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Homeowners’ insurance shouldn’t be taken lightly. If you get too much coverage, you’re throwing money away. However, with too little, you won’t be able to rebuild if disaster strikes. Homeowner insurance policies can vary greatly, and if homeowners aren’t careful, they may find their claims denied when disaster strikes, according to a study to be published early next year by the University of Chicago Law Review.

Knowing what your insurance policy covers — including fire, theft, and earthquakes — is important. Nevertheless, knowing the things that aren’t covered — known as exclusions — may be even more crucial. While home insurers once used standard policy forms by the Insurance Services Office, now some are coming up with their own policies and a few tweaks in the wording can mean trouble for some homeowners, according to the study. Homeowners should read the fine print and carefully review their policies to examine what’s covered and what’s not, the study notes. For example, some policies include mold and lead coverage; other policies do not.

Your homeowners’ insurance policy should probably cover the following items:

1. The structure of your house: Don’t base the cost of replacement of your home on what you paid for it, or on the value of the land. You’re not replacing the ground around you, and construction costs might be much different from what you paid.

2. Your personal possessions: Take an inventory of your home’s personal property, especially high-priced items such as jewelry, furniture, and electronic equipment. Determine how much it would cost to replace everything if you lost your goods to theft or destruction. If you think you need more than what the basic policies provide, talk to your agent.

3. Additional living expenses if you can’t live in your home: Additional living expenses are usually part of your standard policy and total about 20% of the cost of insuring your home. Policies that provide for unlimited expenses for a short period may also be available, as are policies for special situations, such as renting out your home.

4. Liability for injury to others: While most policies provide a base of $100,000 in insurance to cover your liability should you be sued, consider getting more: In today’s litigious society, potential damage awards could exceed those lower limits in a hurry.

5. Get special coverage if you need it: If you live in an area that floods frequently, you’ll want to make sure your coverage won’t leave you underwater in a flood. Similarly, residents in earthquake-prone areas have to weigh the added costs of earthquake insurance against the risks of being uninsured.

6. Consider umbrella insurance: Umbrella insurance isn’t directly connected to your home. However, if other types of insurance you have don’t provide enough coverage for damages, then your home could be at risk. Umbrella insurance provides additional coverage that makes sure injured parties won’t threaten to collect by taking away your home.

You should consider homeowners’ insurance to be an integral part of your overall financial plan. It can help minimize the disruption and economic loss you would realize should a calamity strike.

Filed under: 20 Blogs, Blog by Kim Bregman
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Homes.org recently released a list of the top 10 reasons for using a buyer’s agent. The list was derived from detailed feedback provided by numerous real estate professionals across the country. After reviewing the reasons provided it became clear that the better question wasn’t why should home buyers use a buyer’s agent but why wouldn’t they?

“HUD’S Settlement Cost Booklet, ‘Shopping for Your Home Loan’ advises the home buyer in Section IV on page 6: It is your responsibility to search for an agent who will represent your interests in the real estate transaction. If you want someone to represent only your interests, consider hiring an “exclusive buyer’s agent”, who will be working for you, ” points out John F. Sullivan, Vice-President & Associate Broker at Buyer’s Edge Co. Inc. “If a buyer can’t find an exclusive buyer’s agent in their area, they should seek a single agency licensee who is an Accredited Buyer’s Representative (ABR) or an ABR with a small dual agency brokerage to minimize the chance of dual agency.”

Maxwell Carr Realtor and Designated Luxury Specialist at First Team Real Estate put it this way, “imagine sitting at a poker table, and there’s $200,000 in the center of the table. You’re emotionally involved, nervous – get the idea? Rather than risk making a mistake, find representation. A [buyer agent] Realtor is a professional negotiator, with a fiduciary duty to act in your best interest.”

Top 10 Reasons for Using a Buyer’s Agent based on feedback from real estate professionals actively working around the country, the points below are the most important and beneficial reasons for hiring a buyer’s agent.

1. It’s free
2. It’s makes the home search and buying process much more convenient
3. Market knowledge
4. Professional negotiation
5. Professional connections
6. Insider knowledge
7. Access to Comps/Sales
8. Â Info Help Identifying your needs
9. Buyer agent is a mitigatory of emotions
10. Knowledge of industry standards, legalities, and writing a contract

Filed under: 20 Blogs, Blog by Kim Bregman
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What do you do when the appraisal on the dream home you want to buy comes in below the price in the offer the seller has accepted even as much as 10 to 20 percent below?

Chances are that raising the cash for your down payment and closing cost has tapped you out. Finding thousands more to make up the difference between the appraised value and the contracted amount is out of the question.

You’re not the only buyer who has hit the low appraisal snag. This past June and July, 16 percent of real estate pros reported a cancellation in a sale, mostly due to a large number of low appraisals.

However, you don’t have to walk away. In fact, some real estate professionals and economists say that low-ball appraisals are pushing home values down and undermining the housing recovery.

You can fight back. You have options, and chances are you can find a way to make the deal work without increasing your down payment.

Appraisals are largely based on prices recently paid for comparable local properties. Over the past decade, finding comps that accurately reflect values has been a challenge as values rose quickly during the boom and fell just as fast during the bust. Discounts paid for foreclosures and short sales have created a dual price structure between normal and distress sales.

Finally, today many buyers rely on popular online valuation tools, called AVMs or automated valuation models, instead of a comparable market analysis from a real estate professional. AVMs give fast property value estimates, but they often differ greatly from appraised values because they are determined by algorithms using available local price data, not actual inspections of the property. During this time of record low home values, it’s no wonder that more and more appraisals are coming in below prices that buyers and sellers have agreed on.

It may seem ironic that buyers would want the homes they want to buy to appraise for as much or more than they are willing to pay. Remember, the purpose of the appraisal is not to help you get a better price, but to protect your lender should you default. The lender wants assurance that your home will be worth enough to recoup their investment.

Even if you have a great job, sterling credit, an adequate down payment and money in the bank, your lender will still want a conservative appraisal. In light of losses they have taken on the millions of foreclosures in recent years and the tough times many banks have had on Wall Street, lenders are taking no chances these days. They are more interested in protecting themselves from a loss than they are in giving you a loan.

Here are five steps you can take to save your dream home:

1. Get the seller to lower the price. By far, this is the easiest solution, especially if your appraisal comes in less than 10 percent of the contract price. Obviously, a lower price is a great idea for the buyer, but why would a seller go along? In July, 2011 the average home in America took about 88 days to sell. Demand is soft and time is money. Your seller, particularly if they are selling to buy another home, could be in a real bind if you are forced to back out and they have to put the house on the market again. After all, there is no guarantee that if you walk away, the seller won’t receive a low or even lower appraisal from the next buyer’s lender. Today, many buyers are offering incentives to sellers, such as payment of some or all closing costs. Lowering the price might be a cheaper option for the seller in order to get the deal done on time. Sometimes a bird in the hand is best.

2. Ask the seller to offer to carry a second mortgage for the difference. This solution doesn’t cost the seller anything but the buyer incurs greater debt. If the buyer really wants the home but cannot come up with the difference in cash, making payments or a lump sum payment at a later date to the seller is an option. After the escrow closes, sellers often retain the right to discount the second mortgage, and can sell it for less than face value to an investor.

3. Do your research and dispute the appraisal. Is the contract sales price a fair assessment of the property value based on a well-prepared comparable market analysis (CMA) from your real estate agent as opposed to an online AVM? Was the appraisal done by an appraisal management company that may have used a less-than-expert or out-of-town appraiser?

Disputing the appraisal may sound a little aggressive but you might be the victim of a poorly prepared appraisal. Do some research first and go to war if you have the ammunition.

You have the right to get a copy of the appraisal from your lender and to find out who did it. What is the appraiser’s reputation? Have any complaints been filed with your state appraisal licensing agency? Where is the appraiser based? Did they perform an appraisal in a housing market that they may not know well? Did the appraiser have adequate information about the subject property? If your appraisal was conducted by an out-of-town appraiser unfamiliar with your market, you have every right to demand a new appraisal.

What comparable did they use? Ask your agent and the seller’s agent to put together a list of recent comparable sales that justify the agreed-to sales price. Submit that list to the underwriter and ask for a review of the appraisal. Also, ask the agents to call the listing agents of pending sales to try to find out the actual sales price of those properties. Listing agents do not have to disclose the sales price, but many are happy to help because they could find themselves in the same situation. Pending sales are more current and are not closed, so the original appraiser would not have access to them.

The key to a successful dispute is data. You will need as much data you can get to back up your dispute.

4. Ask the lender for a new appraisal. Should you find that you have a good case that the appraisal wasn’t fair or accurate, ask your lender for a new appraisal, which you may be charged for.

Another strategy is to get two additional, unbiased appraisals and use the average of all three to arrive at a fair price. This is a risky strategy, in light of the fact that another appraisal might not come in higher than your first; it might even be lower if values have fallen.

Depending on how convincing your argument is, your lender has the ability to override the appraisal estimate, which is unlikely, or to order a new appraisal, which is more likely. If a new appraisal is ordered, talk with your agent about somehow splitting the cost with the seller. Perhaps the listing agent and selling agent will split the fee so the buyer does not have to incur additional costs associated with the transaction. Appraisals cost around $400 or so.

5. Get your own, independent appraisal. If you order your own appraisal and your loan is an FHA loan, ask the lender for a list of approved appraisers. Usually the bank will review your appraisal and ask the previous appraiser if they agree or disagree with the newly submitted one.

If the first appraiser disputes your appraisal, the bank may request a third appraisal done by another appraiser, or they may just reject your appraisal.

However, if the first appraiser agrees with the disputes you present, they may adjust their original appraisal and you may get a better price.

If these tactics fail and you cannot make up the shortfall in the appraised value, you may find yourself moving on. If so, be sure that you were protected by a contingency clause in the sales contract, stating that the transaction can be terminated if the home doesn’t appraise at, or above, the sales price.

Filed under: 20 Blogs, Blog by Kim Bregman
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