Homeowner’s Insurance: How Much Coverage Do You Need?

insurance-agentWhen you buy a new home, you are required by the lender to have homeowner’s insurance (aka “hazard insurance”). The question is, how much coverage do you need?

Daryl Alexander, an agent in Fort Collins with State Farm, recommends that you “make sure your home is insured for at least 100% of its estimated REPLACEMENT cost. “

What does Daryl mean by “replacement” cost?

Market value is the amount a buyer would pay for a home. Replacement cost is the rebuilding cost necessary to repair or replace the entire home.

Over the years, the cost of materials and labor increase, sometimes faster than the market value of a property. If you have a fire, water leak or hail claim, and you’ve owned your house for many years, the cost to repair your house could be really high.

Cost of Premium
It sounds like replacement cost is the way to go, right? Then why would anyone get market value insurance?

The premium for market value insurance is lower than replacement insurance, which is why many homeowners buy it.

That’s being penny-wise and pound-foolish, as the expression goes. For the minimal increase in cost, replacement insurance gives you the coverage you’ll need in case of a disaster. Remember, you are buying peace-of-mind that your family and possessions are protected.

Review Your Policy Occasionally
As the years go by, it’s a good idea to get together with your insurance agent to ensure you still have the right coverage for your home. This is particularly true if you have remodeled bathrooms and kitchens, finished basements, or added on rooms or living spaces.

The worst time to find out you DON’T have enough insurance is when a disaster occurs. Avoid the heartache and trauma of insufficient coverage; find a trustworthy, reputable insurance agent, listen to his/her advice, and buy the coverage he/she recommends.

If you would like a referral to some trustworthy insurance agents, please contact Gary Clark.


I’m a Buyer, Why do I Need a Real Estate Agent?

Agent-GuideI can hear the disappointment in their voice through the phone; it’s a caller who wants information about a house they saw on Zillow or Trulia. They want to know how many bedrooms it has, how big it is, if the basement’s unfinished, stuff like that. Due to our red-hot market, I have to tell them the house is under contract. Sorry.

When I ask the callers if they are working with an agent, most say no. This always surprises me. I would think people would welcome free professional help in finding a great property at a fair price, and to ensure that their transaction goes smoothly. After all, buying a house is a BIG PURCHASE, usually for hundreds of thousands dollars.

Yet for some reason, many people would rather shop on their own than work with real estate agents. Is it fear of salespeople? Fear of being coerced into something they don’t want? Or just needing some time to get comfortable? A good real estate agent is there to guide you, advise you, and be your advocate – not to cheat you. Here are the biggest benefits of having a guide on your home buying journey.

Buyers Agents are FREE
The first reason to engage a buyer’s agent is that the service is FREE. How can it be free? Because the seller pays a commission to the listing agent (the agent who listed the house). The listing agent shares their commission with the buyer’s agent.

More Effective House Hunting
Buyer’s agents use the best tools to hunt for houses: Multi-listing Services (MLS). This is most complete, up-to-date source of information. It’s updated instantly, whenever houses are added or data is changed.

Buyers without agents use popular websites and phone aps such as Zillow, Trulia, and Realtor.com. Data in these programs is old, maybe from days or weeks ago. That’s why the people who call me think houses are still available when they are under contract, and they don’t know about new listings.

So when you work with a buyer agent, you get someone looking full time for you, using the best tools available. You are more likely to find a great house with an agent than looking on your own.

Advocacy: Your Best Interests
When you call a listing agent, you need to understand that he or she works for the seller – not you. Think about it this way: assume you are in court. Would you go to the prosecutor and ask him or her to defend you? Does the prosecutor have your best interest in mind, or his client’s?

The listing agent is legally bound to look out for the best interests of the seller – not you. Anything you tell a listing agent he is obligated to tell the seller, no matter how personal or confidential.

You need an advocate during the entire buying process. You need honest advice on the price you offer, the condition of the house, the contract you write, and the stack of disclosures, notices, and addendums you will sign. During negotiations, a buyer agent looks out after your interests only – a seller agent looks out for the seller’s.

After your contract is accepted, a buyer agent still works hard for you. The contract has a list of tasks and a schedule by which you need to complete them. A buyer agent monitors these important tasks, tells you what to do, and keeps you on track with the dates.

Keep in mind that your earnest money is “at risk” throughout the contract. (Earnest money is like a deposit.) If you don’t perform on the contract according to the schedule, you can lose your earnest money to the seller. A buyer agent watches the schedule to keep your earnest money safe.

Your Best Chance to Sell: the “Golden Window” of Opportunity

Golden Window GraphicWhen is your best chance to sell your house at the highest price? It’s the “Golden Window” – the first two weeks it’s on the market.

The Golden Window is your best opportunity because you are capitalizing on frustrated buyers who haven’t found what they want, or have been beaten out by other buyers. These highly motivated buyers have seen every other house similar to yours and are waiting impatiently for new inventory.

As soon as anything new comes along, motivated, frustrated buyers jump on it like cats pouncing on a mouse. If your house meets their needs and budget, frustrated buyers will bid on it quickly and probably pay your asking price (assuming you priced it well).

On the other hand, if you don’t sell your house within the “Golden Window,” you might as well settle in for the long haul. The odds are it will take many weeks or months to sell it.  That’s because you have to wait for new buyers to enter the market. These buyers are neither frustrated nor highly motivated. They are testing the waters, seeing what’s on the market and what they can get for their money. It takes time for them to acclimate. Some may have to write a contract and lose out, or hesitate about making an offer and lose out, before they understand how the game is played.

As time goes on, you might have to lower your asking price or do something extra, such as include a carpeting allowance, to add more value. This means you net less money.

Your other option is simply to wait for the right buyer to come along.  This takes time and patience.

So the best strategy is to do everything you can to capitalize on the Golden Window.  Research the market so you price your house right. Prepare your house so it shows well and has great curb appeal. Execute your marketing plan so you capture all the frustrated, motivated buyers.

By recognizing and maximizing the Golden Window, you will sell your house quicker and for the most money.

Prepare Your Mind as Well as Your House

mindset-300x300As you prepare your home to sell, you should make a difficult but necessary change in mindset.  You have to stop thinking of your home as your home. Instead, think of your home as just a house. Even better, simply think of your home as property that needs to be sold.

Easy to say; hard to do. It’s difficult because you put your heart, creativity and individual imprint on your home. It’s a reflection of who you are.  Maybe you raised your kids there. Perhaps it’s your dream home. Whatever your home is to you, “divorcing” yourself from your feelings about it is tough to do.

Nevertheless, the mindset change is essential because it will help you cope with the challenges, stresses, and frustrations of selling your home.

There are three hurdles you typically need to cross. Thinking of your home as simply a house or property will make it easier to get over these hurdles.

Inspections. After inspectors comb through your house, buyers create a list of objections (problems) that they want you to resolve (fix). Common objection items are plumbing and electrical issues, deferred maintenance issues, and radon mitigation. The list of objections often irritates sellers, who are offended by the notion that something’s wrong with their home. Then, sellers must negotiate what to fix or not to fix, which is stressful. Finally, the expense and hassle of fixing objection items strains pocketbooks and nerves.

Financing. Getting a home loan is a challenge for most buyers. The time frame to process a loan is about 45 to 60 days. The information required is voluminous and the level of detail seems intrusive and silly. No matter what buyers do, the closing can go down to the wire, causing heartburn and sleepless nights for buyers and sellers.

Appraisals. Banks loan against the appraised value of property, so they hire appraisers to set a price for your house. If the appraisal is the same as or more than the negotiated price of your contract, then everything is fine. If the appraisal is lower, then you have a problem; to keep the contract in force, you can either drop the price, or the buyer can come up with a bigger down payment. Otherwise the buyer can terminate the contract.

As you can see, distancing yourself emotionally from your home can be helpful throughout the selling process. Changing your mindset will help maintain a healthy mental, emotional, and physical state so you can deal with the twists and turns of your transaction.

What Sells (or Doesn’t Sell) Your House?

Location-Price-Condition GraphicHouses sell or don’t sell due to three factors: location, price, and condition. These factors relate to each other, so if your house sells it is because you got them right. If your house is not selling, then you’ve got one or two of them wrong.

When you get the factors wrong, you have a VALUE problem. Value is not about what you PAY; it’s about what you GET for your money. The more you get, the more you are willing to pay. The less you get, the less you expect to pay. So price, therefore, is a reflection of value.

Now that we have defined value, let’s take a closer look at the three factors.

Location is the easiest factor because “is what it is.” In other words, you cannot change where your house is located or the attributes of that location – be they good or bad.

If the location of your house offers a fantastic view, sits on a lake or river, or is close to Old Town, it’s desirable and thus valuable. If the location of your house is next to a busy road or smelly feedlot, that’s less desirable and reduces value.

Bottom line: a great location increases your asking price; a poor location reduces your asking price. And there’s nothing you can do about it.

Price is a factor over which you have minimal control. Sure, you can ASK whatever price you want, but you have no control over what buyers will PAY; that’s determined by the current market.

Buyers compare your house to others on the market and determine its VALUE. If the value is high, buyers will pay the PRICE you are asking. If other properties offer better value, buyers won’t pay your price. That’s why it’s so important to preview (personally visit) other properties on the market when setting prices.

Another important pricing factor is supply. How many similar houses are on the market? If there’s a lack of properties like yours, you can charge a premium price. If there’s a glut of houses like yours, it will be difficult to justify a high price.

The condition of your house is a factor over which you have complete control. You can clean and de-clutter your house. You can repair broken things. You can replace worn out carpet, repaint walls, trim bushes and trees, and mow the yard. How much work and money you want to spend fixing up your house is entirely up to you, but be aware that condition directly affects the price you ask.

An agent once told me that selling houses is a price war and a beauty contest. If your house has a great location and is in great condition, then you can ask a premium price. If your house has a bad location and is in poor condition, then you must ask a bargain price. When two houses are the same price, wouldn’t you buy one in that’s cleaner, that shows better, with fewer repairs and less deferred maintenance? Sure you would, because it has more value.

Getting Out of Your Lease and Into Your Own Home

burning-wasting-moneyIt’s the first of the month and your rent is due. As you write out the rent check, you say to yourself, “I can’t believe I’m paying this much money in rent! I’m just throwing my money away! I need to buy a house while interest rates are still low!”

Great idea. But there’s just one little problem: How do I get out of my lease when I find a house to buy?

While you can’t break a lease whenever you want, you do have a few options.

You Could Sublet Your Place. If your lease has six months or more on it, your best bet could be to sublet your place to another person.

You Could Start Searching Near the End of Your Lease. If timing works in your favor, you could start your search with 60-75 days left on your lease. That should be enough time to find a place, get under contract, and close on it.

You Could Negotiate a Month to Month Lease. Some landlords will allow you to have a month-to-month lease and vacate with a 30-day notice. When you get a property under contract, 30 days is enough time to give your notice.

You Could Involve a Real Estate Agent. Your best bet is to engage an agent, like me, and inform him or her or me that you are motivated to buy a home. In addition to selling real estate, I own Rooftop Property Management, LLC and have lots of experience with leases, landlords and tenants. I would be happy to read your lease and talk to your landlord about your options of exiting your lease.

If your landlord is also a real estate agent, watch out for this trick. He or she may offer you a month-to-month deal without a rent increase in exchange for his services. Wow, what a nice person! Except here’s what is really happening: the landlord/agent has threatened to increase your rental rates unless you work with him.

If you want to work with your landlord to buy a home, that’s fine. But if you don’t, and there’s another agent with whom you’d rather work, then let him or her deal with the landlord/agent. A house is the biggest purchase you’ll make. You should be able to work with whomever you want, and not feel coerced into a relationship you’re not comfortable with.

If you feel the time is right to buy a home, don’t let your lease stop you. It’s a minor issue that is easily handled, especially if you enlist a real estate agent who is experienced with leases to help you.

Please contact me if you would like a Free Consultation about your lease and buying a house.

The Home Buying Process

Home Buying Process GraphicHave you ever wondered about the steps involved in buying a home? This is a brief overview of the process I use when working with home buyers.

Buyer Interview
I like to start by learning about you, your goals, and your dreams.

Our Relationship
By law, I need to go over the two types of relationships under which we can proceed. It is your choice which is best for you.

  • Buyer Agent – Agents work as fiduciaries that put your interests ahead of their own.
  • Transaction Broker – Brokers work to put a deal together that is fair for both parties.

Oddly enough, it’s best to start with money in mind. Visit with a lender to see how much you can borrow and what payment you can handle, and get a Pre-qualification Letter. This letter will come in very handy when we go to write an offer.

The fun begins! Based on what I learned from our interview, I’ll look for houses that match your criteria. Then we’ll go out and visit houses with a goal of finding “the one.”

Eventually we’ll find a house that you want to buy. After discussing the price and terms of an offer, I will write a contract and present it to the seller. It’s normal to negotiate one or more counter-offers between the seller and you. Most counter-offers revolve around price, timelines, and inclusions.

Loan & Due Diligence
Once we are officially under contract, we will work on two parallel tracks: getting a loan and conducting due diligence.

  • Loan – You’ll work with your lender to secure a loan on the property. The lender will want to appraise the property to ensure its value is at least as much as how much you offered to pay the seller.
  • Due Diligence – You’ll have the house inspected, make sure you have clear title, and get quotes on hazard insurance (home owner’s policy).

The final step is to attend the closing, which is a meeting between the buyer and seller. Conducted by the title company, the closing formalizes the transfer of ownership. Basically, you sign a bunch of papers, hand over your money, and get the keys to your new home!

For More Information
If you want more information than this brief overview, you have several options.

  • Download an extended presentation (click here).
  • Schedule a personal consultation with Gary.
  • Schedule an introductory seminar for a group of people.

Gary Clark
Century 21 Humpal