Nolo’s Real Estate Tips for Home Buyers

It's that time of year again -- when homeowners' insurance is up for renewal. And for Californians, that means it's also time to reconsider whether to pay around a thousand bucks in order to buy earthquake insurance. (It's a question for people in many other states, too, but for reasons discussed below, a more troubling issue here in California.)

Given that a major earthquake is expected anytime in the Golden State, and that an earthquake is capable of rattling a home into rubble within a few short minutes, you'd think buying insurance would be a no-brainer -- especially for me, whose level of risk tolerance extends no further than penny slot machines.

But I've noticed a curious trend. People I talk to within the real estate and construction industries -- the very industries I thought would insist on such coverage -- often tell me they haven't bought it.  In fact, fewer than 15% of Californians buy quake coverage. What's going on?

There are, in fact, two rational arguments against buying such coverage in California:

• The deductibles are very high, usually 10% to 15% of the insured value of your home.  So if your home is insured for up to $300,000, you could be on the hook for $45,000. In a medium sized earthquake, you might sustain that much damage and have to pay it all yourself.
  
• The California Earthquake Authority (CEA), which is the only source for such insurance, is not government-backed. In a major earthquake, it might just run out of money. So an earthquake that's big enough to get a homeowner past the deductible will probably have done a lot of damage to surrounding homes , and we'll all be running after the same dollars. (Well, maybe not all, given how few people are insured these days. But plenty of people nonetheless.)
  

Coincidentally, I've been getting bids for some foundation work recently. It's not cheap, but making sure that one's home has a solid foundation is an eminently practical way of dealing with earthquake risk. One of the contractors told me, in essence, "I replaced my own home's foundation so that it's as solid as they come, and now I don't buy earthquake insurance. I figure any quake that's big enough to damage my home will have completely destroyed all the homes around me, in which case there really won't be any insurance money left."

So there we have it. Me, I haven't decided about the insurance yet -- but I will be getting that foundation dealt with.

Don't miss this transcript of a radio interview with Bob Diamond, real estate attorney and developer, about the realities of loan modifications -- namely, how to make a request that the overburdened lender will actually pay attention to, and why it's truly in both the borrower's and lender's best interests to work out a modification rather than descend into foreclosure.

Be prepared for some bursts of rage, however, as you read about lenders' slippery tactics for avoiding dealing with consumers -- like Bank of America's continuing to have a working fax line for submissions, while not telling people that it essentially tosses the faxes without looking at them or recording them in its system. Good grief.

I confess, I'm lucky -- my husband does all the laundry. He's even careful (more careful than I would ever be) to read the labels and not mix gentles with regulars, or lights with darks.

So I'm about to recommend doing something that I don't actually do myself -- that is, take every opportunity to hang the laundry outdoors. But there are great reasons to do so, and said husband actually seems to enjoy the ritual of hanging laundry. (Plus, it makes him an avid weather-watcher, which comes in very handy for other plans.)

First of all, hanging the laundry saves energy and is good for the environment. At Project Laundry List, you can download an Excel spreadsheet that lets you calculate exactly how much you'll save.

Second, as the beneficiary, I can attest to how nice it is to have clean clothes that have been sun-dried (which has great antibacterial properties) as opposed to dryer-bashed (which wears clothes out faster).

Third, there's nothing wrong with the sight of hanging laundry -- in fact, it's the subject of many fine photographers' work. But that hasn't stopped misguided efforts by various homeowners' associations to ban the practice within their developments. Isn't it time to set aside such aesthetic judgments about a clean, energy-efficient practice, and use the easiest form of solar power around?

With the last rays of Indian Summer sun beaming down on us, now's the time to begin. Or, for those of us in California and other warm climes, to see how little we can use our dryer throughout the winter.

Maybe because the economy is down, burglaries are up in my neighborhood. We've been broken into before, even with a home security system. So now, every time I leave the house, I look around and wonder, "What would they take first?"

But if there's one thing I know, it's that anyone who breaks into my house will have a long, hard search for the jewelry (such as it is, mostly costume). I've inherited my mother's habit of hiding things in weird places, all over the house. Amidst home supplies, within empty boxes that look like they should hold something else, and in other places I'm too paranoid to mention in print! They're so well hidden even I can't always find them. Recently a necklace turned up after a year in a little plastic box that once held . . . well, I don't even remember anymore.

Recently I saw some pretty jewelry boxes on sale, and thought, "Why don't I have one of those?" But then I talked to a friend whose house had been burglarized, and she basically lost all of her jewelry because it was so conveniently located in her jewelry box. I'm sticking with my weird hiding places. And hey, when I find something that was hidden from me for long enough, it's almost like having something new to wear!

Having a hard time keeping up with your mortgage? If so, you're like many other Americans, for the mortgage is a first priority -- and primary source of worry.

But don't let that lead you to forget that homeowners' association dues are almost equally important. If left unpaid, the association may have the right to foreclose on you -- check your purchase agreement for details.

Worse yet, it may not be your fellow homeowners who make the decision. Homeowners' associations commonly turn the difficult job of dues collecting over to management companies.

For more information, see the article, "Neighbors are forcing neighbors into foreclosure," by Paul J. Weber, Associated Press.

If you're nearing retirement -- or just like to plan ahead -- what you'll do with the house you own is an important topic for discussion with your spouse or partner.

Yes, that sounds obvious. But an astonishing number of couples haven't had that basic conversation, as pointed out by USA TODAY's Sandra Block, in her column entitled "80% of couples disagree when it comes to retirement planning."

Among the statistics she points to, provided by Fidelity Investments: 60% of couples disagree about when to retire, 44% disagree about whether to work in retirement, 42% disagree about their retirement lifestyle, and 44% disagree about whether they'll need to sell real estate to fund their retirement.

This isn't a conversation that should wait until the last minute. For example, perhaps you're thinking about a bathroom remodel.  If you know you'll want to stay in this house during retirement, now might be a great time to take some measurements and make sure it's wheelchair accessible, just in case. But if you know you want to sell the house and move, your focus should be on what changes to the bathroom will add the most to your selling price.

What makes a house suitable for retirement, anyway? Look for features like:

• accessibility to public transport and shops, in case the time comes when you shouldn't really be driving
• minimal challenges to a person with limited mobility -- single-level homes with few stairways are best, and
  
• easy-to-grip handles and knobs, plus safety railings (these probably aren't there now, but make sure they won't be a problem to add later).

For more on evaluating your house's retirement potential, see Buying a Second Home: Income, Getaway, or Retirement, by Craig Venezia.

It's no secret that now is not the best time in recent history to sell a house. Prices are down in most areas of the U.S., buyers are taking their time and asking for lots of concessions, and the economy is keeping everyone cautious.

But life moves on, and many people can't wait for a turnaround to sell their home -- particularly those moving to a place where they can find work, moving to a retirement home, or needing a bigger house for a growing family.

That's why we wrote our most recent Nolo book, Selling Your House in a Tough Market. The book provides advice on key aspects of the process, like getting to know the local market (some are better than others for sellers), setting the right price (so the house doesn't stagnate on the market), staging it to look its best, and much more. And you can hear free tips from the authors, Alayna Schroeder and me, Ilona Bray, by listening to a podcast interview (click here). 

Moving to a new house is a thrill, and will probably offer lots of benefits to your children if you have any: separate bedrooms, a bigger play area, maybe even the possibility of their first cat or dog.

Yet despite all that, your children  may not share your excitement at moving. As child and family therapist Debbie Essex told us when we were writing our book Nolo's Essential Guide to Buying Your First Home, "One of the reasons moving is tough on children is that they've usually had very little input into the process -- they just feel like their lives are being disrupted."

One way of helping kids deal with those feelings is to read them (or gently suggest they read) books about other children who've gone through the same thing. In fact, I'm told by a Berkeley librarian that such books get a lot of requests. We mentioned a few good books in our Nolo guide, but more are out there, even a few recently published goodies. Here's a list of some I've come across:

Plum Fantastic, by Whoopi Goldberg and Deborah Underwood (Hyperion, 2008): Alexandra Petrakova Johnson moves from a small southern town to New York City, where her mother enrolls her in ballet lessons despite her wish to become a speed skater. She must learn to make new friends, conquer stage fright, and more. 

Aldo Applesauce, by Johanna Hurwitz (Puffin, 1989): Aldo, a fourth-grader and vegetarian from New York, adjusts to his family's move to a small town.

Anastasia Again, by Lois Lowry (Yearling, 1982): Fans of Anastasia Krupnik will enjoy watching her deal with her parents' move to the suburbs.

Mr. Rogers' Moving, by Fred Rogers (GP Putnam): I'm from the generation that watched Mr. Rogers so much that I can still sing "It's a Beautiful Day in the Neighborhood", so I have to trust this nonfiction, read-along guide for toddlers!

Alexander, Who's Not (Do You Hear Me? I Mean It!) Going to Move, by Judith Viorst (Atheneum, 1998): The title says it all, at least until Alexander has said goodbye to all his favorite things and come around to the idea of moving.

The recent economic stimulus bill lets first-time home buyers take a substantial tax credit -- either on their 2008 or 2009 taxes! This can work even if you haven't bought your house yet. You'd need to either file for an extension now or file an amended return later this year, after the purchase.

The exact amount of the credit is either $8,000 or 10% of the home's value, whichever is less.

For an excellent set of instructions on how to take the credit in 2008, see USA TODAY finance columnist Sandra Block's article, "Claiming this year's first-time home buyer's tax credit is easy," in the Tuesday, March 31st edition of USA TODAY. And for other details, see the CNN article, "Final score: $8,000 for homebuyers."

Own a co-op? Then you probably won't be happy to know (or remember) that residential buildings are a major offender when it comes to releases of carbon dioxide emissions. But as you also know too well, doing something about it will require enthusiasm, or at least buy-in, from other owners. For inspiration and advice, check out Mireya Navarro's article, "It's Not Easy Turning Co-Op Boards Green," in the March 26, 2009 issue of the New York Times.

One of the most interesting factoids was that you don't need to go all out with solar panels to have an effect on the bottom line -- the greatest bang for the buck comes from simple conservation measures like insulating pipes and weather-stripping doors.

Another interesting suggestion comes up in the article "Start Greening Your Building," from The Cooperator: The Co-Op and Condo Monthly: installing a device that measures every owner's individual energy usage -- that can certainly wake up some people who weren't too concerned about energy costs when they were spread among all owners.

And for more information for New York City residents, check out the website of Green Home NYC, a volunteer-run organization whose mission is to facilitate the adoption of sustainable building methods and materials by owners of small residential and commercial buildings in New York City.