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7 Things That Affect What You Pay for Homeowner’s Insurance

Homeowner’s insurance is a non-negotiable. Not only does it protect you in the event the home is damaged, but it also includes liability insurance in the event someone is injured at your home. When evaluating the policy, insurance companies consider multiple items to determine their risk—and your cost.

Here are 7 things that affect the amount you pay for homeowner’s insurance—some that might make sense and some that might surprise you.

1. Square Footage – First and foremost, the size of the home is considered. The larger the home, the more it would cost to replace if damage occurred. More space also means more furniture, fixtures, personal belongings, and other items which would be replaced in a claim.
2. Layout – The style of the home is another factor in determining replacement costs. A single-story home, for example, might have higher foundation and grading costs, whereas a two-story home would need alternative construction methods.
3. Construction Materials – The type of material used to build the structure is important. Wood roofs would cost more to insure against a fire claim, as would a home with expensive travertine floors. A simpler home of modest building materials would cost less to insure.
4. Property Age – The assumption is that an older home might have more deterioration than a newer home and this is considered in the replacement cost.
5. Home Features – Homes with extra buildings or pools will be insured at a higher cost than other properties without these amenities.
6. Neighborhood – Local crime rates are reviewed to determine the risk to property and personal items.
7. Credit Score – Finally, the insurance company will consider the homeowner’s credit score. Not only does this help them understand if they are at risk for non-payment, but serious credit issues might be a factor in how well a property is maintained.

Homeowner’s insurance is important to every homeowner. Not only is it required by lenders, but it also protects the homeowner against financial disaster in the event of theft, fire, severe weather, and more. Understanding how rates are determined can help you compare options and get the best policy for your home.

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5 Tips for Starting Your Home Search

Everyone wants to time their home purchase “just right.” Ideally, you want to choose the picture perfect buyer’s market with plenty of well-­‐priced listings, low interest rates and a slow moving real estate market where the buyer has plenty of time to decide on an offer. The reality is that the current market is a fast paced environment where the best homes move quickly and serious home buyers need to be prepared to act when they find the right home.

Fortunately, starting your home search the right way is easy by following these simple tips:

  1. Find a Lender and Get Pre-‐Approved – Know what you can afford before you start your search.  By getting a pre-­‐approval letter, you demonstrate to sellers that you are serious when you write your offer and it proves you can afford the home.
  2. Research Neighborhoods – Each community will have its own personality and advantages; before you spend time looking at homes, choose the right area for your lifestyle and family needs.
  3. Pick the Right Home Style – Learn about the various home styles available in your community. Do you want a single story? Large yard? Do you like older homes or historic-­‐ style properties?
  4. Make a List of Must Have and Like-‐to-­Have – There is a difference! Make a list and be ready to compromise when appropriate by ranking the items.
  5. Take Notes – Often a home buyer can see 6-­‐7 homes in a single day; take notes, and if possible take pictures so you can remember the things you like and don’t like about the homes you see once you get home.

In a fast paced real estate market, spending some time preparing for your home search will help you move quickly when you find the right home for you and your family.

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Discount for Cash Offer?

Most parts of the country are seeing a strong seller’s market. Inventory is low and buyers want to take advantage of the low interest rates. As a result, sellers may be in the enviable position of a bidding war. Some buyers believe that presenting an all-cash offer to the seller can earn them a lower price by being more attractive.

But as a seller, should you accept a lower price from a buyer just because it’s all in cash? The short answer is, “it depends.”

  • Do you need to close quickly?
  •  What are the terms of the offer?

The best advantage of an all-cash offer is the ability to close faster than traditional financing. Typically, loan processing will take several weeks from appraisal to underwriting. A cash offer can be completed in a matter of days; the monies need to transfer and the title needs to be recorded. If it’s important for you to get the money quickly, then accepting a slightly lower sales price in return for the speed of closing could be worth the cost.

Consider all terms of cash offer

Even if the offer is all-cash, that doesn’t guarantee it will close any sooner than another buyer. The most important consideration is the terms of the offer. Even though there is no lender involved, the offer might still be contingent upon an appraisal, a home inspection and other standard contingencies. Simply paying in cash by itself does not guarantee that the sale will close any faster than a well-qualified buyer who will use financing.

Compare all offers

The bottom line is that before discounting your home price for an all-cash buyer, compare all the offers. Your goal is to net as much profit from the sale as possible. If the speed of closing is important, then a small discount might be warranted; but if not, consider all the terms carefully before assuming an all-cash offer is better.