When you're planning to spend thousands of dollars on home improvements, the last thing you want is for your investment to go down the drain. For that reason, it's crucial to make sure you've taken all the necessary steps to insure your project before you begin.
Step One: Contact your insurer
Major renovations can leave your home exposed, physically and financially. Those new French doors could be stolen before they are installed. Major roof work might leave your home exposed to the elements, some of which might not be covered under a regular homeowners policy.
In such cases, adjust insurance coverage temporarily. During construction, there may be some kind of insurance rider just in case there's an accident or something that protects you in addition to your insurance coverage. Talk to your insurance agent about what you're planning, and he or she can guide you through short-term coverage options.
Step Two: Find an insured contractor
When hiring a contractor, check to see whether that person is properly insured. Make sure they have workers' compensation for their employees and have general liability insurance for the company. What that means is when a professional contractor is working on your house, if a worker is injured, you're not liable. If the contractor damages something, destroys something or burns your house down, you're protected.
Likewise, if something happens to the contractor's tools or equipment while the project is being completed, his insurance will pick up those costs. Uninsured contractors may charge you less for the job, but you'll pay the price if something goes wrong during the renovations. And even if a contractor tells you he's insured, don't take his word for it. Have the contractor show you a certificate of insurance.
What if you decide to do the project yourself? In that case you don't so much have a liability or a third-party liability issue. As a result, there's no need for workers' compensation or general liability insurance. But, depending upon the scope of the project, your insurance agent may suggest you hire a professional instead. We would never recommend that a policyholder go out and do any type of work that would require a license, especially around an electrical or plumbing system. Also, if you damage your property in the process and your insurance provider determines that your negligence caused the mishap, it might not pay the claim.
Step Three: Get building permits
Some jobs require building permits, particularly if the structure of your home will be changed. In these instances, work must adhere to building codes. Your city or county government can tell you whether your project is under this category. If so, have the contractor apply for the permits. Once the job is done, a building inspector will inspect the work.
If the work fails the inspection, the contractor is liable and has to make adjustments. Incompetent builders can have a tremendous effect on your home's coverage. If you add a room to your home and it does not meet building codes, your insurer could refuse to cover it.
Step Four: Estimate the project's worth
Every home improvement project need not warrant a change to your home insurance policy. If you buy a new refrigerator, change one or two appliances or upgrade one of the bathrooms, there's probably no need to make revisions. But any time you're investing more than $25,000 back into the value of your home, your insurance company should really be on notice of that change. If unsure, err on the side of caution and check with your agent anyway.
Step Five: Review your policy
Once the project is complete, your insurer can help you determine how much value the work has added. This information is crucial: You want the homeowners policy to reflect the new, upgraded value of your home. Say your home is insured for $200,000. Add an expensive addition but fail to revise the policy, and it's like the work didn't happen. If your house burns down, what proof do you have of any improvement work?
Monday, October 27, 2008
Friday, October 24, 2008
Tips for Buying a Foreclosed Home
In good markets and bad, real-estate agents are constantly announcing that "now" is the best time to buy. With housing prices weakening, inventories rising and sales slumping, this attitude has drawn a lot of ridicule in the press.
But you know what? Now may actually be a very good time to buy, or at least start looking seriously.
Though no one can really tell when the downward-trending housing market will reach its nadir -- most economists predict it will bottom out sometime in 2008 or 2009 -- there's no doubt that sellers have let go of bubblelicious notions of what their homes are worth. According to S&P/Case-Shiller, existing home prices dropped 4.5% nationally in the third quarter over the year before; price appreciation was even slowing in Charlotte, one of the few cities that the research group covers that showed price appreciation year-over-year. It rose at a tepid rate of 4.7%.
The media makes this out as a tragedy, but it's really not. For buyers, a market that's nearing its bottom is only a concern for flippers, who need a rising market to make money. For buyers making a long-term investment, it's a reason to rejoice.
Yes, loans are hard to find, but they are still being made, especially if you have good credit. While the qualifications for getting a loan are becoming stricter -- but no more strict than they were in the mid-1990s -- mortgage money is still cheap by historical standards and will likely remain so in the near future. The Mortgage Bankers Association projects that 30-year fixed rates will hover around 6% throughout 2008 and the first two quarters of 2009.
Meanwhile, bargains abound, particularly in foreclosure properties. While many Web sites sell foreclosure information (sometimes after letting you sample the Web site for a week-long free trial), you don't have to pay an online membership fee to find them. Title companies, real-estate agents and lenders -- including credit unions -- all have information on homes in various stages of foreclosure.
Homes that are being auctioned are listed in the legal notices section of the main local newspaper and can usually be found on the newspaper's Web site.
But generally, you will get a better deal if you buy a house before it goes to auction, or after -- if it doesn't sell on the courthouse steps. Bidders at an auction sometimes get caught in the heat of the moment and push up prices.
But you know what? Now may actually be a very good time to buy, or at least start looking seriously.
Though no one can really tell when the downward-trending housing market will reach its nadir -- most economists predict it will bottom out sometime in 2008 or 2009 -- there's no doubt that sellers have let go of bubblelicious notions of what their homes are worth. According to S&P/Case-Shiller, existing home prices dropped 4.5% nationally in the third quarter over the year before; price appreciation was even slowing in Charlotte, one of the few cities that the research group covers that showed price appreciation year-over-year. It rose at a tepid rate of 4.7%.
The media makes this out as a tragedy, but it's really not. For buyers, a market that's nearing its bottom is only a concern for flippers, who need a rising market to make money. For buyers making a long-term investment, it's a reason to rejoice.
Yes, loans are hard to find, but they are still being made, especially if you have good credit. While the qualifications for getting a loan are becoming stricter -- but no more strict than they were in the mid-1990s -- mortgage money is still cheap by historical standards and will likely remain so in the near future. The Mortgage Bankers Association projects that 30-year fixed rates will hover around 6% throughout 2008 and the first two quarters of 2009.
Meanwhile, bargains abound, particularly in foreclosure properties. While many Web sites sell foreclosure information (sometimes after letting you sample the Web site for a week-long free trial), you don't have to pay an online membership fee to find them. Title companies, real-estate agents and lenders -- including credit unions -- all have information on homes in various stages of foreclosure.
Homes that are being auctioned are listed in the legal notices section of the main local newspaper and can usually be found on the newspaper's Web site.
But generally, you will get a better deal if you buy a house before it goes to auction, or after -- if it doesn't sell on the courthouse steps. Bidders at an auction sometimes get caught in the heat of the moment and push up prices.
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