Beth Paisley's Blog – Winchester Real Estate

Shopping for homeowners’ insurance is one of the least glamorous parts of the home buying process, but you’ll be glad you have it when the unexpected happens—a burglary, fire, flood, or when someone gets injured on your property.

Whether you’re in the process of finding homeowners’ insurance because you’re buying a new home, or you have an existing policy that deserves a second look, homeowners’ insurance policies can be difficult to navigate, between tricky language, vague coverage details, and long lists of exclusions.

When you’re ready to start looking for insurance, have this information handy:

Your social security number
The age and location of the home
The home’s proximity to fire hydrants and fire stations
The age and condition of plumbing and electrical systems
Policy numbers for any other policies you have with the same insurance company (auto or life insurance, for example)

Then, ask your insurance agent the following questions:

What type of coverage do you offer?

Be aware of differences in coverage. Basic coverage will cover the rebuilding of your home and its contents up to your policy limit. Replacement cost coverage (also called cash value coverage) pays to rebuild your home and replace your belongings, even if costs exceed your policy limit. For example, if your losses include a five-year-old television, a basic plan will only pay you for what the television is worth now, due to depreciation. Replacement cost coverage ensures that you will be able to buy a new television at today’s cost.

Is loss of use coverage included?

If disaster strikes your home and you have to completely rebuild, you’ll need somewhere to live until your home is habitable again. Does your policy include lodging, travel, and food coverage?

I live in a part of the country where earthquakes/floods/tornadoes/termites are a problem. Does my homeowners’ insurance provide coverage?

Most basic insurance policies do not cover earthquakes, floods, or pest damage. You may need a separate rider for natural disaster coverage. If the insurance company won’t provide it, contact your state or federal government. Some government offices underwrite natural disaster coverage.

I have expensive valuables. Are they covered?

A standard policy should cover your belongings. However, if you own antiques, artwork, or expensive jewelry, you might want a separate rider for these pieces. A standard policy may limit the per-item replacement to $2,000-$3,000, so if you need additional coverage, provide your insurance company with appraisals for your most valuable belongings.

Is your company financially solvent?

Only insure your home with a company that has a long history of financial stability. Insurance companies’ financial statements are released quarterly and can be found online. Don’t insure your home with a company that may not be around to pay your claims in the future.

HOAs in neighborhoods with single-family homes may cover sidewalks, landscaping, and common areas. Ask to see a comprehensive list of what is included.

What discounts are available to me?

Just like with car insurance, there are myriad discounts available for your homeowners’ insurance policy, including:

Multiple policy discounts. You’ll receive discounts of up to 5% when you insure your home with a company that already provides your auto, renters’, or life insurance.
Installing security systems. Save 5-10% when you install a security system in your home. The amount you save may almost completely cover the cost of your monthly alarm monitoring service.
Age of your home, and specifically its roof, plumbing, and electrical. Newer systems mean savings.
Change in deductible. Most companies require a minimum $500 deductible. If you’re comfortable with a higher deductible, you can save 25% on your policy.

Once you’ve insured your home with a policy that fits your needs with a company you trust, revisit your policy documents every year and make sure that your coverage is still sufficient. Always revisit your policy when you’ve made renovations to your home, purchased expensive valuables, or when your financial situation has changed. The right homeowners’ insurance policy will provide peace of mind that you’ve protected one of life’s biggest investments.

Before you begin the process, here are a few things you should know. First and foremost, purchasing a home is a smart decision regardless of the market’s condition. A property’s value will almost always appreciate over time, and there are always benefits for a homeowner. If you find a home that you love and it’s available, there is no reason you shouldn’t fight to get it.

How can you determine your housing needs? Your home should fit the way you live: with spaces and features that appeal to the whole family. Before you begin looking at homes, make a list of your priorities: things like location and size. Should the house be close to local schools, your job, or public transportation? How large should the house be? What type of lot do you prefer? What kinds of amenities are you looking for? Establish a set of “minimum requirements” and a “wish list”

Less-is-more approach for your home using these downsizing ideas.

Lighten the load: Assess your current belongings from furnishings to the stuff tucked in the very back of your closets. Then edit it all down to what you really need and want to have around you, which will uncover both living and storage space you probably didn’t realize you had.

Downsizing Your Home: Make money by finding a new home for your stuff: make cash by selling the excess via a yard sale, online auctions and classifieds, or outlets that specialize in better furnishings and collectibles.

Reorganize and store: Redo closets and other storage areas with do-it-yourself shelving or modular storage solutions. Use double-duty furnishings like ottomans that cleverly contain storage space.

Make the most of furnishings: Arrange your furnishings for a welcoming, clutter-free feel, and put smart pieces like nesting tables and convertible seating to work in busy living areas
.
Design for all: Accommodating a range of ages and abilities with barrier-free floor plans, smart fixtures and all-around easy access. A few small changes will not only help you enjoy your home for a longer period of time but will also make for smoother traffic flow if you’re adding housemates.

Create multiple dwellings in one home: Convert a little-used bonus space to a bedroom suite, add a daybed to a home office or living area for extra sleeping space, and look for other ways you can get more out of existing areas of your home.

One of the decisions most prospective homebuyers have to make is whether to buy a brand new house or a previously owned (“resale”) home. Here’s a comparison of some advantages to each choice:

New house:
Modern floor plans that could include a “great room,” bigger closets, more baths, etc.
The opportunity to choose upgrades and customize floor coverings, colors and more
More energy-efficient insulation, windows and heating/cooling systems
The added protection of a warranty from the home builder

Resale home:
Existing features, including window treatments and mature landscaping
Location — existing homes are often closer to metropolitan areas
Established neighborhoods that provide a sense of community
The opportunity to use an existing home as a base to remodel and create a unique property

If you would like additional information on which option might be your best choice or are ready to look at homes, please call or email me. I would be happy to help you!

The strategy of real estate sellers holding out for a better offer will be brushed off by most homebuyers. Consider that of the homes that took four months or more to sell in the past year, almost half of their owners accepted less than 90 percent of the asking price, according to the National Association of Realtors. For a gauge, have your agent produce the latest comparable sales including short sales and foreclosures as well as a recent summary of sales prices versus original list prices. But be wary that such information doesn’t reflect the homes that failed to sell.

Put your best footage forward

Prep, paint, stage, scrub, improve, repeat. Efforts can include caulking, plastering, planting flowers, adding potted plants, making the windows spotless, pressure washing that oily driveway, edging the walks, trimming the bushes and trees, and mending the fences. None of these is excessively capital-intensive, but when applied, they say “buy me.”

Be flexible

Be ready to negotiate and offer extras such as closing costs, paid property taxes, remodeling work (or a cash credit), appliances, paid condo association/homeowner association dues, a few months of mortgage payments or even seller financing. Home sellers who’ve been on the sidelines and who advised their agents to ignore offers by lowballers don’t have that luxury now. Instruct your agent to listen intently to prospective homebuyers’ misgivings about the home and adjust accordingly and immediately.

Excluding property taxes and insurance, a traditional fixed-rate mortgage payment consist of two parts: (1) interest on the loan and (2) payment towards the principal, or unpaid balance of the loan.

Many people are surprised to learn, however, that the amount you pay towards interest and principal varies dramatically over time. This is because mortgage loans work in such a way that the early payments are primarily in interest, and the later payments are primarily towards the principal.

In the beginning… you pay interest
To help calculate monthly payments for loans based on different interest rates, lenders long ago developed what are known as “amortization tables.” These tables also make it fairly easy to calculate how much money of each payment is interest, and how much goes towards the principal balance.

For example, let’s calculate the principle and interest for the very first monthly payment of a 30-year, $100,000 mortgage loan at 7.5 percent interest. According to the amortization tables, the monthly payment on this loan is fixed at $699.21.

The first step is to calculate the annual interest by multiplying $100,000 x .075 (7.5 %). This equals $7,500, which we then divide by 12 (for the number of months in a year), which equals $625.

If you subtract $625 from the monthly payment of $699.21, we see that:

$625 of the first payment is interest
$74.21 of the first payment goes towards the principal

Next, if we subtract $74.21 (the first principal payment) from the $100,000 of the loan, we come up with a new unpaid principal balance of $99,925.79. To determine the next month’s principal and interest payments, we just repeat the steps already described.

Thus, we now multiply the new principal balance (99,925.79) times the interest rate (7.5%) to get an annual interest payment of $7,494.43. Divided by 12, this equals $624.54. So during the second month’s payment:

$624.54 is interest
$74.67 goes towards the principal.

Note: In Canada, payments are compounded semi-annually instead of monthly.

Equity
As you can see from the above example, even though you pay a lot of interest up front, you’re also slowly paying down the overall debt. This is known as building equity. Thus, even if you sell a house before the loan is paid in full, you only have to pay off the unpaid principal balance–the difference between the sales price and the unpaid principle is your equity.

In order to build equity faster–as well as save money on interest payments–some homeowners choose loans with faster repayment schedules (such as a 15-year loan).

Time versus savings
To help illustrate how this works, consider our previous example of a $100,000 loan at 7.5 percent interest. The monthly payment is around $700, which over 30 years adds up to $252,000. In other words, over the life of the loan you would pay $152,000 just in interest.

With the aggressive repayment schedule of a 15-year loan, however, the monthly payment jumps to $927-for a total of $166,860 over the life of the loan. Obviously, the monthly payments are more than they would be for a 30-year mortgage, but over the life of the loan you would save more than $85,000 in interest.

Bear in mind that shorter term loans are not the right answer for everyone, so make sure to ask your lender or real estate agent about what loan makes the best sense for your individual situation.

As part of the loan application process, virtually all lenders will want to see a copy of your credit report. The report will list all your long-term debts (credit cards, mortgage payments, automobile and student loans, etc), as well as your payment history. If you don’t have a copy of your credit report, most lenders will generally require you to pay for a copy when they process your loan application.

However, most real estate experts agree that it is a good idea to obtain a copy of your credit report several months before you apply for a loan. This is so you have a chance to resolve any problems with your credit before your bank sees it. U.S. Federal law ensures that you have access to your credit report, which may be obtained from your local credit bureau or any of several national firms that specialize in credit reports.

Late payments
For most people, problems with their credit report are likely related to late payments on a debt. If you were late one month in paying off your credit card, but otherwise have a good payment history, chances are most lenders won’t be too concerned. But if you have a history of late payments you’ll need to document the reasons why. A slow payment history won’t necessarily get you turned down for a loan, but you may have to pay a higher rate of interest or otherwise prove to the lender that you can repay your loan in a timely fashion.

Errors on your credit report
Many people are surprised to learn that credit reports can often contains errors or inaccurate information. If this is the case with your credit report, you’ll need to contact the reporting agency or creditor to have the problem resolved. This can sometimes be a slow process, so make sure to give yourself time to clear up the mistake.

Bankruptcies and foreclosures
There’s no getting around it, a bankruptcy on your credit report is not a good thing. But that doesn’t mean you still can’t obtain a loan. Even though a bankruptcy may stay on your credit report for seven to ten years, lenders will often consider the circumstances surrounding a bankruptcy (family illness, injury, etc.). Moreover, if you have reestablished good credit since the bankruptcy, a lender will be more inclined to approve your application.

You’ve probably heard the horror stories—homeowners’ associations nitpicking about insignificant details, tying up property sales with costly lawsuits, or enforcing expensive and unexpected assessments.

But, homeowners’ associations (also called HOAs) can help protect property values, provide great amenities that you couldn’t afford on your own, get you involved with your community, and keep your neighbors from parking cars on their front lawns.

Whether you love, hate, or don’t know much about homeowners’ associations, if you’re thinking about purchasing a home that is affiliated with one, it’s important to do your research. Before you sign on the dotted line, ask these important questions:

Does this home belong to a homeowners’ association?

This question isn’t as simple as you’d think—HOAs aren’t just for condominiums. Don’t assume that just because you’re looking at a townhome, single-family home, or vacation property that you’re in the clear. In fact, according to the Community Association Institute (CAI), four out of five houses built since the late 1990s have an HOA.

Can I see some documentation?

Ask to see the community’s Covenants, Conditions, and Restrictions, commonly known as CC&Rs. These documents are the association’s governing rules, and explain protocol and regulations that officers, homeowners, and tenants are expected to follow. In most cases, CC&Rs are legally enforceable.

In addition to reviewing the CC&Rs, ask to see recent meeting minutes and up-to-date financial statements. These documents will let you know if there are any upcoming assessments in the works and help you determine the overall financial health of the organization.

How are the HOA’s finances managed? How much can I expect to spend?

A well-organized HOA should make very clear the financial responsibilities of its members. Are dues billed monthly, quarterly, or yearly? How much are they? Are there late fees? If a homeowner violates a regulation, are there monetary penalties? Are there limits to the dollar amount and frequency of one-time assessments?

What do my dues cover?

Inclusions vary dramatically and it is safe to assume that the lower your dues, the fewer services, amenities, and utilities are included. In a traditional condominium association, dues may likely include water, cable, ground maintenance, trash, sewer, recreational amenities, parking, security, and more.

HOAs in neighborhoods with single-family homes may cover sidewalks, landscaping, and common areas. Ask to see a comprehensive list of what is included.

How do you like the HOA?

Hit the pavement and ask neighbors about the association. How is the leadership elected? Have you had any negative interactions? How common are expensive assessments?

Can I follow all of the rules?

Before you commit to living in an HOA-affiliated building or neighborhood, take an honest look at the rules and make sure that you are comfortable following every single one. Make sure that your lifestyle fits with the HOA’s parameters. For example, if you’re buying vacation property, make sure that the HOA doesn’t have rules limiting or forbidding owners from renting their property.

Homeowners’ associations can be a good influence on your condo or neighborhood, but only if everyone follows the rules. Understanding the rules and responsibilities before committing to a purchase is crucial to happiness in your new HOA-affiliated home.

I’m not talking about short sales or otherwise complicated listings, I’m talking about nice listings that have sellers and or agents that refuse to acknowledge the recent sales data and want to argue in the face of it. I’m talking about homes with owners that aren’t new to ownership and decision making. Do these sellers understand how to select a realtor?

A few examples:

Home listed in the 300′s in need of 50K+- updating, market support to the low 200′s. Owner rejects a close in 30 day cash offer in the low 200′s – my buyers acknowledging but ignoring my advice not to go that high because they loved the home. No deal, my buyers find something just as nice and that home sits empty into the second year
Custom builder in northern Virginia area loses my buyers when he simply can’t find time to meet and discuss a home they’d like to build….we chased him for a month. You’re that busy?
An appointment for showing a home for sale in Winchester is made, bell rang, door cracked open…owner didn’t get the message we were coming. I explain these are out of town buyers, call your agent, blah blah blah. Owner slams the door, we look at one another, laugh and start walking down the driveway as the door opens. Owner is now agreeable and wants us to come in…we wave as we drive away.
Buyers hit on a nice Frederick county home, I run the comps and find absolutely no value support for the list price…just ridiculously priced. Speak with the well known agent and she tells me how wonderful it is. I send her closed comps and call her back to discuss, she tells me I have no grasp on the market. We move on, the home languishes and forecloses.
I speak with the listing agent for a home in a well known Stephens City community. After a tortuous conversation on everything but value support, she cautions me not to “make an insulting offer”. I send over the offer, with excellent recent closed sales and she calls me back and land blasts me, then hangs up. Four months later she calls me back to “check on my buyers” and suggests that offer “might fly this time”. Click.

To be fair, I’ve had my share of sellers with little interest in the data. Often I can gauge how they’ll be and if completely unreasonable, I don’t take them on. I’ve had a few that just go south on me and I’ll tell them that there’s little I can do if they refuse to acknowledge the data. They have the final say, all we can do is be honest when they ask “what’s my home worth?”.

One thing I always do though, is level with the other agent. If my client isn’t listening to me, I’m not going to have another agent waste time with a deal that isn’t going to happen. Obviously my interest is to represent my clients’s interests at all times, but if it’s clear that a deal isn’t going to develop then there’s no point to continue. In my opinion, there’s a difference between an agent being an advocate and an agent being dumb; professionals understand the difference.

As far as sellers…I find the best ones to be the ones that define success. That definition is best created with this in mind – you can’t always get what you want.

I hope you will find the following snapshot of local Real Estate inventory interesting. The table represents aggregated values based on MLS data for the specified date.

Housing Inventory Snapshot November 27, 2011
Average List Price Median List Price Average Days On Market

Clarke County, VA
Single Family under $500K $286,805 $299,000 159
Single Family over $500K $1,507,195 $999,500 270

Frederick County, VA
Single Family under $500K $296,360 $299,000 179
Single Family over $500K $816,421 $625,000 186
Condo/Townhome under $300K $184,783 $184,990 107
Condo/Townhome over $300K $401,413 $353,990 102

Shenandoah County, VA
Single Family under $500K $219,096 $199,400 226
Single Family over $500K $1,878,233 $900,000 336
Condo/Townhome under $140 $93,778 $90,000 175
Condo/Townhome over $140K $171,809 $169,000 130

Warren County, VA
Single Family under $500K $225,615 $199,500 216
Single Family over $500K $778,627 $670,000 341

Winchester City, VA
Single Family under $250K $140,362 $140,000 119
Single Family over $250K $382,706 $339,500 154

Berkeley County, WV
Single Family under $500K $182,638 $164,900 186
Single Family over $500K $792,796 $690,000 205
Condo/Townhome under $140K $111,233 $119,500 151
Condo/Townhome over $140K $179,690 $169,000 130

Jefferson County, WV
Single Family under $500K $245,155 $236,000 155
Single Family over $500K $1,024,609 $985,000 264
Condo/Townhome under $300K $170,321 $169,900 85