This Month's Market Watch Newsletter

Each month, we publish a series of articles of interest to homeowners -- money-saving tips, household safety checklists, home improvement advice, real estate insider secrets, etc. Whether you currently are in the market for a new home, or not, we hope that this information is of value to you. Please feel free to pass these articles on to your family and friends.

ISSUE #1228
FEATURE REPORT

Before Disaster Strikes
Fires . . . hurricanes. . . floods . . . earthquakes . . . tornadoes.... Natural or other disasters can strike suddenly, at any time, and anywhere.  Your first priority, of course, would be to protect your family and your property.  But it's also important to protect against the financial consequences of a disaster.  A disaster can damage or destroy your property, force you to temporarily live somewhere else, cut the flow of wages and other income, or ruin valuable financial records.

Listed here are some simple, common sense steps you can take now.  Before you take any actions, however, you should be sure you have involved your family or friends whenever possible in decision making and planning.  You also may want the assistance of an advisor, such as a Certified Financial Planner, insurance agent, or similar financial professional.  The important thing is to begin planning now, before the unexpected becomes a harsh reality.




Also This Month...

9 Buyer Traps and How to Avoid Them
No matter which way you look at it buying a home is a major investment. But for many homebuyers, it can be an even more expensive process than it needs to be because many fall prey to at least a few of the many common and costly mistakes which trap them.



 
 

10 Questions To Ask When Choosing A Financial Planner
You may be considering help from a financial planner for a number of reasons, whether it's deciding to buy a new home, planning for retirement or your children's education, or simply not having the time or expertise to get your finances in order. Whatever your needs, working with a financial planner can be a helpful step in securing your financial future.



Quick Links
Before Disaster Strikes
9 Buyer Traps and How to Avoid Them
10 Questions To Ask When Choosing A Financial Planner
 

 

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Before Disaster Strikes

Fires . . . hurricanes. . . floods . . . earthquakes . . . tornadoes.... Natural or other disasters can strike suddenly, at any time, and anywhere. Your first priority, of course, would be to protect your family and your property.  But it's also important to protect against the financial consequences of a disaster.  A disaster can damage or destroy your property, force you to temporarily live somewhere else, cut the flow of wages and other income, or ruin valuable financial records.

Listed here are some simple, common sense steps you can take now.  Before you take any actions, however, you should be sure you have involved your family or friends whenever possible in decision making and planning.  You also may want the assistance of an advisor, such as a Certified Financial Planner, insurance agent, or similar financial professional.

The important thing is to begin planning now, before the unexpected becomes a harsh reality.

Protect your property

One of the first things to do is find out what disasters could strike where you live----fire, flood, earthquake, hurricane, or tornado, for example.  The following steps can help you avoid or reduce substantially the potential physical destruction to your property if you were to be hit with a disaster.  These steps can reduce your insurance costs, too.  For example, you could:

  • Install smoke detectors to warn of an apartment or home fire.
  • Elevate utilities to upper floor or attic.
  • Clear surrounding bush to protect your home against wildfires.
  • Anchor your house to the foundation, and anchor the roof to the main frame.
  • Secure objects that could fall and cause damage in an earthquake, such as a bookcase or hot water heater.
  • Install hurricane shutters on windows, and prepare plywood covers for glass doors.
  • Cover windows, turn off utilities, or move possessions to a safer location if you have adequate warning of something like a hurricane or flood.
  • If your home is in a high risk flood area, on a fault line, or threatened by coastal erosion, consider relocating.
  • Have your house inspected by a building inspector or architect to find out what structural improvements could prevent or reduce major damage from disasters.
  • If you haven't yet bought a house, you might take construction type into account. Frame houses tend to withstand some disasters, while brick homes hold up better in others.

If you're not sure where to start, you could contact your local fire department.  Fire departments will often make house calls to evaluate your property and make suggestions on how to improve safety.  In earthquake-prone areas, the local utility can be called upon to come to your location and show you how and where to shut off gas lines or how to elevate utilities to get them above a possible flood.

Conduct a household inventory

Inventory your household possessions by making a list of everything you own. If disaster strikes, this list could:

  • Help you prove the value of what you owned if those possessions are damaged or destroyed.
  • Make it more likely you'll receive a fast, fair payment from your insurance company for your losses.
  • Provide documentation for tax deductions you claim for your losses.

To conduct a thorough home inventory:

  • Record the location of the originals of all important financial and family documents, such as birth and marriage certificates, wills, deeds, tax returns, insurance policies, and stock and bond certificates.  Keep the originals in a safe place and store copies elsewhere.  You'll need accessible records for tax and insurance purposes.
  • Make a visual or written record of your possessions.  If you don't own a camera or videotaping equipment (and can't borrow or rent it), buy an inventory booklet and fill it out, or make a simple list on notebook paper.  Ask your insurance agent if he or she can provide one.
  • Go from room to room.  Describe each item, when you bought it, and how much it cost.  If you're photographing or videotaping, have someone open closet doors and hold up items.
  • Record model and serial numbers.
  • Include less expensive items, such as bath towels and clothes.  Their costs add up if you have to replace them.
  • Be sure you include items in your attic, basement, and garage.
  • Note the quality of building materials, particularly for such furnishings as oak doors or expensive plumbing fixtures.
  • Photograph the exterior of your home.  Include the landscaping---that big tree in the front yard may not be insurable, but it does increase the value of your property for tax purposes.  Make special note of any improvements, such as a patio, fencing, or outbuildings.
  • Photograph cars, boats, and recreational vehicles.
  • Make copies of receipts and cancelled checks for more valuable items.
  • Get professional appraisals of jewelry, collectibles, artwork, or other items that are difficult to value.  Update the appraisals every two to three years.
  • Update your inventory list annually.

Sound like too much work? Computer software programs designed for such purposes can make the task much easier.  These programs are readily available in local computer stores.

Most important, once you have completed your inventory, leave a copy with relatives or friends, or in a safe deposit box.  Don't leave your only copy at home, where it might be destroyed.

Buy insurance

Even with adequate time to prepare for a disaster, you still may suffer significant, unavoidable damage to your property. That's when insurance for renters or homeowners can be a big help.  Yet, many people affected by recent disasters have been underinsured-or worse-not insured at all.  Homeowners insurance doesn't cover floods and some other major disasters.  Make sure you buy the insurance you need to protect against the perils you face.

If you own a home:

  • Buy, at a minimum, full replacement or replacement cost coverage.  This means the structure can be replaced up to the limits specified in the policy.
  • Investigate buying a guaranteed replacement cost policy.  When and where available, these policies can pay to rebuild your house, including improvements, at today's prices, regardless of the limits of the policy.
  • Have your home periodically reappraised to be sure the policy reflects the real replacement cost.
  • Update the policy to include any home improvements, such as basement refinishing.  Annual automatic increases may not be enough to cover these.
  • Buy a policy that covers the replacement cost of your possessions.  Standard coverage only pays for the actual cash value (replacement cost discounted for age or use).
  • Be very clear about what the policy will and will not cover, and how the deductibles work (the part you pay before the policy pays).
  • Check government operated insurance pools if you find it difficult to obtain private coverage because of a recent disaster.  Premiums often run higher than market rates, but this is better than no coverage.
  • Use your home inventory list to check that your policy's coverage matches the value of your possessions.

If you rent:

  • If you are renting, consider locating outside a high risk flood area or away from a fault line.
  • Buy renter's insurance, which pays for damaged, destroyed, or stolen personal property.  Your landlord's insurance won't cover damage to or loss of your possessions.  Also, consider special coverage like flood insurance for your belongings.
  • Be clear about what a policy will cover.  Some policies cover more than others.  For example, will the policy pay for living expenses if you have to live somewhere else temporarily, or for damage from sewer backup?
  • Comparison shop for the best coverage at the best price.  Other than government flood insurance, policies vary from company to company.  Policies in most areas are very affordable.  Start with the company that insures your car.  Discounts are often available if you carry more than one policy with a company.

If you are moving:

  • Select a home in an area not on a fault line, in a flood area, or at risk from coastal erosion.
Consider special coverage

Insurance for renters and homeowners won't cover certain types of losses.  Ask your insurance agent or financial planner about special or additional coverage for the following:

  • Floods- Homeowner policies don't cover damage from flooding.  Call your current insurance company or agent first about getting coverage.
  • Earthquakes- Premiums typically are high, and deductibles may range from 5% to 20% of the policy's coverage.  Still, such coverage may be better than no coverage. (Earthquake coverage for the contents of a home usually is separate.)
  • Home offices- Some policies automatically extend coverage to computer equipment and a few other items of business property. Talk to your agent to determine what items would or would not be covered.  If necessary, you could buy additional business coverage at a modest cost.  Or it may be better to buy a separate small business policy, which would also provide more coverage.
  • Building codes- Ask your agent about additional insurance to cover the costs of meeting new, stricter building codes.  Frequently, after a disaster people get shocked with rebuilding costs that are much higher because building codes have changed.  All current codes must be met when rebuilding.  Consider additional structural improvements that provide more protection.
  • Other potential problems- This would include problems such as underground mines (located beneath your property) sewer backup, or mudslides.
  • Big-ticket items- Purchase additional coverage for specific jewelry, collectibles, artwork, furs, or other big-ticket items.
Where to keep cash

After a disaster, you may need cash for the first few days, or even several weeks.  Income may stop if you can't work.  To help stay solvent, consider the following:

  • Keep a small amount of cash or traveler's checks at home in a place where you can get at it quickly in case of a sudden evacuation.  A disaster can shut down local ATMs and banks.  The money should be in small denominations for easier use.
  • Set aside money in an emergency fund.  That can be tough to do on a tight budget, but it can be well worth the effort.  The fund can be very helpful, not only in a disaster, but in other financial crises, such as during unemployment or when unexpected expenses like legal fees arise.
  • Keep your emergency funds in a safe, easily accessible account, such as a passbook savings account or a money market account.
  • Keep some funds outside the local area, since the disaster that affects you could also affect your local financial institutions.  A mutual fund money market account in another city is one option to consider.
  • Keep your credit cards paid off. You may have to draw on them to tide you over.
Use an evacuation box

Buy a lockable, durable "evacuation box" to grab in the event of an emergency.  Even a cardboard box would do.  Put important papers into the box in sealed, waterproof plastic bags.  Store the box in your home where you can get to it easily.  Keep this box with you at all times, don't leave it in your unattended car.

The box should be large enough to carry:

  • A small amount of traveler's checks or cash and a few rolls of quarters.
  • Negatives for irreplaceable personal photographs, protected in plastic sleeves.
  • A list of emergency contacts that includes doctors, financial advisors, clergy, reputable repair contractors, and family members who live outside your area.
  • Copies of important prescriptions for medicines and eyeglasses, and copies of children's immunization records.
  • Health, dental, or prescription insurance cards or information.
  • Copies of your auto, flood, renter's, or homeowners insurance policies (or at least policy numbers) and a list of insurance company telephone numbers.
  • Copies of other important financial and family records (or at least a list of their locations).  These would include deeds, titles, wills, a letter of instructions, birth and marriage certificates, passports, relevant employee benefits documents, the first two pages of the previous year's income tax returns, etc.  Originals, other than wills, should be kept in a safe deposit box or at another location.
  • Backups of computerized financial records.
  • A list of bank account, loan, credit card, driver's license, investment account (brokerage and mutual funds), and Social Security numbers.
  • Safe deposit box key.
Rent a safe deposit box

Safe deposit boxes are invaluable for protecting originals of important papers. If you don't have a safe deposit box, keep copies in your evacuation box or with family or friends.  Original documents to store in a safe deposit box include:

  • Deeds, titles, and other ownership records for your home, autos, RVs, boats, etc.
  • Birth certificates and naturalization papers.
  • Marriage license/divorce papers and child custody papers.
  • Passports and military/veteran papers.
  • Appraisals of expensive jewelry and heirlooms.
  • Certificates for stocks, bonds, and other investments.
  • Trust agreements.
  • Living wills, powers of attorney, and health care powers of attorney.
  • Insurance policies (copies are sufficient).
  • Home improvement records.
  • Household inventory documentation.

Generally, originals of wills should not be kept in a safe deposit box since the box may be sealed temporarily after death.  Keep originals of wills with your local registrar of wills or your attorney.

Deciding on a safe and convenient location is an issue.  You may want to consider renting a safe deposit box in a bank far enough away from your home so it is not likely to be affected by the same disaster that strikes your home (for instance, bank vaults have been flooded). Keep the key to the safe deposit box in your evacuation box.

Home safes and fire boxes

Safes and fire boxes can be convenient places to store important papers.  However, some disasters, such as hurricanes, floods, or tornadoes, could destroy your home.  Usually, it's better to store original papers in a safe deposit box or at another location well away from your home.

If you have time...

Some disasters, such as tornadoes or earthquakes, strike with little or no warning.  Others, such as floods or hurricanes, may allow some time to prepare.  If there is enough time, you could take the following actions:

  • Decide what household items you would put on a very short priority list.  For example, imagine you could take only one suitcase or pack a single carload.  What would you take?  Involve the whole family in this discussion.  Take jewelry and other small valuables.
  • Take irreplaceable heirlooms, mementos, and photos.
  • Don't bother with replaceable items such as televisions, furniture, computers, and clothing (except what you need to wear for a few days).
  • Be sure, however, to take a battery-powered radio and spare batteries so you can stay informed.
  • Take important papers and computer disks if you have a home business.

Whew! These are a lot of ideas.  You may not be able to do everything that is suggested---that's OK.  Do what you can.  Taking even limited action now will go a long way toward preparing you financially before a disaster strikes.

 

 

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9 Buyer Traps and How to Avoid Them


" A systemized approach to the homebuying process can help you steer clear of these common traps, allowing you to not only cut costs, but also secure the home that's best for you."


No matter which way you look at it buying a home is a major investment. But for many homebuyers, it can be an even more expensive process than it needs to be because many fall prey to at least a few of the many common and costly mistakes which trap them into either:

  • paying too much for the home they want, or
  • losing their dream home to another buyer or,
  • (worse) buying the wrong home for their needs.

A systemized approach to the homebuying process can help you steer clear of these common traps, allowing you to not only cut costs, but also secure the home that's best for you.

9 Buyer Traps

This important report discusses the 9 most common and costly of these homebuyer traps, how to identify them, and what you can do to avoid them:

1. Bidding Blind

What price should you offer when you bid on a home? Is the seller's asking price too high, or does it represent a great deal. If you fail to research the market in order to understand what comparable homes are selling for, making your offer would be like bidding blind. Without this knowledge of market value, you could easily bid too much, or fail to make a competitive offer at all on an excellent value.

2. Buying the Wrong Home

What are you looking for in a home? A simple enough question, but the answer can be quite complex. More than one buyer has been swept up in the emotion and excitement of the buying process only to find themselves the owner of a home that is either too big or too small. Maybe they're stuck with a longer than desired commute to work, or a dozen more fix-ups than they really want to deal with now that the excitement has died down. Take the time upfront to clearly define your wants and needs. Put it in writing and then use it as a yard stick with which to measure every home you look at.

3. Unclear Title

Make sure very early on in the negotiation that you will own your new home free and clear by having a title search completed. The last thing you want to discover when you’re in the back stretch of a transaction is that there are encumbrances on the property such as tax liens, undisclosed owners, easements, leases or the like.

4. Inaccurate Survey

As part of your offer to purchase, make sure you request an updated property survey which clearly marks your boundaries. If the survey is not current, you may find that there are structural changes that are not shown (e.g. additions to the house, a new swimming pool, a neighbor's new fence which is extending a boundary line, etc.). Be very clear on these issues.

5. Undisclosed Fix-ups

Don't expect every seller to own up to every physical detail that will need to be attended to. Both you and the seller are out to maximize your investment. Ensure that you conduct a thorough inspection of the home early in the process. Consider hiring an independent inspector to objectively view the home inside and out, and make the final contract contingent upon this inspector's report. This inspector should be able to give you a report of any item that needs to be fixed with associated, approximate cost.

6. Not Getting Mortgage Pre-approval

Pre-approval is fast, easy and free. When you have a pre-approved mortgage, you can shop for your home with a greater sense of freedom and security, knowing that the money will be there when you find the home of your dreams.

7. Contract Misses

If a seller fails to comply to the letter of the contract by neglecting to attend to some repair issues, or changing the spirit of the agreement in some way, this could delay the final closing and settlement. Agree ahead of time on a dollar amount for an escrow fund to cover items that the seller fails to follow through on. Prepare a list of agreed issues, walk through them, and check them off one by one.

8. Hidden Costs

Make sure you identify and uncover all costs - large and small -far enough ahead of time. When a transaction closes, you will sometimes find fees for this or that sneaking through after the "sub"-total - fees such as loan disbursement charges, underwriting fees etc. Understand these in advance by having your lender project total charges for you in writing.

9. Rushing the Closing

Take your time during this critical part of the process, and insist on seeing all paperwork the day before you sign. Make sure this documentation perfectly reflects your understanding of the transaction, and that nothing has been added or subtracted. Is the interest rate right? Is everything covered? If you rush this process on the day of closing, you may run into a last minute snag that you can't fix without compromising the terms of the deal, the financing, or even the sale itself.

 


 

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10 Questions To Ask When Choosing A Financial Planner

These questions will help you interview and evaluate several financial planners to find the one that's right for you. You will want to select a competent, qualified professional with whom you feel comfortable, one whose business style suits your financial planning needs. An interview checklist has been included for your convenience.

1. What experience do you have?

Find out how long the planner has been in practice and the number and types of companies with which she has been associated. Ask the planner to briefly describe her work experience and how it relates to her current practice. Choose a financial planner who has a minimum of three years experience counseling individuals on their financial needs.

2. What are your qualifications?

The term "financial planner" is used by many financial professionals. Ask the planner what qualifies him to offer financial planning advice and whether he holds a financial planning designation such as the Certified Financial Planner mark. Look for a planner who has proven experience in financial planning topics such as insurance, tax planning, investments, estate planning or retirement planning. Determine what steps the planner takes to stay current with changes and developments in the financial planning field. If the planner holds a financial planning designation, check on his background with the CFP Board or other relevant professional organizations.

3. What services do you offer?

The services a financial planner offers depend on a number of factors including credentials, licenses and areas of expertise. Financial planners cannot sell insurance or securities products such as mutual funds or stocks without the proper licenses, or give investment advice unless registered with state or Federal authorities. Some planners offer financial planning advice on a range of topics but do not sell financial products. Others may provide advice only in specific areas such as estate planning or on tax matters.

4. What is your approach to financial planning?

Ask the financial planner about the type of clients and financial situations she typically likes to work with. Some planners prefer to develop one plan by bringing together all of your financial goals. Others provide advice on specific areas, as needed. Make sure the planner's viewpoint on investing is not too cautious or overly aggressive for you. Some planners require you to have a certain net worth before offering services. Find out if the planner will carry out the financial recommendations developed for you or refer you to others who will do so.

5. Will you be the only person working with me?

The financial planner may work with you himself or have others in the office assist him. You may want to meet everyone who will be working with you. If the planner works with professionals outside his own practice (such as attorneys, insurance agents or tax specialists) to develop or carry out financial planning recommendations, get a list of their names to check on their backgrounds.

6. How will I pay for your services?

As part of your financial planning agreement, the financial planner should clearly tell you in writing how she will be paid for the services to be provided. Planners can be paid in several ways:

  • a salary paid by the company for which the planner works. The planner's employer receives payment from you or others, either in fees or commissions, in order to pay the planner's salary.
  • fees based on an hourly rate, a flat rate, or on a percentage of your assets and/or income.
  • commissions paid by a third party from the products sold to you to carry out the financial planning recommendations. Commissions are usually a percentage of the amount you invest in a product.
  • a combination of fees and commissions whereby fees are charged for the amount of work done to develop financial planning recommendations and commissions are received from any products sold. In addition, some planners may offset some portion of the fees you pay if they receive commissions for carrying out their recommendations.
7. How much do you typically charge?

While the amount you pay the planner will depend on your particular needs, the financial planner should be able to provide you with an estimate of possible costs based on the work to be performed. Such costs would include the planner's hourly rates or flat fees or the percentage he would receive as commission on products you may purchase as part of the financial planning recommendations.

8. Could anyone besides me benefit from your recommendations?

Some business relationships or partnerships that a planner has could affect her professional judgment while working with you, inhibiting the planner from acting in your best interest. Ask the planner to provide you with a description of her conflicts of interest in writing. For example, financial planners who sell insurance policies, securities or mutual funds have a business relationship with the companies that provide these financial products. The planner may also have relationships or partnerships that should be disclosed to you, such as business she receives for referring you to an insurance agent, accountant or attorney for implementation of planning suggestions.

9. Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career?

Several government and professional regulatory organizations, keep records on the disciplinary history of financial planners and advisers. Ask what organizations the planner is regulated by, and contact these groups to conduct a background check.

10. Can I have it in writing?

Ask the planner to provide you with a written agreement that details the services that will be provided. Keep this document in your files for future reference.

 

 

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