Each month, we publish a series of articles of interest to homeowners -- money-saving tips, household safety checklists, home improvement advice, real estate insider secrets, etc. Whether you currently are in the market for a new home, or not, we hope that this information is of value to you. Please feel free to pass these articles on to your family and friends.
Before Disaster Strikes
Fires . . . hurricanes. . . floods . .
. earthquakes . . . tornadoes.... Natural or other disasters can
strike suddenly, at any time, and anywhere. Your first
priority, of course, would be to protect your family and your
property. But it's also important to protect against the
financial consequences of a disaster. A disaster can
damage or destroy your property, force you to temporarily live
somewhere else, cut the flow of wages and other income, or ruin
valuable financial records.
Listed here are some simple, common sense steps you can take
now. Before you take any actions, however, you should be
sure you have involved your family or friends whenever possible
in decision making and planning. You also may want the
assistance of an advisor, such as a Certified Financial Planner,
insurance agent, or similar financial professional. The
important thing is to begin planning now, before the unexpected
becomes a harsh reality.
Also This Month...
9 Buyer Traps and How to Avoid Them
No matter which way you look at it buying a home is a major investment. But for many homebuyers, it can be an even more expensive process than
it needs to be because many fall prey to at least a few of the many common and costly
mistakes which trap them.
10 Questions To Ask When Choosing A Financial Planner
You may be considering help from a financial planner for a number of
reasons, whether it's deciding to buy a new home, planning for retirement
or your children's education, or simply not having the time or expertise
to get your finances in order. Whatever your needs, working with a
financial planner can be a helpful step in securing your financial future.
Fires . . . hurricanes. . . floods . . .
earthquakes . . . tornadoes.... Natural or other disasters can strike
suddenly, at any time, and anywhere. Your first priority, of course, would
be to protect your family and your property. But it's also important
to protect against the financial consequences of a disaster. A
disaster can damage or destroy your property, force you to temporarily
live somewhere else, cut the flow of wages and other income, or ruin
valuable financial records.
Listed here are some simple, common sense
steps you can take now. Before you take any actions, however, you
should be sure you have involved your family or friends whenever possible
in decision making and planning. You also may want the assistance of
an advisor, such as a Certified Financial Planner, insurance agent, or
similar financial professional.
The important thing is to begin planning now,
before the unexpected becomes a harsh reality.
Protect your property
One of the first things to do is find out what
disasters could strike where you live----fire, flood, earthquake,
hurricane, or tornado, for example. The following steps can help you
avoid or reduce substantially the potential physical destruction to your
property if you were to be hit with a disaster. These steps can
reduce your insurance costs, too. For example, you could:
- Install smoke detectors to warn of an
apartment or home fire.
- Elevate utilities to upper floor or attic.
- Clear surrounding bush to protect your home
- Anchor your house to the foundation, and
anchor the roof to the main frame.
- Secure objects that could fall and cause
damage in an earthquake, such as a bookcase or hot water heater.
- Install hurricane shutters on windows, and
prepare plywood covers for glass doors.
- Cover windows, turn off utilities, or move
possessions to a safer location if you have adequate warning of
something like a hurricane or flood.
- If your home is in a high risk flood area,
on a fault line, or threatened by coastal erosion, consider relocating.
- Have your house inspected by a building
inspector or architect to find out what structural improvements could
prevent or reduce major damage from disasters.
- If you haven't yet bought a house, you
might take construction type into account. Frame houses tend to
withstand some disasters, while brick homes hold up better in others.
If you're not sure where to start, you could
contact your local fire department. Fire departments will often make
house calls to evaluate your property and make suggestions on how to
improve safety. In earthquake-prone areas, the local utility can be
called upon to come to your location and show you how and where to shut
off gas lines or how to elevate utilities to get them above a possible
Conduct a household inventory
Inventory your household possessions by making
a list of everything you own. If disaster strikes, this list could:
- Help you prove the value of what you owned
if those possessions are damaged or destroyed.
- Make it more likely you'll receive a fast,
fair payment from your insurance company for your losses.
- Provide documentation for tax deductions
you claim for your losses.
To conduct a thorough home inventory:
- Record the location of the originals of all
important financial and family documents, such as birth and marriage
certificates, wills, deeds, tax returns, insurance policies, and stock
and bond certificates. Keep the originals in a safe place and
store copies elsewhere. You'll need accessible records for tax and
- Make a visual or written record of your
possessions. If you don't own a camera or videotaping equipment
(and can't borrow or rent it), buy an inventory booklet and fill it out,
or make a simple list on notebook paper. Ask your insurance agent
if he or she can provide one.
- Go from room to room. Describe each
item, when you bought it, and how much it cost. If you're
photographing or videotaping, have someone open closet doors and hold up
- Record model and serial numbers.
- Include less expensive items, such as bath
towels and clothes. Their costs add up if you have to replace
- Be sure you include items in your attic,
basement, and garage.
- Note the quality of building materials,
particularly for such furnishings as oak doors or expensive plumbing
- Photograph the exterior of your home.
Include the landscaping---that big tree in the front yard may not be
insurable, but it does increase the value of your property for tax
purposes. Make special note of any improvements, such as a patio,
fencing, or outbuildings.
- Photograph cars, boats, and recreational
- Make copies of receipts and cancelled
checks for more valuable items.
- Get professional appraisals of jewelry,
collectibles, artwork, or other items that are difficult to value.
Update the appraisals every two to three years.
- Update your inventory list annually.
Sound like too much work? Computer software
programs designed for such purposes can make the task much easier.
These programs are readily available in local computer stores.
Most important, once you have completed your
inventory, leave a copy with relatives or friends, or in a safe deposit
box. Don't leave your only copy at home, where it might be
Even with adequate time to prepare for a
disaster, you still may suffer significant, unavoidable damage to your
property. That's when insurance for renters or homeowners can be a big
help. Yet, many people affected by recent disasters have been
underinsured-or worse-not insured at all. Homeowners insurance
doesn't cover floods and some other major disasters. Make sure you
buy the insurance you need to protect against the perils you face.
If you own a home:
- Buy, at a minimum, full replacement or
replacement cost coverage. This means the structure can be
replaced up to the limits specified in the policy.
- Investigate buying a guaranteed replacement
cost policy. When and where available, these policies can pay to
rebuild your house, including improvements, at today's prices,
regardless of the limits of the policy.
- Have your home periodically reappraised to
be sure the policy reflects the real replacement cost.
- Update the policy to include any home
improvements, such as basement refinishing. Annual automatic
increases may not be enough to cover these.
- Buy a policy that covers the replacement
cost of your possessions. Standard coverage only pays for the
actual cash value (replacement cost discounted for age or use).
- Be very clear about what the policy will
and will not cover, and how the deductibles work (the part you pay
before the policy pays).
- Check government operated insurance pools
if you find it difficult to obtain private coverage because of a recent
disaster. Premiums often run higher than market rates, but this is
better than no coverage.
- Use your home inventory list to check that
your policy's coverage matches the value of your possessions.
If you rent:
- If you are renting, consider locating
outside a high risk flood area or away from a fault line.
- Buy renter's insurance, which pays for
damaged, destroyed, or stolen personal property. Your landlord's
insurance won't cover damage to or loss of your possessions. Also,
consider special coverage like flood insurance for your belongings.
- Be clear about what a policy will cover.
Some policies cover more than others. For example, will the policy
pay for living expenses if you have to live somewhere else temporarily,
or for damage from sewer backup?
- Comparison shop for the best coverage at
the best price. Other than government flood insurance, policies
vary from company to company. Policies in most areas are very
affordable. Start with the company that insures your car.
Discounts are often available if you carry more than one policy with a
If you are moving:
- Select a home in an area not on a fault
line, in a flood area, or at risk from coastal erosion.
Consider special coverage
Insurance for renters and homeowners won't
cover certain types of losses. Ask your insurance agent or financial
planner about special or additional coverage for the following:
- Floods- Homeowner policies don't cover
damage from flooding. Call your current insurance company or agent
first about getting coverage.
- Earthquakes- Premiums typically are high,
and deductibles may range from 5% to 20% of the policy's coverage.
Still, such coverage may be better than no coverage. (Earthquake
coverage for the contents of a home usually is separate.)
- Home offices- Some policies automatically
extend coverage to computer equipment and a few other items of business
property. Talk to your agent to determine what items would or would not
be covered. If necessary, you could buy additional business
coverage at a modest cost. Or it may be better to buy a separate
small business policy, which would also provide more coverage.
- Building codes- Ask your agent about
additional insurance to cover the costs of meeting new, stricter
building codes. Frequently, after a disaster people get shocked
with rebuilding costs that are much higher because building codes have
changed. All current codes must be met when rebuilding.
Consider additional structural improvements that provide more
- Other potential problems- This would
include problems such as underground mines (located beneath your
property) sewer backup, or mudslides.
- Big-ticket items- Purchase additional
coverage for specific jewelry, collectibles, artwork, furs, or other
Where to keep cash
After a disaster, you may need cash for the
first few days, or even several weeks. Income may stop if you can't
work. To help stay solvent, consider the following:
- Keep a small amount of cash or traveler's
checks at home in a place where you can get at it quickly in case of a
sudden evacuation. A disaster can shut down local ATMs and banks.
The money should be in small denominations for easier use.
- Set aside money in an emergency fund.
That can be tough to do on a tight budget, but it can be well worth the
effort. The fund can be very helpful, not only in a disaster, but
in other financial crises, such as during unemployment or when
unexpected expenses like legal fees arise.
- Keep your emergency funds in a safe, easily
accessible account, such as a passbook savings account or a money market
- Keep some funds outside the local area,
since the disaster that affects you could also affect your local
financial institutions. A mutual fund money market account in
another city is one option to consider.
- Keep your credit cards paid off. You may
have to draw on them to tide you over.
Use an evacuation box
Buy a lockable, durable "evacuation box" to
grab in the event of an emergency. Even a cardboard box would do.
Put important papers into the box in sealed, waterproof plastic bags.
Store the box in your home where you can get to it easily. Keep this
box with you at all times, don't leave it in your unattended car.
The box should be large enough to carry:
- A small amount of traveler's checks or cash
and a few rolls of quarters.
- Negatives for irreplaceable personal
photographs, protected in plastic sleeves.
- A list of emergency contacts that includes
doctors, financial advisors, clergy, reputable repair contractors, and
family members who live outside your area.
- Copies of important prescriptions for
medicines and eyeglasses, and copies of children's immunization records.
- Health, dental, or prescription insurance
cards or information.
- Copies of your auto, flood, renter's, or
homeowners insurance policies (or at least policy numbers) and a list of
insurance company telephone numbers.
- Copies of other important financial and
family records (or at least a list of their locations). These
would include deeds, titles, wills, a letter of instructions, birth and
marriage certificates, passports, relevant employee benefits documents,
the first two pages of the previous year's income tax returns, etc.
Originals, other than wills, should be kept in a safe deposit box or at
- Backups of computerized financial records.
- A list of bank account, loan, credit card,
driver's license, investment account (brokerage and mutual funds), and
Social Security numbers.
- Safe deposit box key.
Rent a safe deposit box
Safe deposit boxes are invaluable for
protecting originals of important papers. If you don't have a safe deposit
box, keep copies in your evacuation box or with family or friends.
Original documents to store in a safe deposit box include:
- Deeds, titles, and other ownership records
for your home, autos, RVs, boats, etc.
- Birth certificates and naturalization
- Marriage license/divorce papers and child
- Passports and military/veteran papers.
- Appraisals of expensive jewelry and
- Certificates for stocks, bonds, and other
- Trust agreements.
- Living wills, powers of attorney, and
health care powers of attorney.
- Insurance policies (copies are sufficient).
- Home improvement records.
- Household inventory documentation.
Generally, originals of wills should not be
kept in a safe deposit box since the box may be sealed temporarily after
death. Keep originals of wills with your local registrar of wills or
Deciding on a safe and convenient location is
an issue. You may want to consider renting a safe deposit box in a
bank far enough away from your home so it is not likely to be affected by
the same disaster that strikes your home (for instance, bank vaults have
been flooded). Keep the key to the safe deposit box in your evacuation
Home safes and fire boxes
Safes and fire boxes can be convenient places
to store important papers. However, some disasters, such as
hurricanes, floods, or tornadoes, could destroy your home. Usually,
it's better to store original papers in a safe deposit box or at another
location well away from your home.
If you have time...
Some disasters, such as tornadoes or
earthquakes, strike with little or no warning. Others, such as
floods or hurricanes, may allow some time to prepare. If there is
enough time, you could take the following actions:
- Decide what household items you would put
on a very short priority list. For example, imagine you could take
only one suitcase or pack a single carload. What would you take?
Involve the whole family in this discussion. Take jewelry and
other small valuables.
- Take irreplaceable heirlooms, mementos, and
- Don't bother with replaceable items such as
televisions, furniture, computers, and clothing (except what you need to
wear for a few days).
- Be sure, however, to take a battery-powered
radio and spare batteries so you can stay informed.
- Take important papers and computer disks if
you have a home business.
Whew! These are a lot of ideas. You may
not be able to do everything that is suggested---that's OK. Do what
you can. Taking even limited action now will go a long way toward
preparing you financially before a disaster strikes.
9 Buyer Traps and How to Avoid
" A systemized approach to the homebuying process
can help you steer clear of these common traps, allowing you to not only cut costs,
but also secure the home that's best for you."
No matter which way you look at it buying a home is a major
investment. But for many homebuyers, it can be an even more expensive process than
it needs to be because many fall prey to at least a few of the many common and costly
mistakes which trap them into either:
- paying too much for the home they want, or
- losing their dream home to another buyer or,
- (worse) buying the wrong home for their needs.
A systemized approach to the homebuying process can help you
steer clear of these common traps, allowing you to not only cut costs, but also
secure the home that's best for you.
9 Buyer Traps
This important report discusses the 9 most common and costly
of these homebuyer traps, how to identify them, and what you can do to avoid them:
1. Bidding Blind
What price should you offer when you bid on a home? Is the
seller's asking price too high, or does it represent a great deal. If you fail to
research the market in order to understand what comparable homes are selling for,
making your offer would be like bidding blind. Without this knowledge of market
value, you could easily bid too much, or fail to make a competitive offer at all
on an excellent value.
2. Buying the Wrong Home
What are you looking for in a home? A simple enough question,
but the answer can be quite complex. More than one buyer has been swept up in the
emotion and excitement of the buying process only to find themselves the owner of
a home that is either too big or too small. Maybe they're stuck with a longer than
desired commute to work, or a dozen more fix-ups than they really want to deal with
now that the excitement has died down. Take the time upfront to clearly define your
wants and needs. Put it in writing and then use it as a yard stick with which to
measure every home you look at.
3. Unclear Title
Make sure very early on in the negotiation that you will own
your new home free and clear by having a title search completed. The last thing
you want to discover when you’re in the back stretch of a transaction is that there
are encumbrances on the property such as tax liens, undisclosed owners, easements,
leases or the like.
4. Inaccurate Survey
As part of your offer to purchase, make sure you request an
updated property survey which clearly marks your boundaries. If the survey is not
current, you may find that there are structural changes that are not shown (e.g.
additions to the house, a new swimming pool, a neighbor's new fence which is extending
a boundary line, etc.). Be very clear on these issues.
5. Undisclosed Fix-ups
Don't expect every seller to own up to every physical detail
that will need to be attended to. Both you and the seller are out to maximize your
investment. Ensure that you conduct a thorough inspection of the home early in the
process. Consider hiring an independent inspector to objectively view the home inside
and out, and make the final contract contingent upon this inspector's report. This
inspector should be able to give you a report of any item that needs to be fixed
with associated, approximate cost.
6. Not Getting Mortgage Pre-approval
Pre-approval is fast, easy and free. When you have a pre-approved
mortgage, you can shop for your home with a greater sense of freedom and security,
knowing that the money will be there when you find the home of your dreams.
7. Contract Misses
If a seller fails to comply to the letter of the contract by
neglecting to attend to some repair issues, or changing the spirit of the agreement
in some way, this could delay the final closing and settlement. Agree ahead of time
on a dollar amount for an escrow fund to cover items that the seller fails to follow
through on. Prepare a list of agreed issues, walk through them, and check them off
one by one.
8. Hidden Costs
Make sure you identify and uncover all costs - large and small
-far enough ahead of time. When a transaction closes, you will sometimes find fees
for this or that sneaking through after the "sub"-total - fees such as loan disbursement
charges, underwriting fees etc. Understand these in advance by having your lender
project total charges for you in writing.
9. Rushing the Closing
Take your time during this critical part of the process, and
insist on seeing all paperwork the day before you sign. Make sure this documentation
perfectly reflects your understanding of the transaction, and that nothing has been
added or subtracted. Is the interest rate right? Is everything covered? If you rush
this process on the day of closing, you may run into a last minute snag that you
can't fix without compromising the terms of the deal, the financing, or even the
10 Questions To Ask When Choosing A Financial Planner
These questions will help you interview and evaluate several financial
planners to find the one that's right for you. You will want to select a
competent, qualified professional with whom you feel comfortable, one whose
business style suits your financial planning needs. An interview checklist has
been included for your convenience.
1. What experience do you have?
Find out how long the planner has been in practice and the number and types
of companies with which she has been associated. Ask the planner to briefly
describe her work experience and how it relates to her current practice. Choose
a financial planner who has a minimum of three years experience counseling
individuals on their financial needs.
2. What are your qualifications?
The term "financial planner" is used by many financial professionals. Ask the
planner what qualifies him to offer financial planning advice and whether he
holds a financial planning designation such as the Certified Financial Planner
mark. Look for a planner who has proven experience in financial planning topics
such as insurance, tax planning, investments, estate planning or retirement
planning. Determine what steps the planner takes to stay current with changes
and developments in the financial planning field. If the planner holds a
financial planning designation, check on his background with the CFP Board or
other relevant professional organizations.
3. What services do you offer?
The services a financial planner offers depend on a number of factors
including credentials, licenses and areas of expertise. Financial planners
cannot sell insurance or securities products such as mutual funds or stocks
without the proper licenses, or give investment advice unless registered with
state or Federal authorities. Some planners offer financial planning advice on a
range of topics but do not sell financial products. Others may provide advice
only in specific areas such as estate planning or on tax matters.
4. What is your approach to financial planning?
Ask the financial planner about the type of clients and financial situations
she typically likes to work with. Some planners prefer to develop one plan by
bringing together all of your financial goals. Others provide advice on specific
areas, as needed. Make sure the planner's viewpoint on investing is not too
cautious or overly aggressive for you. Some planners require you to have a
certain net worth before offering services. Find out if the planner will carry
out the financial recommendations developed for you or refer you to others who
will do so.
5. Will you be the only person working with me?
The financial planner may work with you himself or have others in the office
assist him. You may want to meet everyone who will be working with you. If the
planner works with professionals outside his own practice (such as attorneys,
insurance agents or tax specialists) to develop or carry out financial planning
recommendations, get a list of their names to check on their backgrounds.
6. How will I pay for your services?
As part of your financial planning agreement, the financial planner should
clearly tell you in writing how she will be paid for the services to be
provided. Planners can be paid in several ways:
- a salary paid by the company for which the planner works. The
planner's employer receives payment from you or others, either in fees or
commissions, in order to pay the planner's salary.
- fees based on an hourly rate, a flat rate, or on a percentage of
your assets and/or income.
- commissions paid by a third party from the products sold to you to
carry out the financial planning recommendations. Commissions are usually a
percentage of the amount you invest in a product.
- a combination of fees and commissions whereby fees are charged for
the amount of work done to develop financial planning recommendations and
commissions are received from any products sold. In addition, some planners
may offset some portion of the fees you pay if they receive commissions for
carrying out their recommendations.
7. How much do you typically charge?
While the amount you pay the planner will depend on your particular needs,
the financial planner should be able to provide you with an estimate of possible
costs based on the work to be performed. Such costs would include the planner's
hourly rates or flat fees or the percentage he would receive as commission on
products you may purchase as part of the financial planning recommendations.
8. Could anyone besides me benefit from your recommendations?
Some business relationships or partnerships that a planner has could affect
her professional judgment while working with you, inhibiting the planner from
acting in your best interest. Ask the planner to provide you with a description
of her conflicts of interest in writing. For example, financial planners who
sell insurance policies, securities or mutual funds have a business relationship
with the companies that provide these financial products. The planner may also
have relationships or partnerships that should be disclosed to you, such as
business she receives for referring you to an insurance agent, accountant or
attorney for implementation of planning suggestions.
9. Have you ever been publicly disciplined for any unlawful or unethical
actions in your professional career?
Several government and professional regulatory organizations, keep records on
the disciplinary history of financial planners and advisers. Ask what
organizations the planner is regulated by, and contact these groups to conduct a
10. Can I have it in writing?
Ask the planner to provide you with a written agreement that details the
services that will be provided. Keep this document in your files for future