert about what’s “normal” in your local market.

2.  Average number of offers per listing 

Buyers keep hearing that this is a multiple offer market. But what that truly looks like and means for any given buyer in any given market varies dramatically.  If most buyers are bidding against 1 or 2 other offers, that’s one thing. If it’s common to have one or two dozen offers in contention for every home, though, that’s an entirely different scenario.

Talk with your buyers as early as possibly in the buying process about what is normal in the way of competition levels in the various neighborhoods, price ranges and property types in which they’ll be hunting.  That will avoid the sometimes paralyzing fears and feeling of futility that come up when they hear about multiple offers and click their mindsets into reality mode sooner, rather than later.

3.  Neighborhood “run rate.”

You calculate a run rate by projecting mathematically how the current rate of rise in home prices in an area would look like if it continued for the whole year.  For example, if homes have risen 7.5% this quarter, a run rate for the year would look like 30%.

It’s true that home price increases are seasonal, and that spring and summer home price increases will likely outpace the increases the same market will see in the fall and winter – especially in cold weather markets. So, a run rate is not at all a highly precise way of predicting the market’s performance – but it still has utility (see below). That said, in many markets, there’s still a long way to go for the market to recover. As a result, the pace of appreciation might actually continue to increase over a one-year horizon, as the market simply continues to make it’s comeback and buyer demand continues to outweigh seller supply.  So, a run rate is not a terrible tool to use, right this moment, either.

Buyers may logically understand that they need to be aggressive in multiple offer markets or face the prospect of being priced out.  But talking through the run rate for their target neighborhood can help them understand precisely what that could look like. Instead of just saying “you’ll end up priced out,” in the abstract, a run rate allows you to get much more vivid. “If homes continue to increase in value at the rate they did this quarter, X home that you lost, which sold at $200,000 will actually go for $260,000 this time next year.”

Breaking the numbers down this way creates the reality check some buyers need to make their real best offers in heated, ascending market climates like today’s.  Use your best judgment, though, before having this conversation with buyers. Make sure that they know the reality that appreciation could slow after the summer, or not. Also take an approach that creates a reality check vs. using unfounded fear tactics: no buyer should feel scared into buying prematurely or overextending himself or herself financially.

4.  Average pest report repair estimates.

If you work in an as-is market with older homes or where many of the homes have decks, woodwork or other items that commonly need repair, buyers may balk at the concept of taking a home as-is and still paying top dollar – despite the fact that the pest inspector is calling for $10,000, $20,000 or even $30,000 of repairs.  But that is the reality of what it takes to be successful on many markets. The thing is, buyers have no way to know this is normal.

Giving them hard data to show the average pest report bill in your neighborhood or town – even if you just compile it from your last 10 transactions or jointly with other agents in your office – can help buyers know what is a standard practice in your area, and make it easier for them to wrap their heads around it.  It also empowers them to make an offer that is competitive not just on price, but on terms.

5.  Inventory rate and direction it’s trending.

The inquiring minds of buyers with demanding or hard-to-find home feature requirements want to know: what are their chances of finding a home that fits the bill.  As they make offers, it’s critical to brief them on how those chances are trending, numerically speaking.

Making your buyer aware that they fall on the picky end of the spectrum, that very few homes on the market will work for them, and that the trend in inventory in their target areas is flat or barely budging, this can change the way they approach offer-making. It may motivate them to loosen the purse strings when they do make an offer on a home that checks all the boxes on their wants and needs list.  It can also help them be more willing to deprioritize some ‘needs’ to non-essential ‘wants,’ when a house comes up that could work for them.

These five powerful stats can help your buyer clients make both well-informed and -timed decisions. What other stats and tactics are you guys using to help your buyer “see the light” in today’s market?

Five proven ways to cut mortgage costs

If you want to reduce your mortgage bills, then consider these surefire tips to help you cut your mortgage costs.

By Sarah Tann

Let's not sugarcoat it: High mortgage costs can be a real pain in the butt.

In fact, some 84 percent of homeowners say mortgage costs are a big concern for them and that "high interest rates, high payments, and taxes and escrow are the top three most frustrating issues regarding consumers' current mortgages," according to a September 2012 mortgage study conducted by Carlisle & Gallagher Consulting Group, a management and technology consulting firm.

The good news: There are ways to alleviate some of this financial stress.

Keep reading for some proven tips on how to cut your mortgage costs.

Tip #1 - Refinance Your Mortgage

What makes refinancing your mortgage a buck-saving option?

For starters, refinancing, which is the process of paying off your existing mortgage with a new one, could help you lower your monthly payments if you qualify for a lower interest rate.

Perhaps that's why Joffrey Long, president of Southwestern Mortgage in Granada Hills, California, says that refinancing is a viable option to help lower mortgage expenses.

"Any consumer, at any time, who has a mortgage and is paying interest should be aware of the opportunity to refinance," says Long, who is also the education chair for the California Mortgage Association.

And the opportunity to refinance could result in huge savings.

Where's the Proof? Consider this example from "A Consumer's Guide to Mortgage Refinancings" published by the Federal Reserve Board, which oversees national monetary policy and banks. It compares monthly payments on a 30-year fixed-rate loan of $200,000 at 5.5 percent and 6 percent:

 

Monthly payment @ 6 percent:                $1,199

Monthly payment @ 5.5 percent:             $1,136

The difference each month is:                 $63.00

Over 10 years, you will have saved:          $7,560

That's a considerable amount of savings for just a .5 percent interest rate drop, isn't it? Now just imagine how big your savings would be if you could lower your interest rate by 1 or 2 percent.

However, it's good to keep in mind that refinancing is not for everyone, says Long, and that costs and long-term property plans are things to consider before taking this big step.

Tip #2 - Shop Around for a Super-Low Interest Rate

Whether you're perusing for your first home loan or thinking about refinancing your existing mortgage, shopping around is a key cost-cutter when it comes to your mortgage payments.

According to Long, shopping around is one of the most important ways for homeowners to cut mortgage costs, but unfortunately, some people overlook it because they're too comfortable with their current bank.

"There's a comfort level that people have with big banks," Long says, "and it makes sense because they've been with the bank for many years. But, it's a good idea to check with independent mortgage bankers and lenders to make sure that the rates you're receiving are indeed competitive."

Where's the Proof? "Shopping, comparing, and negotiating may save you thousands of dollars," says the Federal Reserve Board. Just think about it: If you don't compare rates from multiple lenders and banks, how will you truly know if the rates you're receiving are indeed the lowest?

Tip #3 - Take a Second Glance at Your Home Value

When the value of your property goes down, it's not the best news in the world. One upside, however, is that you may not have to pay as much in property taxes, and that could be great news.

And because property values fluctuate up and down depending on the real estate market, it's always a good idea to reassess your home's worth to make sure you're not paying more than you need to in property taxes.

In fact, "After several years without a reassessment, some properties will be over-assessed and some will be under-assessed," notes the New York State Department of Taxation and Finance's website. "This is because some properties will have increased in value, while others may have decreased or stayed the same. Without a reassessment, all of the properties will continue to pay the same amount of taxes."

That's why Long says reassessing your home is important. "If your home is assessed at more than it's worth, a reassessment could help reduce property taxes," he says.

Where's the Proof? Just consider this example from the New York State Department of Taxation and Finance:

 

                                                  Property A               Property B

Market value 20 years ago                100,000                  100,000

Taxes 20 years ago                          $2,000                    $2,000

Market value today                          300,000                  150,000

Taxes today, after a reassessment      $2,667                    $1,333

 

 

So what's the big takeaway here? If you don't reassess your home value, you could be paying much more in mortgage costs than you have to.

Tip #4 - Give Your Credit Score a Healthy Boost

Oh, credit scores...they can make life amazing - or incredibly miserable. And when it comes to cutting your mortgage costs, a good credit score could be the difference between beautifully low or unpleasantly high payments.

Why? Because according to a consumer credit guide published by Federal Reserve Board, your credit score is used by lenders to evaluate how you handle your financial responsibilities. So, if you've been rather reckless with your finances, you'll likely have a lower credit score which is often reflected in a higher interest rate. Likewise, the higher your credit score, the lower your rate will be.

And this is precisely why raising your credit score is always a good idea.

"Whether you buy or refinance, raising credit does help decrease mortgage rates," says Long.

Where's the Proof? You don't have to look much further than this chart, which shows what kind of interest rates you could get - based on your credit score. The data is pulled by myFICO, a division of the Fair Isaac Corporation, with interest rates as of November 13, 2012.

 

FICO Score                                      APR

760-850                                    2.926 percent

700-759                                    3.148 percent

680-699                                    3.325 percent

660-679                                    3.539 percent

640-659                                    3.969 percent

620-639                                    4.515 percent

 

As you can see, a good credit score can definitely work in your favor. However, Long warns that boosting your score is a long term proposition, so it may take awhile before you can reap the benefits of an improved score. "It's not just going to go up overnight, so by the time you've raised your credit score, the low rate you want may no longer exist."

Long recommends checking with your lender to find out what kind of score is necessary to qualify for the loans and rates you want - then figure out if the effort will be worth it.

Tip #5 - Make Extra Mortgage Payments

You're probably thinking this is a crazy and contradictory suggestion, but trust us - it's not.

No, this tip is geared towards people who may have a little extra money to spend and are looking to invest it wisely. In this case, by paying off their mortgage quickly.

In fact, doing so will reduce future interest costs and save you money, notes a 2011 consumer mortgage report by the Federal Deposit Insurance Corporation (FDIC), an agency designed to promote public confidence in banks.

"By adding a little more money to your monthly payment or sending all or part of your payment in sooner than you're scheduled to, you can repay your loan faster and cut your total interest costs by thousands of dollars over the life of the loan," said FDIC's associate director, Luke Brown, in the 2011 consumer report.

Where's the Proof? Let's say you had a $200,000, 30-year fixed-rate mortgage at 6 percent, with a monthly payment of $1,199. If you made just one extra payment a year (13 instead of 12), you could save $47,000 in interest and cut five years from your loan term, says Zillow in its report "7 easy ways to trim your mortgage costs."

Of course, before deciding to embark on this route, you should first determine if you have the funds necessary - and then some, says Long. He recommends having at least six months worth of household income saved up for emergencies before making any extra payments.

Are your pros insured?

From: This Old House

Yahoo! Homes/Thinkstock

 

Making sure you have proper insurance coverage when work is being done on your home often means upgrading your homeowner's policy. The goal is to make sure your policy and those of anyone working on your home cover injuries to people, materials, the existing house and the new work.
Sounds simple, but any insurance agent can tell you horror stories. Tom Shaw, marketing manager for Madison, New Jersey-based Atlantic Mutual Insurance Company, recalls a minor roof repair that ended up costing $1 million. "The roofer used a blowtorch," says Shaw, igniting the house, which burned. "Thousand-dollar job, million-dollar claim." Atlantic Mutual paid the claim and then sued the contractor and roofer as well as their insurers. 

What coverage is right? If you're hiring a general contractor for an addition, upgrade your homeowner's policy before the job starts so the addition is covered as it's being built. And carry at least $1 million in liability coverage on your homeowner's policy. Also, to cover injuries, damages and uninstalled materials, ask for written proof of the contractor's license, workers'-compensation coverage and a general liability policy. For large jobs, you can ask your contractor for a performance bond (you might have to share costs), which protects you if your contractor fails to finish the job. List any valuables you have with your agent and ask the contractor to carry fidelity insurance, which guards against theft. Also require proof of workers'-compensation coverage for subcontractors working on your project. If they don't carry it and someone gets injured, you're liable. 

If you're acting as your own contractor, make sure the subcontractors you hire have a current license, general liability insurance and workers' comp for their employees. 

If you're doing the work yourself, your homeowner's policy often will cover you, with one exception: uninstalled materials (for example, if you crash a hammer through a $500 French door). Check with your agent—a good idea in any situation—and see about extending coverage. For a good primer, check out the Insurance Information Institute.

A cash-out refinance helped me buy my $585,000 dream home

By Scott Grindstaff

December 2007 was the official start of the Great Recession. That happened to be the same month my wife and I decided to do a cash-out refinance on our first house and use the cash as a down payment to buy our dream home.

 

We bought our first house in La Mesa, Calif., in June 2000 for $200,000; we took out a 30-year fixed-rate mortgage with an interest rate of 8.375 percent. Shortly after purchasing, the housing market in Southern California skyrocketed. I decided to leverage the red hot real estate market and steadily dropping interest rates over the next few years. From 2001 to 2004 I refinanced our home five times, with the sole intent of lowering the interest rate and principal balance and forcing equity into our home. I made sure I never had to pay closing costs, so every time I refinanced I was trading a higher interest rate in lieu of paying any closing costs. I also used the falling interest rates (and the lower monthly payments associated with lower rates) to change my loan from a 30-year to a 15-year fixed-rate mortgage, which really increased the amount of principal payments being applied to my loan each month.

With two young sons, our house became too small for our family. My wife and I attempted to sell our home in the summer of 2005 in the hopes of moving to a bigger home and nicer area. We received an offer of $495,000, but we ultimately didn't sell; we thought the offer was too low.

My wife and I talked it over and decided to do a cash-out refinance and use the cash proceeds to purchase a new home while renting out our current one. By late 2007, our principal balance on our home loan was under $124,000. We decided to pull the trigger in December 2007 and refinanced our home to a 30-year fixed-rate mortgage with an interest rate of 5.625 percent. Our new loan balance became $284,000, which meant we were able to pull out $160,000 in cash. I found a renter for our La Mesa home and the rent covered all the expenses and provided $200 per month positive cash flow. This cash flow then helped -- and, to this day, continues to -- cover maintenance, repair, and vacancy expenses.

 
Soon after refinancing we found our dream home in Del Cerro, a suburb of San Diego. We closed on it in March 2008. We had looked at the same floorplan home in 2005; the home we looked at then had sold for over $700,000. By March 2008, the grinding real estate downturn knocked our dream home price down to $585,000. With a down payment of $168,000 (which mostly came from the cash-out refinance on our La Mesa home), we ended up with a loan balance on our new home of $417,000; right below jumbo loan status, this helped keep our interest rate on the low end at 5.5 percent for a 30-year fixed mortgage.

 
I have subsequently refinanced both properties to a much lower rate; they're each on a 30-year fixed-rate mortgage with an interest rate of 3.75 percent. My wife and I are very glad we decided to reach outside of our financial comfort zone by renting out our first home and purchasing our dream home. We now live next to a wonderful neighborhood park that allows my boys to ride their bikes and enjoy the playground equipment.
Also, our dream home has better-performing schools than those near our original home. We have much more room in our dream home, and we now have a play room for our sons and they have their own bedrooms, which are ample sized rooms compared to our last home. I am especially glad now with the real estate market turning around as my family enjoys the benefits of having two homes appreciating in value, instead of one.

Home Security 101

By Joe Provey

 

It wasn't so long ago that when an intruder broke into a home, the home security system would sound an alarm. If it was a monitored system, the central station would call the police to report the intrusion. This assumes, of course, that you armed the system, the batteries were still good and the intruder wasn't quick enough to disable the system before it sounded the alarm or dialed the central station.

The revolution brought on by wireless technologies, smart phones, and mobile apps have changed all of that. Today, home security systems can still sound alarms, but are much more difficult to forget about or foil. A software-supported security system can send you a text message every time a door or window is opened, whether you've armed it or not. It can stream live video or send still images of what's happening in your garage, living room, backyard or wherever you deploy a security camera. You can even be alerted before the break-in, the moment the burglar pulls into the driveway!

And that's not all. Home security has teamed up with home automation so the same interactive service can give your home the appearance that someone is home. Lights, TVs and radios can be turned on and off at random intervals, or according to the schedule you choose. Even motorized blinds can be raised or lowered upon your command.

Home security systems can give you peace of mind in other ways, too. Whether you're home or away, they can inform you of hazards like fire, elevated carbon monoxide levels, and power outages.  They can alert you if someone is tampering with a safe, a locked tool chest, or a medicine or gun cabinet. You might even use it to check on the safe arrival of a child returning home from school. Or, if you lose sleep wondering whether the water heater is flooding your basement, you can have your system set up to alert you of that as well.

With interactive systems come other benefits as well. Prefer not to hand out house keys to housekeepers, or other service providers? You can unlock a door for them from wherever you are, whether you're at work or on a trip, with systems such as Kwikset's SmartCode.

You can also use the system to program your home's temperature so you don't waste energy heating or cooling your home unnecessarily. During cool seasons, it can automatically lower settings when you're sleeping or away—and raise them just before you wake or return home.

 

BUILDING A SECURITY SYSTEM
Smart systems consist of hardware that doesn't look a lot different than it did twenty-five years ago. There are some specialized sensors and video cameras that weren't common in the past and window and door contact switches have gotten a lot smaller, but the basics are the same: a control panel or console, magnetic contact switches, motion sensors, a siren. The new systems may also be connected to central monitoring stations, as do many old-style security systems. The big difference, however, is the degree of interactivity. New software platforms, such as alarm.com and iControl (pictured below) allow you to send commands, program home systems, view surveillance video, and receive alerts on a smart phone or computer—whether you're at home or away.

 

I Control Open Home Software Control Panel

When shopping for a system, review software platforms first. Alarm.com and iControl are the two biggest. The former has partnered with more than 2,500 dealers and the latter with ADT and Comcast. Among other things, you'll have to decide between a "cellular primary" or "broadband primary" system. The former is a wireless connection to the monitoring station, making it immune to power outages or someone cutting a cable. It is limited, however, with regard to transmitting large quantities of video, so many cellular primary systems incorporate broadband for video.

Broadband primary services, on the other hand, have cables running down the side of a house that can be cut, thereby disabling the system. Some services offer cellular back-up should this occur.

Be sure to choose a reputable dealer; one that will sell you the equipment as well as a monitoring plan. Many dealers will install the system for you, but there are others that sell equipment and services for the do-it-yourselfer. Frontpoint Security, a national provider based in Virginia, for example, offers a GE-branded system, the Simon XT, that can easily be installed by the homeowner (along with alarm.com features, and a third party monitoring plan). Installing the system yourself can save you several hundred dollars and make you more knowledgeable about how it works.

Smart home security systems do not restrict the type of security hardware you use, although a dealer may limit your choices. The inside-the-house components may connect by wire (known as hardwired) or via radio frequency (wireless) or RF radiation. While hardwired components were considered the standard because they are more difficult to disable and don't rely on batteries for power, the reliability gap has narrowed—or even disappeared—with new technology.

Alarm.com and its partners, for example, offer "smash and bash" protection for wireless home security systems. As soon as a point of entry is breached, the central station is immediately sent a pending alarm signal. It doesn't wait to find out if the person who entered is you or a bad guy. If the system is not disarmed within the programmed amount of time, the alarm is treated as an intrusion. In this way, a smashed controller won't stop the central station from calling the police.

A conventional system, on the other hand, does not send a signal for a period of time (typically 30 seconds while it allows time the homeowner to tap in a code and then more time for the dialer to call the monitoring station). It doesn't sound like much time but for a smart burglar, it can be enough to disable the security system or to grab a purse or valuable and run.

Wireless hardware is, of course, much easier to install than wired components, making it more appealing to do-it-yourself homeowners. You can also take it with you should you move.

 

Look for a home security system with a full line of wireless peripherals, including modules for controlling lights and appliances, thermostats, cameras, motion sensors(some can distinguish between a pet and a person), water sensors, and glass break and vibration sensors. Look for long-life battery power, too. Lithium sensor batteries, for example, can last three to five years. When they do run low, the system lets you know well in advance. Choose a controller with back-up battery so the system will stay active in the event of a power outage or if the Internet is down. If you will be installing smoke alarms you'll need the extra power of a 24-hour battery back-up, not the 4-hour back-up offered by many manufacturers.

Smart systems all require a subscription to a third-party alarm monitoring service. Ask about which central station will be handling your account and be sure that it is UL certified.

THE COST FOR SECURITY
There are two costs to keep in mind when shopping for a home security system. The first is for the equipment and the installation, if you're having it done by a professional. It can run from a few hundred dollars for a basic installation (or less that half of that if you install it yourself) to north of $1000 for a full-feature system with specialized sensors and wireless smoke and CO detectors. The second is the monthly service charge that includes fees for software-driven features and central station monitoring. It typically ranges between $35 and $60 per month. Some dealers, much like mobile phone and cable TV companies, will reduce the installation cost in return for a multi-year contract.

 

 

LOW-TECH, LOW-COST ALTERNATIVES
Burglaries have been dropping steadily for 20 years in the US, according to the FBI, but that's small consolation to the roughly 2 million victims of break-ins every year. To avoid becoming part of this statistic, there are a number of things you can do to make your home less vulnerable to theft. They begin with relatively low-cost improvements and common-sense practices. This is where to make your initial investment in home security.

1. Install window and door shades that make it difficult to see if someone is home

2. Upgrade locks on all doors and windows—and use them!

3. Put interior lights, TV and radio on timers so you can create the illusion that someone is home when you're out.

4. Install motion-controlled or infrared-controlled outdoor lighting. There is nothing more suspicious than a porch light left on from dusk to dawn over a long period of time.

5. Prune or replace large foundation plantings so intruders cannot hide behind shrubs while prying open a window or door. Low thorny bushes are also a deterrent.

6. Form or join a block watch group. Such groups are effective crime deterrents because they encourage residents to be vigilant and to call the police whenever they see something amiss. They also exchange information about crime in your neighborhood and work with police to improve response times.

7. Don't forget about garages and sheds. Always keep garage doors closed, even while at home, so thieves are not able to spot items they may want to steal. Lock valuable items, such as expensive bicycles and grills, to a very heavy object with a chain and pad lock. Drill holes in garage door tracks and insert a padlock or bolt, to prevent the door from being forced open. Install a hasp and padlock on shed doors.

8. Change the greeting on your answering machine so it doesn't indicate whether you are away or not. Never leave a note on the door indicating you are away.

9. Keep car doors locked and windows closed. Never leave valuables,
especially electronics or money, in the car. Or, if you must, put them out of sight. Use a locking device on your steering wheel in high-crime areas.

10. When engaged in a home improvement project, do not leave ladders in sight. They are an invitation to burglars. Similarly, don't leave tools lying about that might be useful to an intruder, such as hammer or pry bar.

We're paying off our mortgage in less than 5 years

By Adam Hatter

I am not a financial genius by any means. At times in my life, I've maxed out all available credit and found myself in debt up to my eyes. But as of June 7, 2013, my wife and I are mortgage-free. That's four years and 10 months from the day we made our first payment.

Why we're paying off our mortgage

Shortly after being married in 2006, my wife and I had a new home built less than 10 minutes away from our jobs. We moved into our home in July 2008 and had our first payment due the following month. Our initial mortgage was in the amount of $156,780 on a 30-year fixed-rate loan at 5.875 percent, which gave us a monthly payment of $927 (before insurance and taxes). This meant at the completion of our 30 years of dedicated payments we would have paid $333,868 (give or take) -- and $177,078 of that would go to the lender, just for having let us borrow money.

Initially we had no intentions of living in our home for more than a few years, so we only made the minimum monthly payments during the first year. The goal was to finish our attic and basement, build a deck, and then sell the home and downsize. But after the birth of our first child and deciding to have a second, we realized the house did meet our needs and we wanted to raise our children there. Once we decided to remain in the house, we knew the sooner it was paid for the sooner we would be free from the shackles of debt; the sooner we would have the ability to use our money for more than just monthly bills.

We devised a plan to pay off the mortgage and "suffer" for a few years while our children were young. We figured while they were babies and toddlers we wouldn't want to have many adventures away from home (Disney with a 1- and 3-year old, no thanks) and they wouldn't require many high-dollar necessities (play dough and crayons provide nearly endless entertainment early on).

How we did it

We pooled resources. This meant taking every penny made and concentrating that beam of liquidity in the direction of our mortgage debt. Our household income is quite average, but when we closely examined our finances, we found that we had much more than we were putting forth to pay toward our mortgage. I'm an analyst for a day job and of course I deal with numbers a great deal, so I created my own budget sheets and amortization charts. In the end, there were several contributing factors that helped us pay off our mortgage in less than five years:

• 
  We made bi-weekly payments and ensured the extra payment each month went directly to principal. Once the bank started receiving an extra full payment every two weeks they immediately started applying it to our account as a future payment; we learned this lesson quickly and after that made sure the bank coded our account to only apply one payment a month and put everything else toward principal .
• 
  We refinanced. After 26 months of payments on our original mortgage, we had only whittled it down to a little over $147,000. In November 2010 we refinanced this amount to an interest rate of 4.375, staying with a 30-year fixed mortgage. Our new payment was $737 (before insurance and taxes). 

   

• We lived well within our means. Goodwill saw the majority of our business.
• Anytime we had extra money we applied it to the mortgage. This was everything from an unexpected tax refund to finding opportunities for overtime at work.
• 
  We lowered our savings contributions. Our 401k contributions were originally set at 15 percent, so we cut this down to 5 percent and still received our employer match of 5 percent. We also had monthly allotments going toward 529 college savings accounts for our children; after realizing our pooling efforts would only require these contributions to be discontinued for a few years, we decided to stop them temporarily until the mortgage was paid off .
• 
  We avoided other forms of debt. For example, our two paid-for reliable vehicles meant we didn't have car payments absorbing our income. We decided not to purchase a new car unless one of the current vehicles died. Thankfully, they held on.
• 
  We originally had separate his and hers spending accounts that allowed us each to make minor impulse buys without acquiring the blessing of the other; these were cut out.
• 
  We reevaluated our monthly bills. After a number of phone calls and negotiations I was able to lower our cable, cellphone, and car insurance bills. We eliminated our home land line entirely, and we also had our home security service disconnected.
• 
  The tax man was getting more than his share each paycheck, which meant every year we were getting a substantial tax return. We reconfigured our tax deductions with a goal of never owing but trying to gauge our return as close to zero as possible. This added that much more each payday to our bank account. In the few occasions that we received lumps of tax money back, of course those funds went directly to our mortgage, down to the last penny.
• 
  Lastly, we looked at ways we could shrink our utilities. For electric savings, we installed programmable thermostats and lowered the heat temperature and raised the air-conditioning temperature; in the winter we bought mini oscillating heaters (with safety shutoffs) for each bedroom and turned off the heat from 7 p.m. until 4 p.m. the next day; we closed the vents in any room that was not in use (including the basement, attic, bathrooms, and laundry room); as incandescent light bulbs blew out we replaced them with compact fluorescents. All of these changes decreased our average monthly electric usage by almost 50 percent, from around 1,800 to 2,000 kilowatt-hour to where we are now at approximately 1,000 kwh. We also applied a few water conservation rules as well -- opting to take showers at the free gym facilities available at our places of work, enacting "if it's yellow let it mellow, if it's brown flush it down," washing all dishes by hand, and purchasing energy-efficient front loads -- that dropped our water bill down to an average of only $25 a month, which is as low as it gets in our area.

We had some unexpected items pop up during these years. There were post-Christmas 50-percent-off sales that we couldn't resist. We were affected by the derecho storms in summer 2012. And we did have a few events arise that required us to travel. Even though we cut back so much and were applying a lot of our income toward our mortgage, we still found enough money to spend somewhat freely on food and little luxuries like Dora the Explorer stickers and dinosaur fruit snacks.

Life with no mortgage

What next? We plan to take our 401(k) contributions back up to 15 percent, resume our monthly allocations toward the 529 accounts, and start saving to our discretionary accounts so we can finally begin making a few impulse buys without generating a position paper on how the need outweighs the cost to sway the opinion of the other party (that's in marriage terms). We will most likely keep the remaining savings practices we've adopted and possibly work toward reducing our monthly obligations even further. I have been bitten by the energy conservation bug during this endeavor and have pitched plans to include some solar and thermal additions to our home.

I wish I could say we are going to do something extraordinary -- like an extravagant family vacation -- to celebrate our financial conquest but as for right now we have no plans to do so, since our children are still young enough that they are much happier running through the sprinkler in the yard than riding in a car for 10 hours just to pile in a hotel or stand in line at a theme park. But in a few years, once we have two potty-trained non-nap-taking children, we plan to go all out and take a Disney cruise.

How to Make Your Home Bid Stand Out

by Donna Fuscaldo

Home sellers in some markets are receiving multiple bids, and when it comes to picking the best offer, experts warn it’s not all about price.

“The highest offer is not always the best offer,” says Debbie Rossetto, a real estate agent at ERA Legacy, in Fremont, Calif. “It’s a combination of price and terms.”

Selling a home, especially for sellers who have raised a family in a property, often becomes an emotional decision—no matter how hard they try to keep it a purely business decision. Because of that, real estate agents say it’s not uncommon for sellers to choose a slightly lower offer if they like the buyer.

“Often times it ends up being something personal,” says Bree Al-Rashid, a RedFin listing agent in Seattle. “Price gets to the final cut, but what wins the place outright is something deeper than the contract price.” She points to a recent bid that won because the buyer agreed to continue to care for the chickens that lived on the property.

Since accepting an offer is only the beginning of the selling process, sellers have to be cautious about choosing a buyer that is able to close the deal. According to Brendon DeSimone, Zillow's real estate expert,  sellers should seek out a serious buyer who has made previous offers. “You want a buyer that is going to close. You want to avoid losing your first buyer.”

DeSimone says clues of serious buyers include multiple visits to the home and questions they’ve asked the agent about the features. He says a buyer who only briefly walked through an open house could make a $10,000-aboving-asking-price bid, but that doesn’t make it a good offer.

“That would scare me if you get an offer and don’t know who the buyer is.”

Terms also matter, especially when sorting through multiple offers. A seller dealing with more than five offers within the same price range is going to look with the one with the less contingencies, explains Rossetto.

When comparing offers for clients, she looks at price  as well as offers with no appraisal, financing or inspection contingencies. She wants the buyer to say he or she will purchase the home regardless of an appraisal or inspection findings.

According to Rossetto, if she can’t get a completely clean offer, which means no contingencies, she’ll go with the second best option: an offer that doesn’t rely on financing. In hot markets, the prices of homes aren’t keeping up with the appraisal, which means people are willing to pay more than a home’s appraisal value. Unfortunately, mortgage companies aren’t so willing to ignore that, so a buyer with a financing contingency may not make it to the closing table.

According to Rossetto, prime buyers have to be pre-approved and be able to prove they have the down payment sitting in a bank account as well as closing costs and the difference in the home’s price and appraisal.

“Sometimes people come in with cash and think they will get a discount because it’s cash, but at the end of the day it’s all the same to the seller,” says Rossetto. “The best way to tie up the deal is not have an appraisal contingency.”

Mortgage's Impact on Winning Financial Aid

by Dr. Don Taylor, Ph.D., CFA, CFP, CASL

Dear Dr. Don,
Will paying off my mortgage hurt my daughter's chances of getting a grant or other college financial aid?

Thanks,
-- Vicki Vicissitude

Dear Vicki,
There are a lot of variables here, including where your daughter is going to college. Generally, paying off your mortgage should improve your daughter's financial aid chances and the amount of a potential package. The Free Application for Federal Student Aid, known as FAFSA, doesn't count all of your assets in establishing the expected family contribution and her eligibility for aid.

FAFSA doesn't consider the equity you have in your home, nor does it consider funds held in your retirement accounts. So, raiding your retirement accounts to pay down the mortgage doesn't make sense. But using savings or investments to pay down the mortgage can help improve her aid package. Don't forget to consider the tax impact of selling any investments to pay down the note.

There's a second aid application, however, called the College Scholarship Service Profile. The more in-depth CSS Profile is used by nearly 400 private universities and colleges. It does include your retirement accounts and the equity you have in your principal residence, among other items considered in determining a possible aid package.

If your daughter plans to attend a school that requires the more complicated CSS Profile to determine her aid package, it makes even less sense to raid your savings or any investments to pay off your mortgage.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

5 Top Things Today’s Home Buyers Want

By Brendon DeSimone

Many people shopping for real estate today are younger than previous generations of home buyers, and they’re extremely tech savvy. They grew up with smartphones, apps, and Google searches. And they want to use technology not only in their search for a home but throughout the home itself.

A recent survey by Better Homes & Gardens Real Estate shows that 77% of Gen X & Gen Y home buyers want their homes “equipped with the technological capabilities they have grown accustomed to.” And it doesn’t stop there. This new generation of home buyers is “rewriting the rules to home ownership and reinterpreting traditional norms to fit their values,” says Better Homes & Gardens Real Estate.

These aren’t your standard-issue young home buyers from 30 or 40 years ago, who were often married couples looking for a starter home in the suburbs to raise a family. Today, single women make up a large percentage of first-time buyers, as do gay couples and the always-connected mobile professional.

As the home buyer evolves, so does the home. Here are five major shifts in homes you can expect to see today and in the coming years.

1. Man Caves and Smart Homes

The media room or “man cave” emerged in real estate marketing a few years back. Many buyers now prefer high-tech rooms with surround sound, large-screen TV’s, and the most up-to-date A/V equipment to the coveted formal dining room of a generation’s past.

But some aren’t limiting technology to just one room. They’re transforming an entire property into a “smart home” with home automation systems.

At a recent Maple Ridge, N.J. open house, the real estate agent demonstrated the features of the home automation system to excited buyers. With one tap on a touch screen, the owner of that home could remotely lock/unlock doors to let in their kids from school, automatically turn on the A/C or heat before they leave work, or monitor the family dog via webcam.

Given how technology is only going to be more important in our lives, transforming a home into a “smart home” is likely to be a good investment.

2. Carrie Bradshaw Closets

In the first Sex and the City movie, Carrie Bradshaw excitedly tours her future Manhattan apartment with Mr. Big — and is woefully disappointed at the tiny closet space. He surprises her by dramatically remodeling the cramped space into a dream closet, with glowing, glass-enclosed sub-closets.

 

That 2008 movie raised the bar and set the tone for closets. Today, the walk-in closet is a must-have on many buyers’ wish list. Some homeowners are paring down a four-bedroom home to three by transforming one bedroom into an oversized walk-in closet. It’s a far cry from the Victorian era, when bedroom closets were often the size of a coat closet today.

A large closet will probably never go out of style. If you intend to expand a closet or bedroom into a grand walk-in closet, just be careful not to overly customize it. The more specific you get with your taste, the fewer people your closet will appeal to when you go to sell later.

3. Home Offices

Even though a few companies (most notably Yahoo!) are instituting a ban on working from home, most encourage it. And so, in our always-on culture, many people entering the real estate market are tethered to email well into the evening hours and on weekends.

A home office tops this buyer’s wish list. Depending on the number of bedrooms, some will create a home office with built-in desks, shelving and cabinets. The customized home office with built-ins could deter some buyers, however, who feel they’ve lost a bedroom or other space. But many prefer to have one place dedicated to their laptops, printers and work-related stuff. (A dedicated home office is better for tax purposes, too). Either way, try to make your home office as appealing to the next buyer as it is to you. And keep in mind that, provided you don’t create a built-in a desk or bookshelf, the space can easily be reverted back to a bedroom.

4. Hardwood Floors

If you walk into a home that hasn’t been on the market for decades, you’ll probably see a lot of wall-to-wall carpeting. This was common in the mid 20th century. Not only did carpeting help reduce heating bills, it was seen as physically comforting and less sterile.

Fast forward 50 years, a time when most buyers prefer gleaming hardwood floors. Hardwood floors make a space feel less confined and give it a new, clean feeling. No matter how many times the carpet has been cleaned, there’s something about stepping on someone else’s carpet with your bare feet that turns off today’s buyers.

If you see a home you love, with wall-to-wall carpeting you don’t love, ask the agent what’s underneath it. You might be surprised to find a hardwood floor that, with some sanding and polishing, will give the home that updated, lighter look you want.

5. Urban Homes With Amenities

Home buyers used to covet a three-quarter acre lot. Today’s buyers — both the Gen X and Gen Y generations as well as empty-nest retirees—see that same lot and think “maintenance.”

Instead, they’re opting for city living in big cities like New York as well as smaller urban centers such as Baltimore, Pittsburgh, and San Jose. These buyers seek active lifestyles and opportunities to socialize. They want to be near transit hubs. And they’re looking for buildings with amenities.

They want a full-time concierge, a full-service gym, even an in-house spa or business center. If this type of property appeals to you, make sure you’re fully aware of the homeowners’ dues and other associated costs. You might be willing and able to absorb those expenses, but future buyers might not be.

Think Long-Term

Trends in kitchen countertops, paint colors and bath fixtures come and go. They’re based on larger design or style trends and even fashion trends. However, as our society and our culture changes, the larger fixtures and features of our homes change more gradually. They don’t mirror the latest trends so much as they reflect shifts in how we live. As a result, investing in long-term home shifts will usually be a better idea than paying extra money for the latest home fad.

Though the world has changed dramatically in the past 30 years, some things will always remain the same. People will always need a place to rest their head at night. And real estate, despite its recent ups and downs, is still a good investment — if you’re in it for the long haul.

Lovely inside and out. Large fenced backyard with RV parking, Anchorage

Lovely inside and out. Large fenced backyard with RV parking, Anchorage

202 Stewart Street

Anchorage, AK 99508

Phone#: 907-694-1234

Price: $259,000

 

Just Listed

Property Type: Resale/New/Single Family

• Bedrooms: 4; Total Baths: 2; Garage(s): 2
• Year Built: 2012; Sq. Feet: 1,728; Lot Size: 0.19
  • View: Beautiful Mountain Views
• Heat: Baseboard

See this quick tour:

Click here for more exciting features.

Gorgeous inside and out. Large fenced backyard with RV parking in the rear of home off of alley.

All new interior and exterior paint! This home has a kitchenette downstairs, family room,

large back deck, etc. This is a wonderful starter home.

 

We also have vacant lots available.

 

Brought to you by:

Les Bailey & Associates Real Estate Team

Keller Williams Alaska Group

Direct: 907-694-1234

Toll Free: 1-800-784-2912

www.LesBaileyAndAssociates.com

What You Need to Know About a Home Insurance Plan

By Andrea Murad

The right homeowners insurance can protect your assets in the event of a natural disaster or a catastrophic loss. But finding the right plan with adequate coverage can be difficult depending on where you live.

 
If you live in an area prone to natural disasters, like fires or earthquakes, experts suggest knowing what your insurance covers. Some events, like flooding, require separate insurance from the government or private insurer, so it’s important to review your vulnerabilities and get coverage.

“Insurance companies can provide information about what natural calamities you’re at risk for, like flooding, fires or sinkholes,” says Eric Vaith, assistant vice president of product management at USAA.

Insurance companies are willing to work with homeowners to find the right policy. “No matter how good of a job we do at settling a claim, would rather not have a claim at all,” says David Spencer, vice president of Premier Client Services at ACE Private Risk Services.

When considering plans, your coverage and premiums are key. Even though your mortgage company will likely pay your premiums out of escrow, experts recommend reviewing policies annually and when you’ve a major life event. If you decide to increase deductibles to lower your premiums, Jim Towns, Allstate agency owner, recommends making sure you have that deductible amount in savings.

To get the most protection from your homeowners policy, experts suggest knowing the coverage you need, as well as what your insurer offers. Here’s how to pick the right plan:

Natural Disasters

Your basement is covered if there’s damage in your basement due to a fire or burst pipe, according to Vaith, but not for flooding from water backing up or a broken sump pump. You may need to purchase an extra rider to cover damages in your basement.

Floods. As most policies don’t include floods, you can buy insurance through the National Flood Insurance Program (NFIP). “The only people who buy it will be the most exposed,” says Vaith. Some insurance companies will write the government policy for you and service the claim.

NFIP provides up to $250,000 coverage on a home and $100,00 coverage on contents based on an item’s actual cash value or depreciated cost instead of the replacement cost.

Some carriers do provide broader flood coverage in lieu of purchasing a government policy, says Spencer.  “Much like other government programs, it’s intended to serve the masses, but not everybody.” Some private polices provide a much higher replacement cost coverage on a very limited bases for people living in certain flood zones.

Heavy Rains. “Heavy rains can cause backup of sewers and drains,” says Spencer. This damage isn’t covered by NFIP or is very limited by a few thousand dollars. Carriers providing coverage may have a special deductible. “If you’ve a finished basement, this is coverage you should seek and get good counsel from a trusted insurance advisor.”

Earthquakes. Most homeowners policies don’t cover earthquakes, says Vaith, but in California, you can purchase insurance through the California Earthquake Authority (CEA).

CEA provides coverage on a mini quake and broad quake—one is a more limited form because earthquake insurance is so expensive, says Spencer. “Earthquakes don’t always cause total loss.”

Wildfire. While wildfire is covered under most homeowner’s policy, there’s an industry drive to provide better protection where wildfires occur to prevent homes from burning and get people to a safe location, says Spencer. “A little scorching is better than a pile of rubble.”

Hurricanes. “In Florida, you can get wind coverage with a special deductible,” says Spencer. Citizens Property Insurance Corporation is run by the state government and provides coverage for those who can’t purchase private insurance.

Liability

Homeowner's policies typically cover liability for bodily injury, personal injury and property damage, says Spencer, and personal injury can include libel, slander, character defamation, and invasion of privacy, whether these occur online in social media or in another public forum.

Homeowner policies generally cover up to $500,000 in damages but oftentimes this amount isn’t enough. An umbrella policy is an affordable way to protect against potential damages in excess of your homeowner or auto policies, including legal fees.

If you employ a nanny or other help, says Spencer, your homeowners policy will not protect you if your helper sues for discrimination, sexual harassment or some other wrongful act. Employment practices liability insurance or an option in your umbrella policy would protect you against this risk.

Construction Costs

If your home is valued at $100,000 and you’re insured to that value, Vaith says rebuilding your home may cost more than what you paid. Most insurance companies add 25% above the replacement cost just in case construction costs are higher than expected.

Base the replacement value to rebuild your home on your home’s square footage, says Towns. “It’s not market value but how much it costs to rebuild your house.” Tell your insurance company about any home renovations, like custom cabinets, new kitchens and new bathrooms. If your policy includes building codes coverage, when you’ve a covered loss, the insurer will upgrade what you have to keep it up with new building codes.

Personal Possessions

“Knowing what you have is important,” says Towns, when determining how much coverage you need and documenting any losses. Without pictures and descriptions of your possessions, a claim is difficult to process, so be sure to take an inventory of your home and your valuable possessions and keep a record online or somewhere outside the house.

Replacement coverage is typically between 50% and 75% of your home’s value. Insuring items for the cash value instead of replacement cost can lower your premiums, says Vaith, but if you file a claim, you won’t be reimbursed for the amount required to buy the item new. “It’s a more affordable option to go with a cash value for certain items but as a consumer, you need to understand the details.”

Collectibles. “Scheduling specific collectible items, like jewelry, art, furs, musical instruments, expensive clothes, cameras, silverware, antiques or wine, is a very inexpensive way to get the broadest coverage,” says Spencer. Depending on your carrier, you may not need an appraisal for items valued less than $50,000. Experts recommend asking your agent about this limit to help you make an informed decision.

Items listed on a valuable personal property (VPP) rider do not have deductibles. “If you’ve a beautiful walk-out basement and water backs up, if you’ve musical instruments that are specifically scheduled, they’re covered at the replacement cost,” says Spencer.

Farewell 3% mortgage rates

By Les Christie

 

Say goodbye to ultra-low mortgage rates.

In the past month, rates have been on the rise and they are expected to continue to climb.

 

This week, the average rate on a 30-year fixed-rate mortgage jumped another 10 percentage points to 3.91% and are up from 3.3% in early May, according to mortgage giant Freddie Mac. Meanwhile, those seeking a 15-year loan received an average rate of 3.03%, up from 2.56% -- a record low.

"It's unlikely that rates will ever be that low again," said Doug Duncan, Fannie Mae's chief economist.

Those who didn't take advantage of record-low rates have missed the boat -- at least for now. Here are three reasons why.

The Fed is going to stop bolstering the housing market. The Fed has kept rates at rock-bottom levels by buying up to $85 billion a month of Treasury bonds and mortgage-backed securities. That has enabled lenders to sell mortgage loans at low interest rates and recoup their money immediately -- plus profits.

"Up until recently, expectations were that the Fed would begin to taper purchases of mortgage-backed securities (MBS) and Treasury bonds late in 2013, but that timeframe appears to have moved to September, possibly sooner," said Keith Gumbinger, vice president of HSH.com, a mortgage information company.

 

If the Fed stops purchasing the securities, private investors will have to pick up the slack. For investors to do that, the loans will have offer a better payoff. And that would mean raising rates for borrowers, said Duncan.

The economy is no longer reeling. During the recession, the Fed lowered its short-term interest rate to near zero in order to stimulate the economy. But now conditions have improved considerably since the economy emerged from recession four years ago. As the economic revival gains traction, it is creating a tailwind for interest rate increases, according to Gumbinger.

Low rates happen when the economy is in distress. But now, the market believes the economy is getting stronger, said Wendy Cutrefelli, a vice president in the Mortgage Banking Division of Bank of the West.

 

Job gains have picked up lately, averaging about 202,000 a month over the past six months.

That hiring is advancing rather than retreating is good news for the economy and any positive future reports are expected to push rates higher, according to Gumbinger. Even mediocre news might not cause any meaningful decline in rates.

3.3% rates are unprecedented. "The 30-year [mortgage rate] hit a 37-year low in 2003 at 5.23%," said Gumbinger. "That was the previous low-watermark prior to this financial crisis and it's likely we will move closer to that mark as we grind forward."

Any return to normal conditions, therefore, will likely be accompanied by higher mortgage rates.

Even if they go up a percentage point or two, however, mortgages will still be relatively low. Historically, 30-year loans are usually 5.5% or higher.

For clues to the direction of mortgage rates, look at the daily movements in 10-year Treasury bond yields. Mortgage rates track Treasury yields with the difference between them holding fairly constant.

These days, Treasury bonds have been on a jumpy uphill climb, with the 10-year hitting 2.21% on May 31, its highest closing since April 2012. On Thursday, the yield was about 2.10%. Since the interest rate on a 30-year is usually 1.7 to 2 percentage points higher, it indicates that mortgages should be at between 3.82% and 4.12% this week.

How to Handle Your Parents Moving in With You

By Marilyn Bowden

When the Folks Move In

Multigenerational households are becoming more common -- and it's not just unemployed adult children moving in with baby boomer parents. Longer lifespans and rising health care costs are bringing more aging parents into their children's spare rooms.

According to the National Association of Professional Geriatric Care Managers, from 2000 to 2007, the number of parents living with their adult kids rose from 2.2 million to 3.6 million -- an increase of 64%.

When contemplating moving parents in with you, the impulse is often to welcome mom or dad with open arms and little thought of consequences. Experts on geriatric care suggest a more cautious approach. It's a life-changing step for the parent as well as the caregiving child, the household and the extended family, they say, and everyone needs to understand what's involved.

Will Your Parent Cross State Lines?

If moving parents in with you involves relocation to a different state, it's important to understand how this will affect insurance policies and health care.

Are there doctors where you live who are qualified to treat your parents' medical conditions? In some areas, it's difficult to find primary care physicians who accept Medicare patients, says Suzanne Modigliani, a certified, independent geriatric care manager based in Boston.

Is mom's supplemental insurance transferable? Some policies require establishing residency of at least six months, Modigliani says. What happens if she needs medical treatment before that? Who will pay for medical expenses not covered by Medicare or insurance?

Will You Assume a Caregiving Role?

Some long-term care insurance policies cover payment in certain situations to family members who are caregivers, says June Ann Schroeder, a Certified Financial Planner professional with Liberty Financial Group in Elm Grove, Wis., but the premiums are often prohibitive.

Medicaid may pay relatives for caregiving, too, in cases where the patient is eligible, Modigliani says. She recommends that the whole family agree to a care contract spelling out who will pay if the caregiver needs outside help.

Even if medical expenses are covered, hidden costs can add up quickly, says Schroeder, a former nurse who cared for her mother at home. For example, utility bills will likely rise. "Older people like it warm and need to turn the thermostat up," she says. "They may want their own phone line or account."

Special diets are almost certain to have an impact on the household food budget, Schroeder adds -- as are favorite treats, such as a cheese Danish with breakfast or a glass of brandy at bedtime.

"Caregivers may want to explore a financial contribution from the parent," says Miriam Zucker, a certified professional geriatric care manager and founder of Directions In Aging in New Rochelle, N.Y. "Not only because they may need it, but also because older adults need to feel that they are not a burden."

Get a Health Care Proxy, Power of Attorney

Be sure your parents' estate planning documents are up-to-date, says Delia Fernandez, a Certified Financial Planner professional at Fernandez Financial Advisory in Los Alamitos, Calif. "This is the stage of life when it's best to work with a specialist in elder care to be sure you have documents that will give you the power to act on your parent's or parents' behalf for health care decisions and finances if they are unable to do so," she says, "and also to determine whether or not they'd be eligible for Medicaid benefits."

Living with an adult child may change the parents' wishes for their estate, Fernandez says, and it's best if they can talk openly about it with the whole family. Otherwise, "When it comes time to settle the estate, the caregiver may feel entitled to a larger share than other siblings, and there could be legal issues."

Does Your Home Need Modification?

It's also important to estimate the cost of home improvements, Fernandez says -- "grab bars, accessible shower or bath or sinks, bedrooms and baths downstairs, and so on."

Unexpected space issues can cause havoc, says Schroeder. "The doorways may not be wide enough for her walker. He may be able to climb stairs now, but for how long? They may want to bring along some of the furniture they are used to, and that brings up other issues. What happens to the rest of their furniture? Should it be sold or stored? All these little things can really snowball, and the expense and stress pile up."

Ideally, Modigliani says, a semiseparate place such as a former home office with its own bathroom can be adapted, affording some privacy for everyone.

Are You Ready Emotionally?

"I always ask how the prospective caretakers get along with the parent and with their siblings," Fernandez says. If your relationship with your father has been strained, living under the same roof again is going to cause emotional stress.

Be sure the rest of the family is on board with your plans, Fernandez advises. "Caregivers can quickly feel overwhelmed by taking on the job of caring for aging parents, and coordinating with other family members is key."

If siblings are not willing to pitch in and give the caretaker a break now and then, Zucker asks, will they help pay for a companion to come in once or twice a week? "Adult children have to think about what sort of respite can be built into their home lives," she says, "so that they are not with their parents at all times."

They may also have to lower their expectations, Zucker says. Older people are set in their likes and dislikes as well as their ways, and this can cause conflict.

"The emotional expense is trying," Schroeder says. "You may become almost resentful of the parent living with you, and siblings may become resentful of you having mom's extra money, not understanding how much extra work there is."

If your parent has a new spouse, Modigliani says, his feelings on the move need to be clear.

Be Ready for Changes

Fernandez recommends consulting with a professional geriatric care manager to develop a plan of care. "You need experts to help guide you through the many resources available to the aged in your neighborhood," she says.

What is your parent going to do all day? Even if he doesn't need constant supervision, says Modigliani, "They are giving up their entire social network, and some thought needs to be given to what their lives will be like. Otherwise, they will be quite isolated."

"It's a tremendous change," Zucker says, "But if children and grandchildren are in the neighborhood, it can be a very meaningful time."