John Beckett's Real Estate Blog

Before deciding to move to that new location, make sure you know how much it will really cost you to live their. Residents fed up with high property taxes or expensive housing may be tempted to relocate to a home in a lower-cost region. People who fail to do their homework may get burned. Whether you are moving by choice or by necessity, you should evaluate all the costs of relocating because costs vary a lot even within a metropolitan area. Before you move, weigh the following costs:

Transportation

After housing, transportation is the second-biggest expense for most households, according to the Center for Neighborhood Technology in Chicago. Costs can be high whether residents drive their own cars or use public transportation. The first calculation when it comes to choosing a place to live should be this: You don’t live your life in your home, you live it outside your home. While homeowners generally are urged to keep housing costs to no more than 31% of income, the combined costs of housing and transportation should not exceed 45% of income. Many home shoppers budgeting for a new home weigh their monthly payment, taxes and insurance, but they don’t always estimate their transportation costs. It’s a mistake to think of transportation costs purely in terms of commuting. For every five miles that the average person drives, only one mile is for commuting. People need to think about the compactness of their neighborhood, how far they need to drive to reach places like the grocery store, school and medical offices.

Taxes

Taxes are especially important when comparing the overall cost of living in one area to another. Property taxes will be estimated on each home listing, but everyone should also review sales taxes and state and local income taxes. Some states also have personal property taxes on items such as cars and boats, which can add to the cost of living.

Insurance and utilities

It is recommended that people contact their insurance agent to receive an estimate of the costs of car insurance and homeowners insurance in the new location. People moving to a flood-prone or tornado-prone area may find they need additional hazard insurance. Car insurance costs depend not only on the car and driver, but also regional theft and accident rates. Utility costs also can vary from region to region. Utility costs have a lot to do with the size of the property and the energy efficiency of the design and the systems. The best way to estimate them is to get copies of the utility bills from the owners.

Other costs

Even the cost of basic groceries and medicines can vary from place to place. For example, someone earning $200,000 in Washington, D.C., would need 30% more income to maintain his or her lifestyle in New York City. By contrast, that same D.C. resident could earn 33% less in Dallas and still maintain the same lifestyle. It’s very important for people to know what the fees are and what they cover in terms of amenities and maintenance. You need to look at the association’s finances and ask about the rate of increase in fees. Of course, costs are not the only factor in deciding whether or not to relocate. I think the primary consideration should be quality of life.  As long as they can afford to live there and still save for retirement, people should choose where they want to live.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=24764498&GT1=35005

You’re at a disadvantage when you have major house damage or a total loss of your home. You face a home insurance claim process that could easily stretch out for more than a year, require reams of paperwork and leave you exhausted. Here is a look at many of the things that can take people by surprise when they have a large home insurance claim:

1. A claim for a total loss of a house can cost less than rebuilding a damaged house.

Construction from scratch costs less per foot than construction for rebuilding. Often it’s “easier” to fix your problem if your house is simply gone, rather than to try to repair the damaged sections of what’s left. When you start from scratch, you don’t have to incorporate changes that exist with the building, so you have a clean slate. Also, it’s often more costly to retrofit your old house to prevailing code than to start fresh.

2. If you have a mortgage, your insurance checks will be made out to both you and your mortgage bank.

Your mortgage holder is likely listed as a “loss payee” on your home insurance policy, so payments for rebuilding are issued to both you and your lien holder. And don’t expect your mortgage holder to sign over the check to you. Policyholders have to endorse and send the check to the mortgage company, and it will sit in escrow until repairs are made. Mortgage banks typically release the funds back to you in three installments over the course of your reconstruction. Mortgage companies want to be sure your property is repaired before releasing payment to you. As a result, you may have to advance your own money for construction costs until the mortgage company verifies the repairs.

3. Don’t cash any insurance checks marked “full and final settlement.”

In some states, such as California, it’s illegal for an insurer to issue a check like this. You don’t want to cut yourself off from any funds you’d be entitled to if you later discover that not everything has been paid for.

4. Don’t sign a release on your home insurance claim.

This takes the home insurer off the hook for any future payments on your claim. Insurance companies ask the insured to do it when they think there’s a problem or big dispute coming. The home insurance policy does not require the insured to execute a release, so why should you sign?

5. Don’t let your insurance company replace your Pottery Barn stuff with Wal-Mart stuff.

The values of particular items are often disputed in home insurance claims. If you’ve bought expensive items, your insurance company may say it can replace them with very similar items from Wal-Mart or Target. The insured is entitled to be paid for what they had — not a knockoff version of it.

6. Many condo owners have no idea that they need their own home insurance policies.

They think that the condo association’s policy covers their property. However, the association’s policy covers only common areas, typically up to the walls of the condo. If you want your own space and belongings protected, you need an HO-6 home insurance policy. Otherwise, all your belongings, furniture, appliances and cabinets are uninsured. Without an HO-6, you also may have no liability protection if you’re sued for something that happens within your condo, like a slip-and-fall injury.

7. If you’re forced to evacuate, don’t sleep at a shelter.

Your home insurance covers your “additional living expenses” if there’s a mandatory evacuation, including hotels and food — even additional transportation costs. Why sleep on a cot when you could go to a hotel? You don’t realize you have that coverage until you have a loss.

8. After a widespread disaster, insurance companies will bring in company adjusters from out of state who aren’t familiar with local costs.

Adjusters from outside your area may not have a handle on how much electricians, plumbers or other workers charge, or how much it costs to rebuild a house. Often they will rely on a software program called Xactimate, which isn’t very exact if you don’t account for local costs. The insurance company will bring in out-of-state adjusters who are probably not licensed in the state. They’re not as familiar with local building codes. What we saw from the 2007 fires in Southern California was that out-of-state adjusters can’t comprehend that it will cost $800,000 or $1 million to rebuild someone’s house. They can’t comprehend local building values.

9. People regularly settle for less than the total cost of their damages because they are exhausted.

Especially near the end of a complicated claim, such as a total home loss, homeowners just want the process to be over. Even if your policy entitles you to “replacement cost” of your belongings, home insurance companies will initially issue checks for your belongings’ actual cash value. Then, once you’ve replace the items, you must submit your receipts to get the difference between the initial checks and what you actually paid for replacements. In reality, most people don’t go back and submit receipts because they’re so frustrated with the claim, they’re done with it. They’ll settle for less and close the claim and rebuild for less, and the insurance company knows this. Hiring a public claims adjuster can put you on an even playing field with your insurance company. Your insurer may assign three adjusters to work on your claim: one for “additional living expenses,” one for your personal property and one for the building portion of your claim. A public adjuster will be able to explain the process and work on your behalf handling the countless meetings, e-mails, phone calls and paper documents that flow for a large claim.

Read at: http://articles.moneycentral.msn.com/Insurance/InsureYourHome/9-secrets-of-home-insurance-claims.aspx?page=1

The clock is ticking on the federal homebuyer tax credit. Homebuyers still have time to buy a home and meet the deadlines, but they will need to act soon and be proactive throughout the transaction. The homebuyer tax credit is worth 10 percent of the home’s sale price, up to $8,000 for buyers who haven’t owned a home in the previous three years and up to $6,500 for buyers who have owned and occupied a principal residence for at least five consecutive years during the eight-year period that ends on the day the new home is purchased.

Here are some tips for last-minute buyers:

• The buyer must enter into a binding contract to purchase the home on or before April 30 of this year. The term “binding contract” isn’t defined in the homebuyer tax credit law and may be subject to interpretation. Generally, the term refers to an agreement that’s signed by both parties and has a deposit in escrow, according to Randi Bennett, an escrow officer at First Centennial Title Co. of Nevada in Reno.
• The purchase must close within 60 days after the binding contract deadline. In this context, that means June 30, not June 29, according to the Internal Revenue Service. The discrepancy between 60 calendar days and two months occurs due to a financial fiction that every month equals 30 days.
• Certain U.S. military, foreign service and intelligence service personnel have an extra year to claim the homebuyer tax credit. These buyers must enter into a binding contact on or before April 30, 2011, and close on or before June 30, 2011.

• Buyers should be upfront with their Realtor about their must-haves and their wish list. Buyers who aren’t realistic could find themselves up against the deadline with fewer houses from which to choose.
• Contract contingencies allow buyers some breathing room to take care of big items such as financing, inspections and the sale of their current home, but contingencies shouldn’t be an excuse to delay once the deal is pending.

If you run into a problem and you no longer want to buy that house, it’s great that you had those contingencies to protect you, but you may not have time to find another property,” she says.

• Anecdotal reports suggest that some buyers have included a tax-credit contingency in the purchase contract. Whether that’s a necessary protection to make sure the deal closes on time depends on the situation and local practices. Either way, buyers should read the contract to make sure the closing will occur before the deadline.
• Buyers should get preapproved for a mortgage, because glitches such as a mistake on a credit report or a lender’s request for tax returns that must be retrieved from the IRS can cause a delay.

You don’t want to wait until the last minute, because you could end up shooting yourself in the foot over something that’s no one’s fault, but you just run out of time.

• Buyers also should allow extra time in case the mortgage lender requires a second appraisal, which can delay final loan approval.

The appraisal process in residential lending is going through some painful changes. It is not uncommon to have a mortgage lender require more than one appraisal.

• Buyers should line up homeowners insurance as soon as the house is under contract. Homeowners insurance is usually routine, but some states have special disaster-related issues. A big storm, earthquake or fire can trigger a moratorium on new policies.
• Buyers should be aware that short sales, in which the seller needs a lender’s approval to sell the home for less than the loan balance, are typically subject to lengthy delays. For instance, one typical requirement is that the final closing statement must be sent to the bank for final approval. That can take five to 10 business days.

It’s an unfortunate irony for homeowners who have experienced a financial hardship, but  buyers who want to claim the tax credit should set some firm deadlines or avoid short-sale homes.

If the home they fall in love with is a short sale, they need to have a very serious talk with their Realtor with the calendar in front of them and say, ‘If we don’t have an answer by this date, we need to look for another house”.

• The IRS has introduced Form 5405 and instructions for taxpayers who want to claim the home buyer tax credit.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=23657587