Always Be Prepared!

The House Next Door
Here’s more incentive for you to help your neighbors stay out of foreclosure. A new Harvard University study shows that if the house next door gets seized by the bank, not only will the value of that property fall by an average of 27 percent, but the value of your home will fall as well, by about one percentage point.

Economists at Harvard and MIT poured through more than 1.8 million Massachusetts home sales records to come up with their findings, which were reported at Consumer Affairs.com. The study shows that homes within 2250 feet of a foreclosure see their values impacted, while homes further away do not. However, the study does detect a cumulative effect, which means the more homes lost to foreclosures in any given neighborhood, the more surrounding homes are affected.

The national median price for a single-family home was 176-thousand, 9-hundred dollars – up 27-hundred dollars, or a percent and a half – from the same period last year. Part of the reason prices managed to increase is because the rate of distressed homes continues to decline. 32 percent of all homes sold during the quarter were bank owned, compared to 36 percent for the same period in 2009. Distressed homes, which are usually sold by banks, tend to sell for less than homes sold by actual homeowners, so as the percentage of distressed properties decreases, prices tend to go up.

But can those prices stay on a steady course? For the time being, yes they can. Re-sale homes, for the most part, sell for less money than comparable new homes, and with very little new construction taking place right now, the market for existing homes should remain competitive and keep prices steady.

With the federal tax credit in play, it’s no surprise that home sales were up by a lot compared to last year. Sales rose 17 percent, from a seasonally-adjusted rate of 4.8 million homes to 5.6 million, and we saw prices increase, year-to-year, in 47 states and the District of Columbia.

Looking at regional results, sales increased everywhere compared to last year, with the biggest jumps –by more than 20 percent – in the Northeast and Midwest. The Midwest and West enjoyed slight price increases, while Northeast and South saw median prices slip two to three percent.

Despite all of that, only about 4-thousand homes in the area were protected by flood insurance. The rest were not, mostly because they were considered to be in a 500-year flood plain. There was simply very little chance of those homes flooding, so most homeowners did not carry coverage. But the fact still remains that long shot events, no matter how small the odds, do, in fact, take place. And you need to consider that when you plan your insurance policy.

Depending on where you live, your mortgage company may require you to be insured against disasters such as hurricanes, earthquakes or wildfires, and many states have set up insurance pools to cover residents who can’t otherwise get coverage. In fact, most flood insurance is backed by the federal government , and not by private companies.

But wanting extra coverage and actually buying it are often two separate things. Sometimes, the cost can feel prohibitive. Earthquake insurance can add thousands of dollars a year to the cost of your policy. So can hurricane coverage and remember, that usually only covers wind damage, not flooding.

Even when the cost of coverage seems reasonable, the deductable can be a killer. Many earthquake policies only kick in after the homeowner has covered the first 20-to-30-thousand dollars of damage. And some policies only offer limited coverage. The inside of your home and your belongings may be covered, but your outdoor pool and landscaping may not.

So, given all of these limitations, what can you do to protect your family, and how do you choose what to cover? First and foremost, read your existing policy, front to back, fine print included. Know what you’re getting for your money, and make sure the policy reflects the value of your home today. If your home burns down in a fire, it’s going to cost more to replace it now than it did when you bought your home years ago.

Next, look at your family’s financial picture. Do you have an emergency fund on top of any insurance? Even if you have excellent coverage, you may not be reimbursed for your expenses for months or even years after disaster strikes. You’re going to need cash, so factor that in when you consider jacking up your insurance bill.

And finally, perhaps the toughest question, are you prepared to walk away from it all?

If you don’t carry enough insurance to repair your home after a disaster, you might be forced to walk away and lose absolutely everything you’ve worked so hard to build over the years.

That happened to thousands of homeowners after the Northridge, California earthquake in 1994. They didn’t have adequate insurance, so when their homes were lost, they had no money to rebuild. They not only lost their homes, but their credit scores plummeted when their mortgages went unpaid.

So don’t make the same mistake they did. Check your policy. Talk to your insurance agent. Know the facts. And get as much coverage as you can comfortably afford. After all, your home might depend on it.

So let’s take a look at generators, starting with the little ones and ending up with the really big and powerful models.

Portable Generators

If you want a portable, make sure you can lift it easily if it’s a suitcase model, or roll it easily if it’s on wheels. It’s not going to do you any good if it’s in the garage, but too heavy for you to get it outside. These units are typically gasoline-powered, and are designed to be operated outdoors only. Running a gasoline engine in your home is a huge carbon monoxide hazard. We all know that, right?

So when you’re at the store, try out a few, until you find one you can handle.

Now, portable generators are rated to carry a specific electrical load. Generally, the larger the load, the more expensive the generator. You want to make sure to buy one that can handle all of the appliances that you want to plug in. Your dealer can help you with that decision.

Once you set it up outside, you’ll have to run a heavy-duty extension cord from the generator to all the items you want to power up. Even the smaller units will have from two to four electrical sockets, so you can run several power cords to different areas of your house.

Whole-House Generators

Now if the idea of lugging a generator outside, and running extension cords doesn’t do it for you, maybe you should ramp up to a whole-house generator, connected to your home’s electrical system.

These generators run on gasoline or natural gas, and a professional electrician can incorporate them into your home’s electrical system.

With some systems, you can throw a switch, which takes your home off the utility’s power grid and puts it on your generator’s power supply.

With others, that change can happen automatically, when a sensor determines the electricity has gone out.

But in either case, get a professional electrician to do the work. That’s important…try to do it yourself, and you could end up blowing out circuits, frying appliances or causing a fire. This is one of those times you really need to get a pro.

Now, when you add up the cost of the generator, and the electrical work, it can easily run into thousands of dollars, but you’ll be glad you invested in all of it, when the power fails.

Plus, these generator systems can add quite a bit to the value of your home. And they’re a great selling point, especially in areas that are known for regular power outages.

But whether you have a portable suitcase model, or a whole house generator, be careful about not overloading it…if you have a 2000 watt model and try running it with a 3000 watt load…it’s going to kick off. So be aware of how much of a load you’re running.

And don’t forget another thing most generators have in common: they’re loud!

Remember to be considerate of your neighbors, most of whom will not have a generator. You might think about running it only when it’s really necessary and not let it drone on and on all night long.

And that’s not all: you might also think about stringing an extra long extension cord over to their house too! A neighborly gesture, they’ll probably never forget.

And finally, remember to plan ahead! Don’t go shopping for a generator when the power’s out. You probably won’t find one, and if you do, they’ll probably be overpriced since demand will be so high.

Instead, think about getting a generator when the power’s on everywhere.

You’ll find plenty to choose from, they’ll be priced competitively, and you’ll be able to make a decision based on practical issues rather than crisis management.

And that goes for just about all the disaster planning strategies.

Plan ahead! Get your emergency kits, your food, water and supplies in place, well before you need them.

You’ll be glad you did, if…’the big one’ hits your part of the country.