The mortgage crisis has set off an incredible chain of events. Lenders have tightened  requirements, giving even the most creditworthy borrowers a hard time when it comes to qualifying for a new mortgage or refinancing an existing one.  In this Climate, a sensible person could talk themselves out of buying, but history proves that over the long-term, home ownership is a smart way to invest your money. Many people who are struggling to get mortgages are turning to lease-options, where renters  lease the property and have the option to buy the home.  Typically, in return for the landlord/seller extending the offer to buy the property after a period of time (usually one to three years) at a predetermined price, the tenant/buyer has to pay an upfront option fee.  That fee is generally non-refundable.  A portion of the monthly rent may be applied toward the down payment to purchase the home, buth this can only be for payments in excess of fair market.                                         

 Advantages for the buyer/tenant include: 

• You can see if homeownership is right for you by testing it out.
• In an appreciating market, you may get a good deal if the home goes up in value and you have already locked in a price. (although the reverse is true if the value goes down.)
• Can help to rebuild credit

For the seller/landlord:

• Cash flow from the tenant and the opportunity to sell your property later.
•  If the tenant/buyer doesn’t buy your property, you keep the upfront fee.
• You may have a larger pool to market your home to because you are marketing to traditional buyers and also renters and investors.
• You will likely get higher-quality tenants who take better care of the home since the tenants may want to buy it in the future.
• Since you own the home, you retain tax-shelter benefits while you have tenants in the home.

This Week’s Real Estate Insight:  
Understanding the lease-option is very important. There are various differences in the way the contract can be drafted, so it is critical to hire experts  to make sure you understand the terms and are protected, to ensure that you ultimately complete a successful transaction.

 

 Listen to this week's show here: [47:17m]: Play Now | Play in Popup | Download

After the devastation of Katrina, many homeowners found out that their homeowners insurance did not adequately cover the damages they sustained.  This week, Rich and Steve spoke with Andrew Lefebvre from Nationwide Lefebvre Insurance Agency, to discuss some of the finer points of the homeowner’s policy.  While most people know that if they own a home they need to insure it, they might not know exactly what the  policy covers, or more importantly, what it does not cover. Don’t get caught underinsured in case of a hurricane or fire. It is a good idea to review your policy  once a year to make sure you are protecting your investment

Here are 5 ways to help save money and headaches with your Homeowner’s policy:

•  Review your policies annually: A walk-through of your coverage needs with your agent may identify other coverages that you need, as well as ways to save on premiums such as bundling auto and home insurance coverage together with one provider or requesting higher deductibles to help contain your costs.
•  Identify risks you face that are not covered by your homeowners policy: Disasters such as floods and earthquakes need a separate policy or riders to protect your home if tragedy strikes.
•  Understand how much coverage you have: Many homeowners believe their policy will replace their damaged or destroyed property regardless of the amount of damage incurred. Remember, it is generally not your home’s market value that is covered, but rather its replacement cost. Home additions and major kitchen or bath remodeling projects can add significant value to your home, which may not be covered by your current policy. It is important to that your coverage is sufficient, based on your home’s replacement cost.
•  Do your homework: Get quotes from different carriers. Since rates can vary, make sure you compare coverage on an apples-to-apples basis so you can spot when a lower price really just represents less coverage. Consider higher deductibles to help reduce your premiums or ask if discounts are available for installed safety and security devices such as smoke detectors and alarms.
•  Ask your friends and neighbors for references: and  research the financial strength of carriers through independent third-party sources such as state insurance departments, A.M. Best, Standard & Poor’s, and customer satisfaction ratings at the J.D. Power

This Week’s Real Estate Insight:

Your home is  more than likely your most valuable asset, make sure it is properly protected. While insurance agents will help determine the kind of coverage you can buy, it is ultimately your responsibility to know what the policy covers.

 

 Listen to this week's show here: [46:07m]: Play Now | Play in Popup | Download