A home is probably the most valuable asset you will ever own, so it must be protected with adequate insurance. The basic homeowner insurance policy covers against damage from thunderstorms, lightning, fire, smoke, burglary, defacement of property, civilian chaos, vehicle or aircraft damage, and volcanic eruptions. More comprehensive policies cover against damage by earthquakes, floods, ice, sleet or the malfunction of an air conditioner or heating unit.

Condominium owners are typically required to have an insurance policy that only reimburses them for loss of their belongings. The condo association should provide structural insurance, which covers the roof, outside and adjoining walls.

There are two primary types of home insurance:
1. Actual cash value coverage pays the value of property or belongings at the time they were lost, taking into account their age and depreciation.

2. Replacement cost coverage provides enough money to replace lost or damaged property or belongings with new items at cost.
Usually there are replacement-cost limits for certain expensive items, such as jewelry, artwork, antiques and home office equipment. Consult your insurance agent about taking out individual riders for additional coverage on these possessions.

It’s wise to keep an itemized record of household contents, noting their value, date of purchase and description. Valuables should also be photographed or video taped. This will help determine their replacement cost.

Experts suggest that a home be insured for at least 80% of what it would cost to replace at its current value. Finally, a homeowner policy should be reviewed every year. If you have made any improvements, or the home value has increased, more insurance may be required.

Always consult with a licensed insurance provider before making any changes to your home insurance policy.

I’ve been tracking what people are saying about the shadow real estate inventory that many economists, real estate professionals, and bankers are frightened of. Seems there’s some debate if the shadow inventory, will stymie the housing recovery.

First the definition of shadow inventory is up for debate. Depending on who you’re listening to it can mean many different things. The different definitions are some of what’s causing people to debate the subject.

What is Shadow Inventory?
Definition 1 – Foreclosed but not listed. Some analysts say the “shadow inventory” is the homes which the has bank foreclosed on but not sold. These are homes that are not on the market but owned by the bank (REOs not listed on the market).

Definition 2 – Homes in the foreclosure process as well as delinquent mortgages where foreclosure proceedings are imminent.

Definition 3 – All homes delinquent, short sales not on the market, REOs not on the market, and anything in the foreclosure process.

Definition 4 – All of the above plus modified loans (as they have a large percentage of failing anyway, pay option-arms about to be reset, and lots sitting idle with builders in trouble.

I’m going to go with Standards & Poor’s definition which most similar to Definition 3, all delinquent loans, not just REO’s.

If you go with this definition, then naturally your focus is to look at delinquency rates which are widely published. So to say we have no way of knowing the true size of the shadow inventory is false. The mortgage banker’s recent survey with data ending in the 4th quarter shows that 9.47% of all loans are delinquent. Yikes! That’s a scary number; however the number was down slightly when seasonally adjusted. Also according to this recent survey 50% of all past –due mortgages were 90 days or further past due. This is the highest number in the history of the mortgage banker survey. Usually you’d see a large glut of 30-day past-due balances, which becomes smaller at the 60-day mark, and there would be smaller yet number of 90-day balances (assuming homes were being liquidated with efficiency).

With fewer loans at the 30-day mark, it seems the glut of sub-prime loans is being flushed through the system but only so slowly that it is creating the large inventory (the 90-day past due loans). The government and banks are trying loan modifications, short sales, and foreclosure work outs to reduce these properties flooding the market. Unfortunately distressed assets are distressed assets, especially when they have negative equity.

Standard & Poors sees this shift in lender strategy as temporary as lenders will realize that these toxic assets are unredeemable in most cases. Therefore these homes, estimated at 33 month’s supply or 5-7 million, will eventually hit the market. If they do, home prices could head lower because of increased inventories. The saving grace for the market could the limited new home construction, recent loss in builder confidence, a growing economy, and continued political pressure on banks to keep foreclosure as a tool of last resort.

Nothing to Worry About?
Some believe the shadow inventory isn’t a big concern. Steve Cook of Real Estate Economy Watch points out that total housing inventory is at a 7.8-month supply, slightly up, but overall way down over 1 year ago. “The huge shadow inventory of 1.7 to 7million properties first forecast more than a year ago has yet to materialize-and may be a myth,” said Cook recently in blog post challenging the shadow inventory concerns. I tend to agree. Although my credentials aren’t as serious as Standard & Poor’s rating system, there is great pressure on the banks to work with owners to work out, modify, short sell, or salvage these loans in some way. Side note; a friend of mine recently modified his loan from 7% to 2% for the next 5 years and had his payment sliced in half. The odds of him paying this back are good. Market absorption is continuing to happen as well. In my market, Memphis, inventories are down 30% from the peak, so it’s hard to comprehend prices dropping much further.

I think inventories are set to rise in the upcoming months because foreclosures are expected to peak this winter . I’m looking closely at mortgages headed into delinquency for the first time to gage how much time the crisis has left. Those and past-due loans headed into serious delinquency are in decline. This summer will be critical for the market as the government intervention is nearly over. If the builders continue to hold off building, the market should absorb much of the shadow. Some markets have further to correct of course, but I think we’re unlikely to see home prices drop more than another 5% nationally. My last caveat is this; banks are getting smarter. They were dumping properties for next to nothing a year ago and now that they’ve used their free passes for Wall Street, they’ll be making more prudent pricing decisions for the homes they’re marketing. Shadow inventory yes. Should we dig bomb shelters and buy survival seeds? NO. Continue to accumulate real estate (today) at or near the bottom.

Ryan Hinricher

Five Areas To Scrub to Make Yours Sparkle

So, here’s a question for you. Would you rather walk into a clean home or a dirty one? No, it’s not a trick question but it is an important one. You see, when it comes to selling a home, many people forget how important the answer to that question really is. Sellers get busy looking for their new home, preparing the kids for a move, packing up their belongings, getting organized for their new life and relocation so much that sometimes their home that’s for sale doesn’t get the TLC that’s needed to push it to the top of the buyers’ must-have list.

It’s not until the home sits on the market for long periods that sellers realize something has to change. Sometimes it’s the marketing, sometimes it’s the price, and sometimes it’s the fact that the home that’s being shown isn’t clean enough. Yes, a clean home shows better and there are five ways to make yours sparkle from roof to baseboards.

Hard to Reach Windows/Skylights. These often get overlooked either because they’re difficult to access to clean or because they aren’t right at eye level. Whichever the case, cleaning windows in high ceilings or skylights provides a brighter light to shine in your home. Sometimes just getting out the cloud of dust and dirt that accumulates can make a difference between a murky-looking room and one that is eye-catching. And here’s a tip from Buzzle.com, “Clean the windows on a cloudy day, but not a rainy one. If you clean the windows in the direct light of the sun, traces can appear on the window, as the cleaning solution gets dry before being cleaned.”

Baseboards and Walls. I have written about giving your home a fresh coat of paint prior to putting it on the market. But maybe you can get away with a good wipe-down instead. Using a wet, mildly soapy cloth you can scrub the baseboards and walls to make them look like they’ve had a fresh coat of paint, if the paint isn’t chipped or too worn. However, a product called Mr. Clean’s Magic Erasers will save you the mess and ease the elbow grease. These rectangle-shaped cleaning pads help take the grime off nearly everything. You don’t have to spray anything on the surface you’re going to clean; just wet the eraser and wipe off the marks. I’ve done whole walls with these pads and made it look as though the wall had been freshly painted. Be sure to get the baseboards and get down to kids’ level and wipe off the marks where they place their fingers while walking down the hall or up the stairs. When buyers see homes that are scoffed and worn like that, they may think it’s an indication that the home might not have gotten the care it needed for the bigger things too—such as furnace, disposal, plumbing, electrical wiring, etc. It gives a general feeling of un-cleanliness and can leave a negative lasting impression.

Toilets. It may seem like this goes without saying but I’m sure any real estate agent you ask will have a horror story about toilets. Whether they’re leaking, continuously running, stained, or simply stinky, they pose a major deterrent. If you’ve got an older toilet, give it a good inspection and be sure to check under the lid. Buyers sometimes use your toilet when they’re looking at your home and nothing is worse than seeing rust stains and other unsightly marks. A good product is Zep Toilet Bowl Cleaner.

Tile. When you’re showing your house, hopefully, you’ll get lots of foot traffic. This, however, can lead to very dirty flooring and grout. Yes, you can supply those footies and the sign placed by the door asking buyers to remove their shoes or put the footies on before entering your home, but, the truth is, not all will comply. Still, the tile and the condition of the grout will matter to buyers should they decide to make an offer. There are certainly many products to get the dirt out of those tiny grout lines; one that I’ve had success with is called Heavy Duty Acidic Cleaner for tile. Use a brush to really scrub those dirty lines; doing so will make the tile standout and not look like it needs re-grouting.

Closets, Cabinets, Computer areas. “Buyers love to snoop and will open closet and cabinet doors. That’s according to About.com Guide, Elizabeth Weintraub. She writes about the need to de-clutter closets, hang shirts all facing the same way, and even alphabetize the spice cabinet. Wow! Love it! I realize you may feel you don’t have time for all of that. Still, the point is, don’t have junk stuffed inside closets and cabinets so that when potential buyers open them to have a peek, everything comes crashing down on them–and gives the impression that the closets are too small. Computer areas are becoming more popular in homes and behind most of those computers is a tangled web of wires collecting tons of dust.

Organize the wires using Velcro zip-ties and dust them off! Or, better yet, if you don’t have to use the computer daily, arrange the area like you were filming a movie or shooting an advertisement—you never see wires. Remove all of the computer and accessory electronic cords. You can leave the monitor display on the desk but taking away the wires and storing them will give the area a more spacious, clean, and professionally staged look. A little cleaning and preparation before you market your home will help show buyers that you’ve cared for the house and that could be just the signal a buyer needs to make an offer.
by Phoebe Chongchua