Flood insurance benefits outweigh costs.

Thousands of under-insured homeowners in the path of Hurricane Katrina learned first-hand the financial devastation of flooding. Every home in the United States has a one in four chance of experiencing some type of flood damage every three decades according to the Federal Emergency Management Agency (FEMA). With the increase in global warming, more intense storms with their severe flooding will alter the financial future of those with no or minimal insurance for rising waters.

Flood zones are categorized by FEMA by their likelihood to experience flooding based on a once-in-a-century model that states a flood having a one-percent chance of being equaled or exceeded in any year. Areas rated an “A” are at the highest risk and all potential mortgage lenders offering a loan in an “A” flood zone will require the borrower to obtain flood insurance. Locals labeled “B”, “C”, “D”, “V” and “X” carry lower risks and the possibility that mandatory insurance might not be required.

However, lower risk doesn’t mean that you shouldn’t diminish the opportunity for severe flooding. Evolving weather patterns offer areas that historically have predictable precipitation and storm patterns experiencing record rainfalls and flash flooding that haven’t implemented wide ranging flood control infrastructure. Flood damage can also be caused by overwhelmed storm sewer systems backing up into your home.

Rates for policies vary from two to seven hundred dollars a year, based on your flood risk level. Plans restrict coverage amounts to $250,000 for structures and $100,000 in personal property. Florida leads the country with the largest number of flood insurance policy holders. The visual images of the homes in the path of Katrina should offer a stark reminder of why flood insurance in a benefit not a cost.

1031 Exchanges: the basics.

Long utilized by savvy real estate investors, 1031 exchanges are evolving as an important tool for main stream real estate consumers. 1031 exchanges are allowed under Section 1031 of the Internal Revenue Code of the United States. The code permits investors to defer capital gain taxes on the exchange of like-kind properties. You should always consult a qualified attorney or tax advisor to determine if or how an 1031 exchange should be used.

-A like-kind exchange is a tax-deferred not a tax-free investment.

-Like-kind is defined as real property also known as real estate. Qualifying properties are outlined in the 1031 code.Some excluded types are; property held primarily for sale, inventories, stocks, bonds or notes, securities, interests in a partnership, and certificates of trusts. Personal residences do not qualify.

-Properties must be used with a proper purpose. Both the relinquished property and the replacement property must be held for use in a trade, business or as an investment.

-The relinquished property must be exchanged and not sold for cash.

-The majority of 1031 exchanges are facilitated by Qualifying Intermediaries that assist the taxpayer in meting the IRS requirements of Section 1031.

-The value of the replacement property must be equal to or greater than the value of the relinquished property.

-The equity in the replacement property must be equal to or greater than the equity in the relinquished property.

-The debt on the replacement property must be equal to or greater than the debt on the relinquished property.

-All of the net proceeds from the sale of the relinquished property must be used to acquire the replacement property.

-A 1031 exchange ends the moment the taxpayer has control of the proceeds from a relinquished property.

-A Qualified Internediary is considered a safe harbor by the IRS. The safe harbor holds all proceeds from relinquished properties until they are needed for the replacement property. The safe harbor or QI guarantees that the funds will not go into the hands of the taxpayer.

-Title is held in 1031 exchanges by the taxpayers and not the Qualified Intermediary. The taxpayer does though assign her or his interests in the property purchase and sale contracts to the QI.

-There are strict timelines for replacement of a relinquished property. A taxpayer must identify within 45 days of the date a property was relinquished potential replacement properties. Exchanges must be completed within 180 days after the transfer of the relinquished property or the due date taxpayer’s federal tax return for the year in which the relinquished property was transferred, which ever comes first. Extensions are granted in some cases, consult an QI for more detail.

This is an overview of the 1031 exchange. There are many additional definitions and sections to the code. You are urged to consult with an Qualified Intermediary and an attorney to gain the required information to determine if a 1031 Exchange is right for you.

What every homebuyer and seller should know about mold.

The aftermath of Hurricane Katrina brought mold into the forefront in media depictions of the interior of devastated homes covered from floor to ceiling with mold. Depending on where you live in the United States, mold will have varying degrees of impact if you are buying or selling a home. Add mold to your list of potential hazards in a home you’re considering purchasing or selling, but don’t overlook asbestos, lead and radon as other hazards in your quest to determine if mold poses a problem.

Here’s some tips on what buyers and sellers should know about mold in residential properties.

-Health problems from indoor mold produce allergens. Allergic responses include hay fever type symptoms such as red eyes, runny nose, sneezing and skin rashes. Some molds can also irritate eyes, lungs, nose,skin and throats of both allergic and usually non-allergic people.

-Mold spores can be spread by heating, ventilation and air-conditioning systems (HVAC). Do not run your HVAC system if you suspect that mold spores have entered it or mold is growing on intake or out take vents.

-Mold created by sewage requires professional attention. If raw sewage was in the water that created mold in a dwelling you should contact a professional who specializes in sewage based mold clean-up.

-What to wear when cleaning up mold. You should wear an N-95 respirator available online or at home centers. Wear long disposable gloves that can hold up when using chemicals like chlorine bleach. Wear goggles to protect your eyes from both chemical irritants and mold spores, select styles without ventilation holes.

-How to prevent mold occurences. Keep air-conditioning and refrigerator drip pans clear of standing water or condensation. Monitor water lines in furnace humidifiers and refrigerators. Vent appliances and exhaust fans that produce moisture to the outside. Do not vent bathrooms fans to attic or crawl spaces. Open windows in non-vented rooms that have excessive moisture build-up, even in winter months. Check water supply’s for leaks to sinks and toilets and any other appliances that use water, including the hot water heater. Insulate pipes to reduce condensation. Clean and dry bathtubs and areas with poor air circulation, wear condensation or water accumulates.

-Don’t overlook hidden mold sources. After removing known mold sources in kitchens and bathrooms, mold can hide behind paneling and wallpaper, ceiling tiles and in and under carpeting. Mold is commonly found on the rear of drywall even after the room side has been cleaned properly. Plan on discarding drywall, carpeting and ceiling tiles that have had visible mold.

Online resources:
Environmental Protection Agency:
Mold Resources: www.epa.gov/iaq/molds/moldresources.html
What to Wear When Cleaning Moldy Areas: www.epa.gov/iaq/molds/whattowear.html
Hidden Mold: www.epa.gov/iaq/molds/hiddenmold.html

Don’t overlook resale impact when remodeling.

Pickled oak floor and cabinet finishes, whirlpool bathtubs and indoor-outdoor carpeting were once the rage. Careful planning when remodeling today can save you time and frustration when you sell your home. Here are some tips to save you the aggravation of steaming off all your expensive wallpaper. Here’s some tips to consider before starting a project, especially if you plan on selling soon.

-Choose light to medium stain colors when refinishing or installing hardwood floors. Black might be in, but expensive to lighten later.

-Dated ceramic tile and bathroom fixtures need more than today’s paint colors and new bath rugs in buyers eyes.

-Choose wall colors than let homebuyers overlay their style. Strong commitment colors can block buyers from seeing themselves in your space.

-Parquet and laminate floors might be a quick fix, but you’ll pay later with low buyer perceptions of these products.

-Granite countertops on 1980’s oak cabinets with new hardware are a sure sign of a quick but incomplete update to buyers.

-Remember to size walls before applying wallpaper, so it is easier to remove. Homebuyers stay away from homes that have any more than one room of wallpaper. Ditto wallpaper borders.

-Think twice before converting third or fourth bedroom to a master bath. The majority of homebuyers would rather have the flexibility of an extra room.

-Install new kitchen cabinets to the ceiling, today’s buyers want the utility of the extra storage 42” cabinets provide.

-Buyers choose homes with first floor family rooms over basement recreation rooms. Compare costs of adding on to the first floor versus building out basement space.

-Include generous walk-in closets, pantries and laundries near bedrooms. Buyers will walk away from a home that can’t handle their belongings.

- Consider that buyers will see your in-ground swimming pool as a negative in clod climates.

- Kitchen back splash, ceiling and wall to wall ceiling mirrors are number one on the buyer hate parade!

-Keep finishes and proportions of new rooms similar to existing spaces. The huge new living room with crown molding next to the old galley kitchen with metal cabinets screams poor remodeling planning.

- Spiral staircases might solve space limitations; most buyers will stay away from a home with one, or discount your price to add a full-size staircase.

-Textured walls and popcorn ceilings are a common turn-off for buyers.

- Remember to add sufficient heat and air-conditioning when remodeling. After -thought baseboard heating and the only window air-conditioner in a centrally air-conditioned home denotes poor planning.

Low cost decorating ideas that say luxury to homebyers.

Forget shabby-chic and white-on-white. Homebuyers want warm understated elegance in homes they would consider their own. Going through hundreds of homes a month as a broker, I see first hand the body language and hear the comments from today’s homebuyers on what reels them in or turns them off. One of the most interesting examples on how decorating and reformulating a home came early this spring market when a two-story center entry colonial became available.

The home was filled with late 1990′s colors and way too much furniture, artwork and bric-a-brac.The property lingered for a couple of weeks and the buyer feedback was that they couldn’ t see through all the stuff in the house to get an idea of what the homes “bones” were. Plus the deep jewel-tone paint job was dark and over-bearing. So, we did a low-budget overall using some of my basic design principles. The home went to contract soon after the edit and update was completed. Here are some good basic decorating tips.

-Don’t forget first impressions. The entry hall is where you set the tone for the entire home. Keep it simple and spare as this is where buyers and their agents congregate. Have a console table (for listing materials) with a mirror over and one side chair for guests to sit down and put booties or shoes on, or to park purses and coats. Eliminate family photos and throw rugs, less is more.

-Rooms need design basics for functional elegance. Group accessories together. Don’t spread like-kind decorative objects around a room. Place collections together to give them more visual power. If you have a chair it needs a table next to it and a lamp, so it is a cozy reading station. Artwork should be streamlined and focused for impact. Hang artwork close together instead of scattering around a room. Keep the range of colors in a room tight. Too many colors is distracting and not inviting, you want buyers to linger.

-Getting a home update organized. Take room and furniture measurements first and record on graph paper. Move furniture around on paper (saves your back) until your happy with the look, edit pieces that don’t work. Look at the room and furniture, do you need new paint colors, slipcovers or accent pillows, all a quick way to add visual punch and unify a space design-wise.. Minimize window treatments to draw attention back into the room and let the sun shine in.

-Simple furniture rearrangement can bring new life to a tired space. Float sofas and coffee tables away from walls for a designer look. Use area rugs to anchor furniture groupings on bare tile and wood floors. Place groupings of candles and clear glass bowls filled with natural potpourri, fresh fruit or glass crystals on side and coffee tables.

-Discover ways to organize day-to-day room needs. Substantial wicker baskets or square stainless steel or brass can organize magazines, remote controls and toys. Books provide a good look, but vary them by laying some down and standing some up.

-Fresh flowers and green plants complete any space. Don’t get too fussy with flowers and plants, their basic beauty should be featured in plain containers without ribbon. Natural stones or bark covering the soil gives them a finished look. No silk flowers, period.

-Homes should look comfortable. Comfort is the ultimate luxury and buyers love it and want to stay. So if you’re trying to make a decision, let comfort rule. Comfort is feeling like you can sit down on the sofa, floor or window seat and feel at home in your Sunday best or Friday night pajamas.

-Lighting can make or break a room. Too bright and it looks like a movie set and too little like a creepy bar. Use a variety of table, floor and built-in lighting, use appropriate wattage bulbs. My rule of thumb is that as the sun rises the lighting should rise and as it falls so should it.

-Wallpaper is considered fill-in-the-blank decorating. No two people have the same taste in this instant decorator wannabe. If it’s more than three years old, take it down and paint in a neutral color. And wallpaper boarders are out.

-Clean is comfortable and elegant. Buff hardwood floors, clean tile, polish cabinets and don’t forget the windows. Cleanness is the foundation for a beautiful room and can overcome a room with problems.

-Every home must have a good sofa, comfortable chairs, a retreat to get away, good natural light, atmosphere, and practicality.

Preparation is key for successful mortgage application.

First time or repeat, the requirements for applying for a mortgage is constantly in the state of change. Take the time to be prepared before you meet with your mortgage banker or broker, otherwise you’ll get into what I call the “document chase”. This chase can be time consuming and frustrating for home buyers. Request your banker or broker to email or fax you a complete list of all the documents required to complete the application process.

Home buyers can be proactive when applying for a mortgage by following these simple tips.

-Don’t be alarmed or offended when asked to sign an Authorization to Release Financial Information Form. The mortgage lender will need this form to obtain your credit report, bank accounts, employment records, mortgage history and other loans and securities.

-If you are self-employed you might also be requested to sign a Tax Information Authorization form which allows the lender to request a copy of your tax returns.

-Prepare a list of your credit cards you have by type, interest rate balance due, available credit limit, and minimum monthly payments.

-Bring payroll stubs from last six months.

-Locate tax returns from previous two years.

-List your assets such as IRA accounts, securities, bank accounts, personal property such as jewelry and furniture. If you own other real estate bring addresses and fair market value information.

-Bring copies of divorce decrees, bankruptcy discharges, student loan documents, alimony and child support obligations.

-Create lists of employment and residences from the last two years. Mortgage providers want to see stability in both these areas.

-If you have an accepted offer to purchase a property, bring a copy of the contract and copies of any earnest money checks. Have available information of other parties and real estate agents connected with the contract.

-Do not deliberately falsify information on your loan application. All information will be verified through the trimerge credit report, and verification of employment and bank accounts.

-If your lender requires an application, credit check and an appraisal fee, bring these with you to the application meeting. They might not start processing your loan without them. Do not give the loan officer any money for a credit check or other fee until you are sure you want to work with this person.

-Do not give originals to mortgage lenders. Make photo copies and submit these.

-You are only required to list enough assets to show that you can qualify to borrow enough money to purchase the home you are seeking.

-Pull your own credit report before meeting with a lender. What the scores say to a mortgage lender: 800-850=Excellent, 700-800=Great, 650-700=Okay, 600-650=Marginal, 400-600=Not good, Under 400=Help!

-The short story on how a credit score is determined. Payment history=35%, Amounts owed=30%, Length of credit history=15%, New credit=10%, Type of credit=10%.

Owning Real Estate Versus Renting

For first time home buyers deciding to take the plunge and buying a home can be a tough decision. Especially in todays real estate market with prices flat or declining. Here are arguments for both renting and buying.

The pluses for renting versus owning:

- Monthly costs: Renting can be more cost-efficient than owning if utilities are included. The monthly cost of owning is usually more than renting after you total the cost of mortgage, maintenance, taxes, and utilities.

-Features: Some rental apartments offer amenities that are not found in smaller condo/co-op buildings or single-family houses such as 24-hour door attendant, dry cleaners, or a grocery store. Unless you purchase in a full-amenity building you will most likely have to go off-site for some services you are accustomed to having only an elevator ride away.

-Maintenance and repairs: Renting allows you the luxury of repairing or maintaining nothing; if the air-conditioner breaks you call the manager. With owning you have to either repair the air-conditioner yourself or locate, meet, and pay a repairperson.

-Mobility: Renting offers you the convenience of leaving your home when your lease expires. When owning you are tied to other persons’ timeline of moving when a buyer or a tenant agrees to a date, which might not fit your timeline.

The pluses for owning versus renting:

-Equity: Renting has no equity benefits. Owning provides a forced savings because part of each monthly payment is principal, which builds your equity. Potential property appreciation can also increase your equity. Note: If property values decrease in your market you could owe money when you sell.

-Control over your environment: A lease may not allow you to have pets, paint your walls red, or have a roommate. With owning you can choose a building or home that allows you to have pets, decorate to your taste, have roommates, or add a washer and dryer.

-Stability: Your landlord can increase your rent, sell the property, or convert your rental to condos and force you to move on short notice. With a fixed-rate mortgage, you can control your monthly housing expense and peace of mind that you can stay as long as you want.

-Tax benefits: Renting offers none. Owning allows you to deduct mortgage interest and home equity interest from your taxable income. Consult a tax professional for more information.

A quick apples-to-apples housing comparison:

-You pay $800 per month in rent for a two-bedroom house, which does not include heat or electricity.

-You purchase a home for $90,000 putting 10% as your down payment and borrowing $81,000.

-$81,000 at 7% interest equals a P and I payment of approximately $538.90.

-Property taxes are approximately 1.5% of purchase price ($90,000) which equals $1,350 ($112.50/month) plus $250 ($20.83/month) for homeowner’s insurance. $538.90 + $112.50 + $20.83 = $672.23.

-In this scenario, the mortgage payment is actually less than the rent.

Feng Shui and Real Estate.

Many buyers after touring a prospective home practice westernized feng shui when they turn to me and say “bad house karma’. We all know when a house is out-of-sync. Stuffed with belongings, one-off colors, and bad seller energy. Here are some tips to improve house karma.

-Use paint color to add energy. Red in dining rooms, orange in kitchen and playrooms, green in living and bedrooms. Blue to promote healing and relaxing and purple for wealth and abundance.

-Lighting feng shui-style is to calm and uplift. Dimmers maximize benefits, bright lighting brings movement and activity, and softer and lower lighting offers calmness.

-Water and air are key in feng shui. Keep water in vases refreshed and the air clean by opening windows and doors. Fountains and scented water bring calm.

-Artwork and objects de art are reflections of your inner self. Turbulent aggressive pictures disturb and not calm. Look for art for inspires not depresses you.

-Aromatherapy can help you change your way of thinking. Lemon is a study stimulator and the scent of roses inspires romance.

-Sound from wind chimes and soft classical music set the right tone for a feng shui home.

-Hosting an open house with food can create good feng shui. Knowing which foods are tied to which part of our life center can bring results. Knowledge use sweet and bland, career use salty, helpful people use hot or spicy, family use sour, children or creativity use hot or spicy, wealth or abundance use sour, fame or reputation use bitter, and personal relationships use sweet or bland.

Safe and Secure at Home.

One of the rights bundled in home ownership is quiet enjoyment. Maintaining a secure and safe home is an ongoing program to ensure your quiet enjoyment. Many times a break-in or fire occurs when a homeowner lapses in following some basic do’s and don’ts. Here are some tips to help provide a safe and secure home for your family.

-Procure a home security and safety system, that sends an automatic alarm to your local police station. High-tech versions feature smoke alarms and window and door sensors. For as little as forty dollars a month you can have peace of mind.

-Check fire extinguishers yearly for proper charge. I do this at the same time I replace smoke detector and carbon monoxide detectors. Make sure your kitchen is equipped with the right extinguisher for grease and kitchen fires.

-Register you pets with the local fire department. Place stickers on entry doors alerting fireman to saves pets in your home, in case of fire.

-Keep landscaping pruned away from windows, obscured windows provide cover for burglars.

-Use low-voltage lighting to up-light exterior walls and doors at night. Install motion detector lighting on hidden doors and basement stairways.

-Have a neighbor pick up mail ,deliveries, and loose trash blowing around your yard. Stop newspapers while your away.

-Unplug automatic overhead garage door opens for added security. Lock fence gates too.

-Install and use diligently window and door locks. It’s easy in the heat of summer to open windows, but it’s an invitation for theft.

-Leave your day-to-day message on your answering machine, being gone should be seamless to those calling.

-Put lights around your home on staggered timers to make it look like your home when your away. Blinds and curtains should be opened in daylight and closed at night, have your neighbor open and close them.

Never open your front door to someone you don’t know. Keep storm doors locked as a safety barrier.

-Develop a fire escape plan and practice it with your family every six months. The majority of fires occur at night, each person should have a flashlight in their nightstand.

-Have gas lines and hook-ups checked regularly for leaks to prevent explosions. Natural gas is odorless.

Don’t get housing sticker shock after accepting job offer.

In the flurry of activity interviewing and traveling for a position you really want, you might overlook the housing quotient of your new career move. Housing prices are at record highs, and sadly your new job location may put you in the housing poor house, even if your compensation is also at record highs. Moving from a smaller market to a major metropolitan area can inflect major sticker shock when it comes to purchasing a new home. What’s a potential transferee to do? Be prepared to do some research to arm yourself in salary and relocation negotiations.

-Ask your recruiter if you are working with one, or the human resources contact at your potential new company to provide housing statistics on the area your moving to. Look for average sold home prices and commuting times.

-Spend a considerable amount of time on real estate web sites looking at available properties. Realtor.com offers the largest data base. You’ll have a good idea of where you fit into a new housing market and how close or far you’ll be, considering how much you can afford to pay for a home.

-Direct your recruiter to not share your plans for a potential job move with either local real estate agents or those in the destination city. You have enough to juggle without agents looking to appraise your current home or meeting with new ones where you might be moving. Don’t go house hunting until there is a formal written offer on the table.

-If your new to corporate relocation, this is an experienced business model. Basically the employer is trying to contain costs moving you, but at the same time understands happy transferees and content families make better employees.

-Costs and expenses that can be covered by a relocation policy include; 1-3 all expense paid familiarization trips to destination city, home sale and purchase assistance, temporary housing in destination, and storage of household goods.

-When looking for a new home in a market new to you, be diligent about local real estate market conditions. Ask how long the average home is on the market before going under contract. This will provide you with information if you need an exit strategy sooner than later.

-Read and study your relocation policy carefully, all your benefits will be outlined in detail. Procedures typically must be followed to receive all financial compensation under a policy.

-If you are moving for a first job or moving to a new company in a new location, there might not be any relocation benefits for you. Factor all the costs if you must bear them. Sales costs on your existing home, purchase costs on your new home, moving and transportation costs, temporary housing, and household goods storage costs.