If you’re buying a home, choosing the right amount of home insurance for your property is key. Buy too much, and you’re wasting cash on coverage you’ll never use.
Buy too little, and if a hurricane, hailstorm, or other disaster strikes your home, your insurance might not cover the costs to fix the damage—which means you’ll be paying out of your own pocket.
So how much home insurance is enough? In this latest installment of our Home Buyer’s Guide to Home Insurance, we’ll outline all you need to know to get the right amount and type of insurance to suit your circumstances perfectly.
How much home insurance do I need?
The goal of your homeowner insurance policy is to ensure you’re covered not only for minor damage that you’d like financial help fixing, but more importantly, in case your home is completely destroyed (in a tornado, fire, or otherwise) and needs to be rebuilt from scratch. This is known as “actual total loss” or “total loss.”
Total loss coverage varies from area to area as well as from home to home, but basically boils down to an estimate of how much it would cost to rebuild your home. That could cost more than you paid for your house, or less—it all depends on construction costs in your area.
“Size, materials, quality of finish, and a number of other factors will influence that rebuilding cost,” says Stefan Tirschler, product and underwriting manager at Square One Insurance Services.
To determine the total loss coverage for your property, you’ll want to talk to a home insurance company or agent (who probably represents various insurance companies), who can determine the best amount of coverage based on your home’s square footage, the local construction market, and, of course, the current market value of the house.
“When you shop for home insurance, your insurance provider will likely have access to electronic reconstruction cost-estimating tools to help provide a sense of how much coverage you need,” Tirschler explains.
If you have a mortgage on your home, your lender will probably require your coverage to equal 100% of the replacement cost of the home. And even if your home is paid off—or no requirement is in place—it’s still a good idea to buy enough coverage to cover the complete replacement cost.
Even if the odds are slim that you’ll ever need to use it, the peace of mind it can provide in the event of a disaster is priceless.
Does home insurance cover what’s inside the house?
Another factor to consider is not only the replacement cost of your house, but what’s inside as well—in other words, your belongings. After all, if your home is destroyed by fire or damaged by a hurricane, it’s not just the roof and walls that take the hit.
Most home insurance policies will cover interior items, but that doesn’t mean everything inside your home is safe. For instance, a “named perils policy” typically covers only a specific, narrow list of causes of loss, and depending on why you place the claim, you may find your insurance company won’t pay up!
If you want to ensure your valuables are fully protected, Tirschler suggests looking for an insurance provider that offers an “open perils” (or “all-risk”) policy.
“Open perils policies provide the strongest protection, because they cover all possible causes of loss except for those that are specifically excluded,” he notes.
Is basic home insurance enough?
As you shop for home insurance and compare quotes, you should know that most insurance providers won’t give you just one quote—rather, they may offer several. This is because companies often offer different levels of insurance—like “basic” and “enhanced”—each with their own price, pros, and cons. Here are some factors to consider:
Deductible. A deductible is the amount you’ll need to pay out of pocket before your insurance kicks in. Generally speaking, the higher the deductible, the cheaper the monthly insurance premiums. Why? Because with a high deductible, you’ll have to pay more before your insurance company has to pitch in. Deductibles often range from $1,000 up to $5,000.
Coverage limits. A coverage limit is the maximum amount your insurer will pay when something goes wrong and you file a claim—everything above this amount, you’ll have to pay out of pocket. For instance, a more affordable, basic plan might pay the medical bills if a guest is injured at your house at up to $1,000 per person, whereas a more expensive, enhanced plan might cover up to $5,000 per person.
You can choose between these various insurance levels based on your personal comfort level, tolerance for risk, and how much money you have in the bank in case of emergencies.
If your circumstances or outlook change, most companies will allow you to increase or decrease your coverage. For instance, if you could only afford a basic, bare-bones plan originally but want pricier/better coverage after getting a promotion at work, most insurance companies will happily adjust your plan to suit your new circumstances.
Do you need additional home insurance riders?
Your insurer will also likely offer you some additional, optional coverage. Got expensive jewelry or artwork in your home? You may want to purchase additional coverage. You’ll pay more now, but if your valuables are damaged or destroyed, your insurance company will help you pay to replace them, which could save you money in the long run.
“If you have any high-value items, such as jewelry or expensive art, these will require a different policy to truly cover their actual worth,” says Ralph DiBugnara, president of Home Qualified.
Remember, too, that you may need to purchase a separate insurance policy for things that are not covered in your plan. For instance, floods and earthquakes are typically not covered in basic insurance plans, so if you want it, you’ll have to buy this insurance separately.
In our next installment of this series, we’ll dive in more depth into what home insurance covers—and what it doesn’t.
My wife and I are both federal employees and will retire in a few years with total (combined) pensions of around $10,000 a month. Our nest egg for retirement (TSP plus savings) will be another $2 million or so. Social Security will kick in on top of that.
We both love skiing and ski towns, but also lakes with forest running and mountain biking trails. It seems hard to find affordable ski towns that aren’t too touristy with good lakes and water sports nearby. We’d prefer not to be too far from a “real” city to get our urban fix, when needed.
We have $200,000 available for a down payment. That would put a house budget at around $1 million. We’ve looked at Park City — it’s pricey these days. Aspen Valley is way out of reach, as is Breckenridge. East Coast skiing is icy and unpredictable. Places like Whitefish (in Montana) or Crested Butte (in Colorado) are nice but remote and hard to get to. Same with Durango. New Mexico lacks the lake options (ie, Santa Fe, Taos). Lake Tahoe is congested and full of casinos and second homes.
I feel like we must be missing something. Any ideas?
An underdiscovered ski town? That’s a tough one.
I hear you on pricey, but that’s down to supply and demand. And right now, demand is hotter than normal as people figure they can work from somewhere else. Sadly for you, Breckenridge is particularlyhot.
But a $1 million housing budget is nothing to sneeze at. Many are priced out of their dream ski town with far less.
I admit I’m nervous about an $800,000 mortgage. You know your expenses and lifestyle better than I do, but please, double-check your budget and don’t forget to take income taxes on tax-deferred savings into account. Yes, you have an impressive nest egg and pensions. Equally, a 30-year mortgage at 3% is $3,373 in monthly payments — and then there are property taxes and possibly HOA fees.
As you know, having a great time in a ski town for one week is not the same as daily living for 52 weeks. As you look around, ask if it’s mostly filled with second-home owners and vacationers, or are there plenty of year-round residents?
Perhaps consider renting for a year in one town. If it doesn’t feel right, try another one or reassess what you’re looking for. (Cities like Ogden, Utah, and Bozeman, Mont., with ski slopes a short drive away?) And if you love a pricey town, consider a smaller place or something a bit further from the slopes. That could make Summit County — Silverthorne or Dillon instead of Breckenridge? — work for you.
Here are three suggestions to get you started. You should be able to find something well below $1 million.
Winter Park, Colorado
Pick this lower-profile resort as your ski area, and you avoid much of the traffic jams around Georgetown and further up the mountain to Summit County and beyond. While you can live at the resort, you may want to consider Fraser, 15 minutes north of Winter Park, or Granby, another 20 minutes away.
Nearly 16,000 people live in Grand County, or about half as many as in Summit County, and homes are more affordable. The towns are admittedly small — Fraser has about 1,300 year-round residents, and Granby has around 2,100 people. (By comparison, Breckenridge has about 5,000.)
Not only would you be in the mountains, but you’d have plenty of water options. Granby in particular is close to Lake Granby as well as Shadow Mountain Lake (actually a reservoir) and Grand Lake.
Average summer highs are in the low 80s. Snow starts in October, when there is an average of 2 inches and continues through April.
Here’s something that might surprise you: there are almost no chain stores and restaurants in town because of a long-standing local ordinance that restricts their numbers in favor of mom-and-pop stores. You’ll have to go to a local coffee shop instead of Starbucks (no worries, there’s a local roaster too). Be sure to peruse the bulletin boards in the coffee shops to find activities.
Valley County has 11,000 residents, and more than a quarter of them are 65 and older. The town will soon have a new hospital; St. Luke’s McCall Medical Center, part of a major health system in the state, is being rebuilt as well as expanding. Today’s version is rated highly for patient experience.
Would you prefer somewhere a little bigger? Sandpoint, in northern Idaho, has around 8,900 residents (Bonner County has 46,000, and a quarter of people there are 65 and older). It’s perched on Lake Pend Oreille and surrounded by mountains and forest. Schweitzer Mountain Resort is just 11 miles away with 2,900 skiable acres, and, Powder magazine says, rarely is crowded.
You can mountain-bike at the resort during the summer or try local options like the Gold Hill Trail. Given all the mountains and forests, you won’t be short of playgrounds.
Average summer highs here are a touch higher than in McCall. Snow starts falling in November.
Your city fix is Spokane, less than two hours away.
Don’t kid yourself — the COVID boom in ski towns has reached this corner of Idaho 75 miles from the Canadian border. Stephanie Rief of the Selkirk Association of Realtors says home sales in Sandpoint from April 20 through Sept. 30 have jumped 40% from the same period in 2019. The median home price is up 17%.
“We’re being overrun,” she says. Many buyers are from California, Washington and Oregon, “but you name it — I’d say all 50 states, minus 10. At the most.”
The median home price in the two-county area is now $371,500, she says, and the average home price is higher. On the outskirts of Sandpoint, that price translates into a three-bedroom, two-bathroom house. And nothing stays on the market for long these days.
First-time home buyers have it harder today than ever. Caught between high real estate prices, low housing inventory, and a pandemic that has many of us nervous about leaving our house, home shoppers might be wondering: Is it even possible to buy right now—and how?
If you’re curious about what it takes to purchase property in today’s marketplace, look no further than this new series, “First-Time Home Buyer Confessions.” We’ll profile home buyers who’ve successfully navigated a variety of obstacles to close a real estate deal during these challenging times. We’ll also hear what they’ve learned in the process that might inspire other hopeful first-time buyers to get out there and follow in their footsteps.
Our first tale from the trenches comes from Julie Migliacci, a virtual events planner near Boston, and her husband, Mark, a banker who specializes in affordable housing. In June, they beat out 32 other offers (yes, 32!) and purchased a 1,627-square-foot, three-bedroom house in Wakefield, a Boston suburb. Here’s how they pulled it off, along with the many mistakes and lessons learned along the way.
Location: Wakefield, MA
House details: 1,627 square feet, 3 bedrooms, 2.5 baths
List price: $599,000
Price paid: $650,000
What made you decide to buy a house in the middle of a pandemic?
Three years ago, Mark and I moved from New York City to Boston and rented a 900-square-foot apartment in Belmont with our two daughters, Chloe and Rose.
We’d always known we wanted to buy a home. But once COVID-19 hit and we were all working and schooling from home, our tiny apartment felt like nothing anymore.
At one point I looked at my husband and said, “I love you, but I really don’t like being with you right now.” So we agreed to put our house hunt in hyperdrive.
How much did you put down on the house—and how’d you save for it?
We put down 20%. We’d been saving for three years. We’d made sure our rent was low enough that we could really sock a lot away. We could have paid higher rent for a bigger place, but wanted every extra cent we had going to our house fund.
What were you looking for in a house?
COVID-19 definitely shifted what we were looking for in a home. We always had a goal of finding a place with about 1,700 square feet. But now I found myself wanting a yard more than ever. I’m a city kid, so originally I never thought that was something I needed. I also wanted to find a house that was close to the city, in case we ever needed to commute back in.
How many homes did you see in person?
Starting in April, over the course of five weeks, we visited about 10 homes—alone, in masks, with plenty of hand sanitizer of course. With COVID-19, there were no open houses.
How many offers did you make before you had one accepted?
We put in offers on five different houses.
Why do you think your first four offers didn’t pan out?
At the beginning, we had this HGTV idea of what a home-buying experience would be like. We thought we’d go $10,000 above asking and be fine. But what we realized is we weren’t even in the running. It was a waste of time and paper. I was surprised at how competitive the market is right now because of COVID-19. We kept making offers on houses after seeing them for just a few minutes, and we still kept getting outbid. I guess you could say our learning curve was steep.
Every time we got denied, we asked who won the house instead. The offers that kept winning were those that waived all contingencies. So we did what everyone tells you not to do: We waived the financing contingency and the home inspection in order to even have a shot. We crossed our fingers, read all of the disclosures very carefully, and hoped it would all work out.
How did you know this house was the one?
We thought this house was nuts! It has a two-story rock formation out front that, at first glance, looked like a death trap for my two kids.
At the time we put in an offer, we’d actually had an offer in on another house as well. That house checked all the boxes, but needed a bit more work. This house, despite the rock, was move-in ready.
As we waited to hear back on these offers, we actually tried to talk ourselves out of the house. We kept saying, “It’s an empty-nester home, not a home for a family.” And then, of course, that’s the house we ultimately got. We’re really happy, though. It’s definitely our dream home now.
How’d you manage to beat out 32 other offers on this house?
I don’t know honestly! In addition to waiving contingencies, we were very aggressive with our price point, offering $50,000 over the asking price. And that wasn’t even the highest offer!
It may have also helped that I wrote a very heartfelt letter to the sellers. I wrote letters to every house we put an offer on, where I described a tiny detail that I thought would resonate with the owners. For the house we ultimately bought, I wrote a letter where I joked that our whole family smiled when we first walked into the home, except for our fish. My husband was against using that line, but I think it worked!
What surprised you about the home-buying process?
I think it’s crazy that we’d see a house for five or 10 minutes before deciding to put in an offer. With houses staying on the market for a matter of days or even hours, we knew we had to act as fast as possible.
Yet after our offer was accepted, the process slowed down, a lot. We closed in 30 days. I was surprised that it was considered lightning-fast. I wanted to move right away! It takes a few hours to buy a car.
What’s your advice for aspiring home buyers?
If you decide to buy during COVID-19, I’d recommend doing as much research as possible. Get to know the neighborhood. Because once you find a house you like, you’ll likely have to jump on it as soon as possible.
Some markets right now are aggressive, and if you aren’t ready for that, then it’s going to take you a long time to find the right home. So be ready for a lot of heartache. If you’re crazy enough to be a buyer right now, then that must mean you’re motivated—which is good!
If you’re buying a home, you probably know that paying for the property isn’t the only expense you’ll incur. Among other things, you’ll also want to buy home insurance to protect this valuable asset in the event of unforeseen problems, from damaging hailstorms to theft and beyond.
So how much does home insurance cost? In this second installment of our Home Buyer’s Guide to Home Insurance, we’ll walk you through what you should know about home insurance rates, and how to find the best plan and price.
How much does home insurance cost?
The average annual homeowners insurance premium runs about $1,445. However, it can be much higher or lower based on numerous factors. Here’s a full rundown of what can affect homeowners insurance costs.
Condition of your home: This plays a big role in your homeowners insurance rate, and can include everything from the roof to the pipes, heating system, electrical wiring, and age. Your insurer may ask you to provide detailed information about your home; it may also gather information from public records and documents filed with your city and county.
Price to rebuild: Another big factor is the price per square foot to rebuild in your area, based on current construction rates. For reference, the national average is between $100 to $200 per square foot. Why does this matter? Because if your house is damaged or completely destroyed and you need to rebuild, your insurer will be footing the bill.
Natural disasters in your area: The cost of your homeowners insurance also depends heavily on the likelihood of destructive natural disasters or other incidents. In other words, the more known risk there is to your home, the stiffer the homeowners insurance premium. Homeowners in Oklahoma, where tornadoes wreak havoc every summer, pay an average of $2,559 for home insurance each year, the highest in the nation. Texas is not far behind, at $2,451 per year, thanks to its destructive hurricanes and thunderstorms.
Personal information: Your credit score, age, and other personal factors also play a role in your home insurance costs. A higher credit score and few or no insurance claims usually result in a lower rate for home insurance. Generally speaking, the older you are, the lower your premiums. Why? Because older people are less risky for insurers to cover—they tend to spend more time at home, particularly if they’re retired, which means they’ll catch a house fire before it gets out of control.
High-risk features: Your homeowners insurance company will also factor in high-risk home features, including swimming pools, trampolines, and even your dog. (Certain breeds have a reputation for being more aggressive, which could lead to expensive insurance claims if your dog bites someone.) Similarly, adding safety features such as a home security system or fire sprinklers can help lower your home insurance rates.
How to find the best price on home insurance
To determine how much you’ll pay for home insurance, contact a few insurance companies by calling to chat with an agent or by filling out a form on their website. After you share some information about you and your home, they’ll run this information through their own algorithms to come up with a quote on how much your insurance will cost.
But here’s the thing: Since each insurance company uses its own formulas to determine a property’s risk levels, each may offer different rates. To get the best price and policy, it pays to shop around.
“You won’t know your homeowners insurance cost until you get quotes,” says Amy Danise, chief insurance analyst at Forbes Advisor. “Quotes are free. And it’s best to get quotes from multiple companies so that you can get a sense of what a good rate will be.”
Many homeowners go with the first homeowners insurance policy quote they get in order to cross one more thing off their list during a move or the home-purchasing process. And that could be a big, costly mistake because you may pay more. But the cheapest home insurance option isn’t always the best, either.
“An informed insurance agent that can shop your home with multiple insurance carriers is your best bet at finding a great rate for your home,” says Erin Wenzel, account manager at Michigan’s Provision Insurance Group.
Ask the agent to explain why the homeowners insurance premiums are different and what the trade-offs are in liability coverage and deductibles. And this isn’t just something you should do when you first buy a home. Every year, you should review your homeowners insurance, including your liability coverage, premium, and deductible.
“Make an effort to get a new quote each year, and shop around if you’re not happy with your current rate,” says Wes Taft, co-founder of moveCHECK.
Homeowners insurance companies hungry for new business offer competitive rates on premiums.
Is homeowners insurance included in the mortgage?
In many cases, homeowners insurance will be part of your monthly mortgage payment. Why? Because your mortgage lender wants to make sure your important house-related bills get paid on time and in full.
As such, you’ll have to pay your lender your monthly home insurance premium along with your mortgage. From there, your lender will keep that insurance money in a special account, called an escrow account, and will pay your insurance bills for you when they come due.
Lenders will often show you a breakdown on their statements of how much of your payment is going to your mortgage (principal and interest) as well as what’s going toward homeowners insurance and any other fees (such as property taxes or homeowners association dues).
In certain situations, you can pay your home insurance company directly, without having to send this money to your lender first, but this isn’t common. Some lenders may offer some flexibility, such as if you made a 20% (or higher) down payment—it just depends on the lender. Also, if you paid for your house in cash or you’ve paid off your mortgage in full, then you’ll need to pay your insurance company directly.
Is homeowners insurance tax-deductible?
No, the money you spend on home insurance is not tax-deductible. The one exception is if it’s for a rental property, in which case home insurance can get deducted from your taxable income.
In addition to shopping around for the best price on insurance, you should make sure you get the right amount and type. That’s what we’ll explore in our next installment: How much insurance do you need?
Few things are as exciting as purchasing a newly constructed home. Everything is pristine and, presumably, will last for a very long time.
However, just because a house is new doesn’t mean it’s free of flaws. There are a lot of factors that could make a brand-new home a less than ideal purchase.
So, before closing on a new-construction home, here are some things you need to consider.
1. Quality of the build
“They don’t make ’em like they used to” is a common phrase that refers to the solid construction of many older homes. It can be true for a number of reasons—from the building materials used to the skills employed in the building process. Therefore, one of the most important things you can do with a new-construction home is to check the foundation to ensure there are no issues, since this can be costly to fix.
“You should be able to get a set of plans from the builder, designer, or city to make sure nothing was left out,” says Nathan Outlaw, president of Onvico, a design-build and general contracting firm in Thomasville, GA.
Also, he says, you need to step back and compare the home with its setting.
“Is the home oversized or undersized for the neighborhood? Do the materials and style of construction match the neighborhood?” Outlaw warns that purchasing a cheap build in a nice neighborhood will have ramifications—like costly repairs—further down the line.
2. The builder’s reputation
One way to minimize the chances of purchasing a low-quality home is to find out as much as you can about the builder. Outlaw recommends doing your research to find out what others think about the company. Is the builder known for taking shortcuts during the construction process? Does the builder have a reputation for paying its subcontractors and suppliers on time?
Robin Kencel, a broker at Compass in Greenwich, CT, agrees.
“Some of the first questions I ask the listing agent are about the team behind the house: who are the architect, builder, subcontractors, and engineers involved in the project,” Kencel says. “Those answers will help me gauge the strength of construction.”
It’s also a good idea to ask either the builder or the listing agent for references from people who have purchased a home from the builder.
“If the community is partially built and there are folks already living there, knock on some doors and ask what their experience was like and if they are satisfied with the final product,” says Bill Golden, an independent real estate agent with Re/Max Around Atlanta.
3. Possible upgrades and design options
Sometime buyers will get to choose the design elements in new-construction homes that have yet to be built. The builder will offer options for features like the countertop, flooring, tile, and more. Plus, there’s often the possibility of adding upgrades (for a price) like a kitchen backsplash or a water softener.
But it’s wise to avoid the temptation to go overboard. Sometimes it may be better to just stick with the standard features and upgrade them later when your budget permits.
“Ask to see what the standard fixtures/design elements look like, and what it costs to upgrade them,” says Golden. “However, things like tile and flooring make more sense to have the builder do, as changing those out later can be too much trouble to do.”
4. A warranty
You shouldn’t expect to have any problems in a new home for a long time. But if you do, it’s important to be covered. Before you buy a new-construction home, make sure it comes with a warranty.
“Most builders have, at minimum, a customer care program and a first-year warranty, plus a longer-term structural warranty,” explains Alan Beulah, vice president of sales and marketing for M/I Homes in Charlotte, NC.
For example, Beulah’s company offers a 15-year structural warranty that protects mechanical systems and other major structural elements.
But there may be an even bigger issue than honoring the warranty.
“You have to make sure that the builder is one that will be around and able to carry out warranty work,” says Jeff Benach, principal at Lexington Homes, a Chicago-based homebuilder.
5. An experienced real estate agent
When looking for a new-construction home, don’t forget to hire a real estate agent who has experience representing new-construction buyers.
“An experienced agent will negotiate with the builder to ensure pertinent items are covered during the first year of homeownership,” says Patrick Garrett, a broker and owner at H&H Realty in Trussville, AL.
Some of these items include coordinating a punch list (a document showing work that still needs to be done on your new home), a structural and mechanical warranty, and any agreements to fix cosmetic issues that are not noticed during initial inspections or the final walk-through.
If you’re buying a home, one question you might wonder is this: Is home insurance required when you own a house?
In many cases, homeowners insurance is indeed mandatory—and even in cases where it isn’t absolutely necessary, it’s still a good idea. To help you understand why, we’ve put together this Home Buyer’s Guide to Home Insurance, which will help walk you through what you need to know from beginning to end.
In this first article, we’ll introduce you to what homeowners insurance is, why it’s often essential, and what can go wrong if you don’t have it.
What is homeowners insurance?
With home insurance, as with other types of coverage (including health insurance), you pay a relatively small amount of money either monthly or annually in exchange for the promise that your provider will help you pay for unexpected costs you might incur as a homeowner.
What can go wrong? So much, including natural disasters, fires, crimes, accidents, and other emergencies, many of which can be expensive to fix. Without home insurance, you run the risk of getting stuck with a bill that could be in the tens of thousands of dollars. Home insurance offers protection and peace of mind that you won’t get hit with expenses that might be hard to pay on your own.
Why you need home insurance with a mortgage
If you need a mortgage on your home, most lenders will require you to get home insurance before they approve your loan and close the deal.
The reason: By loaning you money for the house, lenders are also investing in your property. If this investment suddenly plummets in value—since, say, a tornado turned it into a pile of rubble—it’s in your lender’s interests for you to have a home insurance plan that will rebuild and restore what you (and your lender) have lost.
“Homeowners insurance is typically required by a mortgage company,” says Brian Rubenstein, senior director for Ally Home. “A lender wants to protect the financial investment they made in your home.”
When to get homeowners insurance
At closing, most mortgage lenders will need you to show proof that you have an insurance policy already in place—even though you don’t officially own the home yet! This proof is known as an insurance binder, and serves as a temporary agreement between you and the insurance company that becomes permanent once you officially close on the home.
In fact, most lenders will want to see an insurance binder at least a few days before closing. As such, you’ll want to start shopping for insurance a few weeks before your closing date, so you have time to compare policies and find the right insurance company for you.
Do you need homeowners insurance without a mortgage?
Now, what if you don’t have a mortgage? Technically speaking, no, you’re not required to have homeowners insurance. But then the question becomes “Should you pay for home insurance?” The answer is still a resounding yes.
“Even if you don’t have a mortgage, home insurance protects the investment you’ve made in your house,” says Amy Danise, chief insurance analyst at Forbes Advisor.
“Think of the worst-case scenario, because that’s really what insurance is for: If your house burned down or was destroyed by a tornado, would you suffer financially?”
Reasons to get home insurance: What home insurance covers
If you don’t have homeowners insurance, you could be in for a rude awakening if disaster strikes and you need to pay engineers, contractors, electricians, masons, painters, roofers, and other highly specialized (read: expensive) professionals to repair the damage to your house.
According to the Insurance Information Institute, about 1 in 20 insured homes will file a claim each year. Meanwhile, data from the Insurance Research Council finds that, on average, insurance companies pay out about $8,787 per claim to help defray homeowners’ costs. Below are some of the most common and expensive insurance claims homeowners experience.
Wind and hail: Wind and hail damage is the most frequent reason why homeowners file insurance claims. Every year, 1 in 40 insured homeowners files claims related to wind and hail, with claims paying out an average of $11,200.
House fire or lightning strikes: Every year, about 1 in 350 insured homeowners files claims due to fire or lightning. These accidents are also among the most costly to repair, with claim payments averaging $11,971. Furthermore, lightning strikes are becoming more expensive. Why? Because our homes are rigged with an increasing number of electronic systems like smart home technologies, which can go haywire when struck by lightning.
Water damage or freezing water: About 1 in 50 insured homeowners files a property damage claim caused by water damage (like a leaky roof) or freezing water (burst pipes) each year. The claim payments average $10,849.
Theft: About 1 in 400 insured homeowners files claims due to theft every year, with claims paying an average of $4,391.
Personal injuries damage: In addition to covering your home and belongings, home insurance often includes liability coverage. This means that if a visitor gets hurt on your property, her medical bills should be covered by your home insurance company. About 1 in 900 insured homeowners files claims related to bodily injury every year. This injury could happen inside your home or, in some cases, elsewhere. For instance, if your dog bites someone on your property or even on the street or down the block, that is typically covered by your home insurance. The reason: Although we all know that dogs are members of our family, pets are considered property in legal terms. As such, any damage they inflict on others is often covered by insurance, wherever the incident happens. And good thing, too, since the average claim to cover the injured party’s medical bills hovers around $45,000.
All that said, what exactly is covered under a home insurance policy—and what you’ll pay for it—varies by provider. As such, it’s important to shop around and understand your options.
So how much does home insurance cost, and how much do you need? We’ll cover that in future installments of this guide. Stay tuned!
If you’re buying a house, you know that your home inspector will check it out and make sure it’s in decent shape. But if you want to get to know your home beyond its pretty facade, you should pepper your inspector with questions—a whole lot of them, in fact!
But when you ask those home inspector questions is as important as what you ask. To ensure you get the most out of your home inspection, here’s a timeline of queries to hit before the inspection even starts, during the actual home inspection, and well after it’s over.
Questions to ask a home inspector before the inspection begins
So, how do you separate a great home contractor from a merely good one? It boils down to interviewing home inspectors to gauge how thorough a job they’ll do. To help, here are some of the best questions to ask.
Bonus: This’ll also help you know what to expect! Knowledge is power, my friends.
1. ‘What do you check?’
“A lot of people don’t know exactly what a home inspector is going to do,” says Frank Lesh, executive director of the American Society of Home Inspectors.
“We inspect everything from the roof to the foundation and everything in between,” Lesh says.
Going into the inspection with a clear understanding of what the inspector can and can’t do will ensure that you walk away from the inspection happy.
2. ‘What don’t you check?’
There are limits. For instance, “we’re restricted to a visual inspection,” says Lesh. “We can’t cut a hole in somebody’s wall.”
As a result, an inspector will often flag potential problems in the report and you will have to get another expert—a roofer, HVAC person, builder, electrician, or plumber—to come back and do a more detailed examination.
“Understand that we’re looking at what exists in the house today,” says home inspector Randy Sipe, of Spring Hill, KS. “I can’t see into the future any more than anybody else.”
3. ‘What do you charge for a home inspection?’
A home inspection costs around $300 and $600, though it will depend on the market, the size of house, and the actual inspector. Generally you’ll pay the inspector the day of the inspection, so you’ll want to know in advance how much and what forms of payment are accepted.
Lesh cautions against going with an inspector who quotes you a very low price.
“That’s often a sign they’re having trouble getting customers,” he says.
Spending on a good inspector will more than pay for itself in the long run.
4. ‘How long have you been doing this?’
Or perhaps more important: How many inspections have you done? A newer inspector doesn’t necessarily mean lower quality, but experience can mean a lot—especially if you’re considering an older home or something with unusual features.
5. ‘Can I come along during the inspection?’
The answer to this should be a resounding yes! Any good inspector will want prospective owners to be present at the inspection. Seeing somebody explain your house’s systems and how they work will always be more valuable than reading a report, and it gives you the opportunity to ask questions and get clarifications in the moment. If an inspector requests that you not join him, definitely walk away. Run!
6. ‘How long will the inspection take?’
Inspections often take place during the workweek, when the seller is less likely to be around. Knowing how much time you’ll need to block out will keep you from having to rush through the inspection to get back to the office. You’ll get only a ballpark figure, because much will depend on the condition of the house. But if you are quoted something that seems way off—such as a half-day for a two-bedroom apartment, or just an hour for a large, historic house—that could be a red flag that the inspector doesn’t know what he’s doing, says Lesh.
7. ‘Can I see a sample report?’
If you’re buying your first home, it can be helpful to see someone else’s report before you see your own. Every house has problems, usually lots of them, though most generally aren’t that big of a deal. A sample report will keep you from panicking when you see your own report, and it will give you a sense of how your inspector communicates. It’s another opportunity to ensure that you and your inspector are on the same page.
Questions to ask a home inspector during a home inspection
Ideally, you should attend your home inspection—in person or by video—and ask your home inspector anything that comes up right then and there. The reason: Rather than trying to decipher your home inspector’s (very technical) report, it’s much easier for this pro to actually show you what’s going on with the house.
To help you get this essential show-and-tell session rolling, here are a few important questions to ask a home inspector that will help you size up a house yourself, and keep it in good condition for as long as you hang your hat there.
1. ‘What does that mean?’
During the inspection, your home inspector will go slowly through the entire house, checking everything to ensure there are no signs of a problem. He’ll point out things to you that aren’t as they should be, or may need repairs.
Don’t be afraid to ask any questions about what the home inspector is telling you, and make sure you understand the issue and why it matters. For example, if the inspector says something like, “Looks like you’ve got some rotten boards here,” it’s smart to ask him to explain what that means for the overall house—how difficult it is to repair, and how much it will cost.
Just keep in mind that your inspector can’t tell you whether or not to become the buyer of the house, or how much you should ask the seller to fix (though your real estate agent should be able to help with that).
2. ‘Is this a big deal or a minor issue?’
For most people, buying real estate is the biggest purchase they’ll ever make. It’s normal to start feeling panicky when your inspector is telling you the house has a foundation problem, a roof or water heater in need of repair, or electrical, heating systems or an HVAC system that isn’t up to code.
Don’t freak out—just ask the inspector whether he thinks the issue is a big deal. You’ll be surprised to hear that most houses have similar issues and that they’re not deal breakers, even if the fixes or repairs sound major. And if it is major? Well, that’s why you’re having the home inspection done. You can address it with the seller or just walk away.
3. ‘What’s that water spot on the ceiling, and does it need a repair?’
Don’t be shy about asking questions and pointing out things that look off to you during the home inspection and checking if they’re OK, real estate–wise. Odds are, if there’s something weird, your inspector has noted it and is going to check it out thoroughly. For example, if there’s a water spot on the ceiling, maybe he needs to check it from the floor above to know if it’s an issue.
Ideally, your inspector will ask you if there’s anything you’re specifically concerned about before he starts the inspection. Make sure to tell him if this is your first real estate purchase, or if you’re worried about the house’s age, or anything at all that strikes you, the buyer, as a possible negative.
4. ‘I’ve never owned a house with an HVAC/boiler/basement. How do I maintain this thing?’
Flaws aside, a home inspection is your golden opportunity to have an expert show you how to take care of your house.
“Inspectors are used to explaining basic things to people. If you have an inspection question, ask it,” Lesh says. “Don’t expect your inspector to teach you how to build a clock, but we are happy to answer and explain how things work.”
5. ‘What are your biggest concerns about the property?’
At the end of the inspection, the inspector should give you, in broad strokes, a summary of what he found. You’ll get a written report later, but this is a great moment to get clarity on what the inspector thinks are the house’s biggest issues, and whether or not they require further investigation.
Often, it’s a good idea to call in another home inspection expert—a plumber, electrician, roofer, or HVAC professional—to take a look at anything the inspector flagged.
You should walk away from inspection day with a mental punch list of things that need to be addressed by either the seller or another expert. In some states, there’s a limited amount of time for these negotiations to happen, so you and your agent may want to hit the ground running.
Your official home inspection report will have more detail, but you should know what’s on it by the time you leave the home that day.
Questions to ask a home inspector after the inspection is done
What are some questions to ask a home inspector after he’s finished the inspection? Because, let’s face it, just staring at that hefty report highlighting every flaw in your future dream home can send many buyers into a full-blown panic!
Know the right questions to ask a home inspector afterward, though, and this can help put that report into perspective. Here are the big ones to hit.
1. ‘I don’t understand [such and such], can you clarify?’
Just so you know what to expect, here’s how it will go down: A day or two after the inspection, you should receive the inspector’s report. It will be a detailed list of every flaw in the house, often along with pictures of some of the problem areas and more elaboration.
Hopefully you also attended the actual inspection and could ask questions then; if so, the report should contain no surprises. It should contain what you talked about at the inspection, with pictures and perhaps a bit more detail. If there’s anything major you don’t remember from the inspection in the report, don’t be afraid to ask about it.
2. ‘Is there any problem in this house that concerns you, and about how much would it cost to fix?’
Keep in mind, most problems in the house will likely be minor and not outright deal breakers. Still, you’ll want your home inspector to help you separate the wheat from the chaff and point out any doozies. So ask him if there are any problems serious enough to keep you from moving forward with the house.
Keep in mind that ultimately it’s up to you and your real estate agent to determine how to address any issues.
“The inspector can’t tell you, ‘Make sure the seller pays for this,’ so be sure you understand what needs to be done,” says Lesh.
3. ‘Should I call in another expert for a follow-up inspection?’
Expect to have to call in other experts at this point to look over major issues and assign a dollar figure to fixing them. If your inspector flags your electrical box as looking iffy, for example, you may need to have an electrician come take a look and tell you what exactly is wrong and what the cost would be to fix it. The same goes for any apparent problems with the heating or air conditioning, roof, or foundation. An HVAC repair person, roofer, or engineer will need to examine your house and provide a bid to repair the problem.
Why is this so important? This bid is what your real estate agent will take to the seller if you decide to ask for a concession instead of having the seller do the fix for you. Your inspector can’t give you these figures, but he can probably give you a sense of whether it’s necessary to call somebody in.
4. ‘Is there anything I’ll need to do once I move in?’
Wait, you’re still not done! It’s easy to forget the inspector’s report in the whirlwind of closing and moving, but there are almost always suggestions for things that need doing in the first two to three months of occupancy.
Lesh says he sometimes gets panicked calls from homeowners whose houses he inspected three months after they’ve moved in. Although he’d noted certain issues in his report, the buyers neglected the report entirely—and paid for it later.
“I had a couple call and tell me they had seepage in the basement,” Lesh says. “I pulled up their report and asked if they’d reconnected the downspout extension like I recommended. Nope. Well, there’s your problem!”
Everything you didn’t ask the seller to fix? That’s your to-do list. Isn’t owning a home fun?
It might be easy to gloss over the bathroom when you’re touring a home in person—but it’s even easier to do so when you’re viewing it by video, as many of us are doing in the age of the coronavirus. It’s a smaller space than most in the house, and, at first glance, there’s not much to take in: toilet, shower, vanity—that’s all you need, right?
But the fact that the bathroom’s purpose is purely functional—the place to go when you go—is what makes it such a crucial space. And one you shouldn’t rush through in any tour.
Experts say there’s a whole lot more you should be looking at in the bathroom besides the sleek vanity and sparkling bathtub. Make sure to inspect—or ask your agent to scope out for you—these potential problem areas.
1. Funky odors
As your agent shows you the bathroom, look out for an air freshener. It might be the buyer’s personal preference to have fragrance in the bathroom, but it could also be masking issues with the plumbing or mold.
“Homes on a septic system that have a strong odor could be a sign of an issue that could cost you more later,” says Wendy Gladson, a real estate consultant at Compass in Los Angeles.
2. No bathroom vent fan
You might not think an ordinary bathroom fan is worth a second look, but it is.
“It is not necessary to have a fan if you have a window, but it could be an unpleasant surprise when you look for the switch to get rid of steam, and there is no fan [or window] present,” says Veronica Sniscak, owner and Realtor® at VSells and Associates in Ellicott City, MD.
3. Bad lighting
“Since you will not be there in person, it may be tough to know if the bathroom is well-lit or if the lighting situation might need attention,” says Sniscak.
Ask your agent to turn on all the lights, to see how bright or dim the room is.
A window provides natural light and helps a small bathroom feel less claustrophobic, but you don’t want your neighbors to watch you brush your teeth every night. Have your agent show you the view out the window, if there is one.
“In urban areas, you want to make sure that, with the proximity to your neighbors, you have privacy,” Gladson says.
5. Squishy floor
If there’s tile in the bathroom, your agent should show you close-ups of it.
“Look to see if there are any areas of cracking in the floor tile, separation, or damaged grouting or any ‘softness’ felt underfoot that could indicate issues with any past or current plumbing, or a pest issue,” Gladson says.
6. Old bathtubs
What looks like a brand-new bathtub might be an old one with a cosmetic upgrade. Reglazing is an inexpensive way to update a tub, but Gladson says the finish doesn’t last long. Look for bubbling or sags in the finish.
“Tubs will scratch and even peel with time and require touch-ups to the finish,” Gladson says.
7. Problems under the sink
“The bathroom is the No. 1 place for water damage, so it’s a good idea to check under the sink for leaking,” says Kari Haas, a real estate agent at Windmere Real Estate in Bellevue, WA.
Ask your agent to zero in on the fixtures. Are they corroded or in good shape? Are any of the fixtures or pipes leaking? Next, ask your agent to turn on the faucets of the sink, tub, and shower. Take note of the water pressure. Is it strong or barely trickling out?
If you don’t see any storage besides under the vanity or in the medicine cabinet, where will you keep your towels and other necessities? And don’t assume a closet in a bathroom is for storage. It might house mechanical components or a water heater.
“It’s important to see inside all cabinets and behind any doors,” notes Sniscak. “It would also be helpful to know if there is a linen closet in the hallway outside of the bathroom.”
9. Mildew or gaps in the shower grout
“What is the condition of the grout? If there are gaps, there could be hidden damage behind the walls, and if there is mildew, it speaks to ventilation and poor maintenance,” says Gladson.
Also, watch your agent open and close the shower doors to ensure they function correctly.
10. A tiny shower
If you’re tall or feel anxious in small places, a small shower can be a deal breaker. And you won’t be able to get a sense of how big or small the shower area is from the live video, Sniscak says.
“It may be helpful to have the agent bring along a measuring tape to see how big the shower area is,” she says. “It’s also a good idea to get a view inside the shower or tub area to see if there is any space to store items like a niche or shelf.”
11. The bathroom is in a weird spot in the home
Multiple bathrooms are a plus, but not if they don’t serve your lifestyle.
“Many find it odd to have a bathroom in the kitchen, for example, and it’s also good to know how far away the bathroom is from the living area,” says Sniscak.
Have your agent walk you through the areas leading to the bathrooms.
“Ask if there is a level that doesn’t have a bathroom at all that may not be easy to tell from the video,” adds Sniscak.
Finally, verify how many bedrooms share a bathroom.
12. Not enough outlets
Outlets are something you probably wouldn’t even think twice about, even when you’re touring a house in person—but you should take notice, Sniscak says.
“Some older homes may be lacking outlets, so it’s always better to check than be surprised later,” says Sniscak.
13. A bad toilet
For something that gets used several times daily, the toilet rarely gets a second glance in house tours. Yet, trouble could be lurking, so (and we’re serious here) get your agent to stand over the toilet and jump up and down to see if the toilet is loose and needs a new wax ring.
“Ask if the flooring is solid—also a sign that there might be rot,” Haas says.
And while you’re at it, ask what sort of toilet it is. Is it water-efficient? Does it have a bidet attachment? These things could significantly improve or detract from your bathroom experience.
What is a condo? Short for “condominium,” a condo is a private residence within a larger building or complex.
The first condo in the United States was built in Salt Lake City in 1960, according to Matthew Gordon Lasner, author of “High Life: Condo Living in the Suburban Century.” Since then, this residence style has truly taken off. Currently, there are approximately 17 million privately owned condominiums in the U.S.
Condos might look like a lot of other types of real estate you may have heard of—like apartments, co-ops, or townhouses—but condos have their own distinct features, rules, pros, and cons. Here’s what condos are all about, and how they’re different from other structures in which you can live.
How condos work
Since a condo is part of a larger residential structure (although “detached condominiums” also exist), condo residents typically share certain common areas and amenities with their neighbors.
So what does this mean for a condo owner? It means you and your neighbors might park in a common parking lot or garage. You might use the same rec room or roof deck, or bump into one another at the condo complex’s swimming pool or gym.
Furthermore, these shared areas and amenities are enjoyed by all condo members without the need to maintain them on their own. Instead, condo owners pay dues to a board (typically made up of elected condominium owners) who then handle the hiring of landscapers, pool cleaners, and other professionals for anything that must be maintained or fixed, from faulty elevators to gopher infestations in common areas.
How much are condo fees, and what do they cover?
Average condo fees range from around $100 to $700 per month, although these fees can go much higher based on what amenities they cover. If the condo complex has high-end shared features such as a swimming pool, gym, and spa, condo fees can be several thousand per month.
Generally, condo fees pay for the maintenance of any amenities outside your personal living space that you share with your neighbors.
“Condo fees are your percentage share of the costs to run the building as a whole,” explains Janice Pynn, president of Simerra Property Management.
And in case you think your condo fees are too high, know this: No one pockets a cent of your checks or is getting rich off condo dues.
“They are not a profit source for building management; in fact, each building is registered as a nonprofit corporation,” Pynn points out. In other words, these fees go solely toward enhancing the value of your real estate, which is a good thing!
Here are the services and amenities you can expect your condo fees to cover:
Interior maintenance: Condo owners share the cost of maintaining common building areas like parking structures, storage rooms, laundry rooms, game rooms, fitness centers, saunas, and hallways, as well as mechanical systems like heating, cooling, electric, gas, plumbing, and elevator maintenance. If a crew comes regularly to clean the common spaces, its fees are also included.
Exterior maintenance:Condo owners also share the cost of exterior common areas like fences, walls, gates, pools, landscaping, and window cleaning, and seasonal expenses like snow removal, winterizing, and cleaning out rain gutters. If a gardening crew comes regularly to take care of the landscaping, its fees are also included.
Security: This could range from cameras at the entrance to full-time guards patrolling the grounds. If visitors have to be buzzed in to the building, this system will be covered by your condo fees.
Utilities: Most developments’ condo fees cover utilities such as water, sewer, and trash. Some buildings even include heat, electricity, cable, and Wi-Fi. Remember that the more utilities covered, the higher your condo fees will probably be.
Insurance: Most condo fees include a homeowners insurance policy that covers exteriors and shared common areas. Depending on where the condos are located, the insurance policies might also cover flood and/or earthquake damage. The nice thing here is that condo owners need only to purchase insurance policies that cover the interior of their home and their possessions.
Reserve fund: There are expenses that don’t come up on a monthly, or even an annual, basis that will need attending to, so a well-managed condo board will charge owners a certain amount per month that will go into a reserve fund. It would cover things like paving, reroofing, replacing water heaters, exterior painting, hallway and lobby flooring and redesign, and more.
What is an assessment?
In addition to your monthly condo fees, special assessments might arise. Every once in a while something big (e.g., a roof or an elevator) gives out, and there aren’t enough reserve funds to cover it. In that case, the condo owners will have to pay an extra fee for these additional expenses, typically tacked on to the usual monthly condo fees in small amounts until the assessment is paid off.
At times like these, it’s best to remember that, as with any type of homeownership, unforeseen expenses arise, and making the necessary repairs is in your best interest. In other words, you get out what you put in.
In addition to collecting dues, a condo board also enforces rules and regulations that owners agree to abide by when they purchase their condominium. The board can regulate everything from the size and number of pets you’re allowed to the ages of the people living in your unit. Retirement condo communities, for example, can legally require that all long-term residents be over the age of 55.
So if you’re looking into buying a condo, make sure to study up on the condominium association rules (called covenants, conditions, and restrictions, or CC&Rs) and fees.
Condo vs. apartment: What’s the difference?
While condominiums and apartments might look exactly the same—a residence in a larger building—the key difference has to do with who owns the property. Condos are homes you can buy, own, and sell when you wish. Apartments are places you can rent, but do not own.
Another key difference between a condo and apartment has to do with property’s maintenance and repairs. With a rental, the apartment’s owner—often called a landlord—is typically responsible for any maintenance and repairs inside the unit as well as out. So for instance, if a renter’s faucet drips or they’ve got pest problems like mice or roaches, all they need to do is call the landlord to come fix the problem.
Condo owners, in contrast, are responsible for any repairs or maintenance inside their unit.
Condo vs. apartment: Which is better for you?
Whether you should buy a condo or rent an apartment can be a tough decision, since each scenario comes with distinct pros and cons. For instance, renting an apartment is great if you’re not sure how long you’ll stay in the area, or don’t want the hassles of maintaining your residence.
Buying a condo, however, makes more sense if you plan to stay in an area for at least a few years, and are willing to maintain your property (by paying repair professionals or by doing the work yourself).
Here are some other factors to consider.
Cost: Condos are meant to be purchased. Even if you get a mortgage, condos will typically require a down payment (typically anywhere from 3.5% to 20% of the price of the property). If you lack a chunk of money to offer upfront, then you’ll probably have to rent, which typically requires lower upfront costs (like first and last month’s rent and one month’s security deposit). That said, depending on the inventory available in a particular area, the monthly costs of renting vs. owning could be similar. As such, it’s worth comparing these two options with an online rent vs. buy calculator.
Home equity: Probably the main advantage for being a condo owner over a renter is that condo owners gain equity in their real estate over time. As they slowly pay off their mortgage and owe less on their property, they own bit more of their condo free and clear, month by month. Once the mortgage is fully paid off (which can take up to 30 years), they own the property in full. This is in stark contrast to renting, where you pay your landlord rent every month but do not gain equity.
Freedom: Condo owners are able to make changes to the property from painting the walls to renovating the kitchen. Meanwhile, renters are not allowed to make any permanent changes without their landlord’s permission.
Housing quality: Since homeowners tend to care more about their property than renters, condos tend to be better built and maintained than rentals.
Condo vs. house: What’s the difference?
But what if your real estate debate is whether to buy a condo vs. house? Take a look at the differences between these two popular residential options, and the benefits each can provide to you and your family.
Price: Condos are usually more affordable than a house, and are thus great starter homes for younger home buyers. To figure out how much you can realistically spend, try using an online home affordability calculator.
Location: If you want to be in the heart of the city, condos will be more prevalent. Single-family homes at around the same price could be found, but likely farther out from metro centers, which might entail a longer commute.
Privacy: Having complete privacy is possible in a single-family house, while condo living means neighbors will be quite close. Condos may not offer private outdoor space.
Freedom: Many condo communities have strict rules about everything from paint choices to the hours when you can take out your trash cans. As a result, a condo complex isn’t a great idea for fiercely independent homeowners who don’t want anyone telling them what they can and can’t do with their property. Single-family home communities tend to be more lenient.
Maintenance: With a house, the homeowner will have to take care of any maintenance, whereas condos include maintenance fees that cover landscaping and (sometimes) exterior maintenance on the unit. As such, condominiums are often ideal for people who want to own a piece of real estate but don’t want to worry about yardwork and repairs.
Budget: How much do you want to spend on the property? Condos are usually more affordable than a house. Give this point considerable thought. The last thing you want is to overextend financially. Try using an online home affordability calculator to help pinpoint a budget.
How to buy a condo
We totally get why people buy condos: They’re cheaper and require less maintenance than a traditional house (no mowing the lawn). Plus, they’re often stacked with cool common amenities from pools to gyms. What’s not to love? Yet while condo living might seem carefree, buying one is not necessarily a simple task.
Here’s how to buy a condo, how it’s different from buying a house, and a few insider tips to pave the way to ownership.
Consider your unit’s surroundings
While the condo unit itself is a key consideration, it’s also important to carefully check out the environment around it—particularly when it comes to noise. Remember, you’ll be sharing walls with your neighbors, and perhaps even ceilings and floors.
“I always suggest my buyers book a showing during typically ‘louder’ times of the day, such as dinnertime when kids are home, to see how well the walls actually dampen the noise,” says David Nelson with the Imperial Home Team in Minneapolis. He also recommends asking a few of the neighbors about general property noise, such as how loud the traffic and surrounding neighborhood are, and if they can hear their neighbors through the walls.
The unit you choose can play a large role as well.
“End units share fewer walls than those in the middle, which can lessen neighbor noise,” says Nelson. Of course, that’s also one of the reasons why end and top-floor units are more coveted—and often pricier—but if you’re sensitive to noise, that could be money well spent.
Check out the condo board and association
When you buy a condo, you’re buying into the entire community—including its rules on everything from when and where it’s OK to let your dogs off the leash to whether RVs are allowed in your driveway. Most states will have a designated rescission period to peruse relevant documents. During this period, you’ll want to carefully read through the community’s covenants, conditions, and restrictions, or CC&Rs, as well as penalties for not following them.
“When a buyer agrees to the association documents, he or she is automatically bound to the condo board’s rules,” says Nelson. These typically entail parking space allowances, regulations related to pets, and homeowner responsibilities for repairs and maintenance.
“If there is something in the association bylaws that you as a buyer don’t agree with, and it is still within the rescission period, you can back out of the home purchase and usually get a full refund of any earnest money,” says Nelson.
In some cases, it can be trickier to secure a mortgage for a condo than a traditional home because the health of the condo development hinges on multiple owners paying their bills. Your mortgage lender is apt to conduct a thorough review of the condo complex as a whole, including documents relating to the overall health of the building and the condo association. The good news is that you can consider this an extra layer of due diligence to protect your own investment.
Prep for your condo interview
Sure, you’re checking them out, but they’re checking you out, too. Once your offer is accepted, many condo associations require prospective buyers to interview with the condo board. Don’t worry: These interviews must comply with all regulations against unlawful discrimination—the goal is to ensure that you can afford the home and fully understand condo rules. This is also your chance to ask questions about any of those rules, and also get a feel for some of the people you’ll be living with—so consider it less of a firing squad and more like a first date.
Questions to ask a condo board
“One of the biggest considerations when purchasing a condo is who manages it,” says Nelson. That’s why, before you sign on the dotted line, you should arm yourself with these questions for the condo board to make sure it’s the right fit for you.
What are the fees? Most condos have a monthly fee that can range from $200 to $400 (an upscale development with tons of amenities will cost more). Ask the board exactly what that fee covers—after all, you’ll be shelling out month after month, and year after year. What’s usually included is anything outside your condo, from cleaning public areas to removing snow to maintaining the community pool. Owners themselves generally pay for whatever is inside the walls of their condo, like painting and appliances. Make sure what you’re getting is on par with what you’re paying for, says Nelson. And always ask if the board sees the fee rising anytime in the near future, and how much it’s risen in the past.
Can I see the financial statements? A condo’s financials should be an open book (or, more accurately, a spreadsheet). And don’t worry if you’re not an accountant. You should quickly be able to determine if a condo’s income and expenses match up—a red flag would be more money going out than coming in. Also eye the condo’s reserve funds to see if it’s healthy enough to cover any unforeseen expenditures. If not—and the pool pump breaks—that could result in more money coming out of your pocket to fix the problem via an assessment (see our next point).
Are there any upcoming assessments? Assessments are periodic, one-time payments made to the association above and beyond the monthly fee, usually to cover capital improvements or repairs. So if the association plans to replace all the windows in the common areas or add a gym, you could end up blindsided by a huge extra bill—unless, of course, you ask ahead of time.
What are the rules? Each association has its own unique bylaws and regulations, which all buyers should review before their purchase, as they have to live by them afterward. So make sure you read every single one. Many of the rules are mundane, dictating where residents or guests can park. But some condos have rules that can range from no holiday decorations on your front door to limits on hours for barbecuing. Another biggie in condo rules is whether a homeowner is allowed to rent out their home, and for how long. While you may not want to rent it out, the ability to do so—or not—could affect your resale value. Did we mention that you should read the rules? Read the rules.
Are there any pending lawsuits? Lawsuits are a potentially huge financial drain on any condo board that loses in court. And even if there are no pending suits, a quick check of a condo’s liability insurance to make sure it’s up to snuff can’t hurt.
Who is the caretaker? Properties generally have a manager on-site to oversee day-to-day tasks. An employee who has been with a condo for a long time is generally a good sign your calls will be answered in case a maintenance issue pops up.
While trying to buy a house this summer, I assumed our real estate options were limited to homes that were officially for sale.
Well, guess what? We ended up buying a house that wasn’t even listed—and learned that this home-buying strategy wasn’t just possible, but often preferable if you’re purchasing property in a competitive market.
Here’s how we pulled it off, and how you can, too.
How we bought an unlisted house
The backstory: My husband and I had been house hunting for months in Alabama, and had fallen in love with one particular property in the highly desirable historic district of Florence. We made an offer the same day we toured the house, only to be heartbroken upon learning that it went to another buyer (a relative of the seller).
Feeling at a loss, we scoured Florence for other options, but nothing else was for sale—which made sense, because it’s a coveted area of the Shoals region.
Disappointed and tired of waiting for listings that seemed to sell within days of their going live, we asked our real estate agent, Jody Lanier with MarMac Real Estate, if he had any ideas.
That’s when he introduced the idea of looking beyond what was available on real estate listings sites.
We were game to try it out. So our real estate agent put out feelers, and soon found a 1917-built home that was on our perfect street. My husband and I fell in love with it the moment we set foot on the front porch and felt giddy stepping inside.
Basically, the sellers had named their asking price, and if we were interested, we could put in an offer for that amount—take it or leave it. Since the price was within our budget, we went for it, signing and submitting a typical home buyer’s contract that evening.
In the morning, we had more good news: They’d accepted!
It was a thrill to know that we’d gone under contract without having to compete against other buyers, saving us a lot of worry and disappointment in the offer process.
How to buy a house that isn’t on the market
Buying an unlisted house appears to be a growing trend in heated markets. According to Pamela Ermen, president of Real Estate Guidance in Norfolk, VA, it’s called “going under the market,” which means digging into the housing inventory in a particular area to find unlisted gems where the owners might be up for selling if they receive the right offer.
It’s just smart to “introduce yourself as a buyer to [a home] before you have to compete with other people for it,” says Ermen, who specializes in such listings.
Here are a few tactics that will help make this needle-in-haystack process a success.
Find a real estate agent willing to do some digging
Buying a house that isn’t for sale takes more legwork on the agent’s end than usual. So for starters, you’ll want to make sure you have an agent willing to go the extra mile. Here are a few of the steps agents take.
Review expired listings: This is where your real estate agent digs through expired listings to see who once had their home on the market, checking to see if it ever sold. If it hasn’t, your agent can then reach out to the sellers and see if they’re open to selling now.
Check tax records: Your agent can also research tax records in a particular neighborhood to see who has a different address for tax returns than the property address. This suggests that the house is vacant or an investment property.
Send direct mail: This involves a real estate agent sending postcards to homeowners in the neighborhood or ZIP code you want to live in, inviting them to get in touch if they’re open to receiving offers on their home. Since part of the appeal might be that the sale could be easy and practically painless—no home staging or open houses needed—the postcard should emphasize that the agent has “fully qualified buyers” (like yourself) who are interested in a “quiet sale.”
Prospecting neighborhoods: This is where you and your agent drive around a particular neighborhood, writing down addresses of homes that, if they were on the market, you’d love to see. During the COVID-19 pandemic, buyers can also do this on their own, then pass the list of addresses to their agent, who can then reach out to these owners.
While a real estate agent will have to do many of the above tactics, there’s plenty home buyers can do as well to improve the odds of finding an unlisted property they’d love to purchase. Here are a few tactics we tried.
Commit to buying a house in a particular area
If a real estate agent is willing to go the extra mile to find you an off-market home, pledging your commitment to that person is a no-brainer. Stay loyal to that agent so his or her work will pay off.
In our case, our real estate agent showed us about 15 homes this summer, so we knew we’d work only with him on a sale to make it worth his time.
When an agent finds you an off-market home, be ready and willing to go see it at a moment’s notice. In our case, our agent urged us to go ASAP, before the sellers potentially changed their mind about selling. Ermen says she once showed an off-market home at 10 p.m.
Work out your mortgage ahead of time
Ermen says it’s a good idea to get pre-approved for a home loan, and have that letter from the bank in hand to submit with your offer. This proves you’re serious, and can put your money where your mouth is.
Decide what you’re willing to do
Get crystal-clear on your budget and what you’re willing (and not willing) to do to get a home before going the route of an off-market listing, says Ermen.
The nice part about buying a home this way means that you’ll hopefully avoid lots of back-and-forth negotiating, as in a typical sale, and the worry that you’re competing with other buyers. But that doesn’t mean you can necessarily go in with an offer far below asking. If you’re in a competitive market, you’ll need to ask yourself: What am I willing to do to buy this house?
Don’t assume your seller won’t play the field
Even if you’re the first buyer to come knocking at a homeowner’s door, don’t assume things will stay that way once you’ve piqued the seller’s interest in selling.
“You have to assume that a seller is astute enough to know that they might get more money with more competition,” explains Ermen.
You’re also going to have to be prepared to make an offer quickly, as we did. Be fair, legitimate, and direct in your offers.
“You know what they say,” Ermen says. “If you’re going to sleep on it, you won’t sleep in it.”