The Sale Leaseback Option

A leaseback option more commonly occurs in commercial real estate transactions than in residential real estate negotiations, however, a buyer of residential rental property will occasionally come across a situation of this nature.

In a leaseback arrangement, a seller may have the need to market the property for sale for some ready cash to clear debts or to free up capital for investment purposes or other reasons, but knowing of the need to rent after selling his/her property, may feel more comfortable staying in familiar surroundings, and would prefer to remain on the premises as a tenant.

If the rental arrangement seems reasonable to the former property owner, the new owner is satisfied that the rents received from the former owner will satisfy the landlord’s expected profit potential for the property, and the length of lease is agreeable to both then a deal can be made.

Both parties can benefit from this arrangement, since the former owner will not have to deal with the expense and hassle of moving, and the new owner will save the time and expense of interviewing and screening prospective tenants.

Expense meaning the time it takes to find a tenant during which no revenues are being collected, instead of having a reliable source of income from a tenant that is more likely to treat the former property with respect.

The benefits to both buyer and seller could be in the form of an agreement that would allow the buyer to purchase the property at a very attractive below market price, and benefit the former owner by agreeing to a long-term leasing arrangement at a premium rate.

Additionally, since the buyer would derive depreciation tax benefits from the rental property, it is important for the buyer to conference with a real estate savvy CPA in order to assure that the timing and structure of the sale are designed to derive maximum taxable credits.

There can be legal complications detrimental to buyer and seller if it is determined that the seller has disposed of the property to hide assets, so the buyer should approach this arrangement with caution and should rely on the counsel of a skilled real estate attorney before making a commitment.

Some leaseback options may include terms which would allow the former owner to buy back the property after a previously agreed-upon time has elapsed.

Attorneys usually advise against the buy back arrangement, since there can be the possibility the  former owner may  construe the original transaction as a loan, and may take court action, which can become a serious headache for the buyer, and may result in unwanted consequences.

In some cases a lease back option could be beneficial to owners of distressed properties, who want to stay where they are but have the need to get out from under oppressive mortgage payments and avoid foreclosure.

If you have any questions about rental properties or leasebacks in Las Vegas, feel free to give us a call at 702.376.0088.

“As is” properties are properties that are not warranted to be free of defects. Of course, selling a Las Vegas property “as is” does not free the seller from the legal responsibility to the prospective buyer to freely and openly disclose all defects.

However, if the buyer has been informed of these defects and still chooses to knowingly purchase the property, than the seller can no longer be held responsible nor will be legally required to undertake any repairs.

However, if a home inspection uncovers defects not disclosed by the seller, either purposely or accidentally overlooked, the seller would then be held responsible for those repairs.

In considering a property in need of repairs, repairs in which the buyer knows he will have to foot the bill, a thorough home inspection prior to purchase is an absolute necessity.

For example, the seller may say that the roof “needs some work” but a home inspection may reveal that the roof needs to be replaced. If the cost of roof replacement amounts to approximately $35,000, by how much would the seller be willing or able to lower the selling price?

“As is” properties are considered bargain properties because the seller would have to offer the residence at a considerably under market price in order to attract a buyer who would willingly undertake repairs to the property.

But, as in the case of a major repair, what would a “bargain price” to the buyer actually be? That is why “as is” property purchases should be undertaken with extreme caution.

If the “as is” property is Real Estate Owned, (an REO) and is being marketed by a government agency such as HUD or Freddie Mac, or by a nationally chartered bank, then full disclosure to the seller can be waived, as these entities are not required by law to advise the prospective buyer of any defects.

Unlike the purchase of a home in the conventional manner, these large REO sellers will not accept, and in fact will outright reject any submitted sales contract that contains a required, “subject to inspection” clause.

In other words, when buying an “as is” property from one of these large institutional entities, you are stuck with the deal, even if an after purchase inspection turns up major defects.

A prospective buyer of an “as is” property should not be so short sighted as to be blinded by a very low asking price, and willingly make the purchase without pausing to realize that the property definitely has repair problems.

A thorough home inspection could reveal major problems that would negate the low asking price and become a “money trap” for the buyer. If the house has structural or foundation problems, that would be an indication to the buyer to look elsewhere for his “bargain property.”

If you have any questions about investing in Las Vegas Real Estate, feel free to give us a call at 702-376-0088.

For the home buyer with somewhat limited financial assets and down payment affordability, but good credit, and of course the means to carry a monthly mortgage, which includes many first-time home buyers, the Federal Housing Authority (FHA) offers a very cost-effective method of financing a home.

For instance, the FHA currently allows some of your closing costs to be paid by the seller; up to 6 percent of the loan amount, but as of October 4th, 2010 the seller’s contribution to closing costs will be lowered to 3 percent. Of course, the buyer may have to pay a somewhat higher price for the property due to the seller’s contribution towards closing costs. FHA programs include the one-year ARM, the buy-down, in which the borrower can lower the interest rate through payment of points or interest at closing, and the fixed-rate loan.

The FHA down payment requirement is also lower than for most conventional loans, but there will be some changes regarding required mortgage insurance payments under FHA’s Mortgage Insurance Program (MIP) that will be affected by the new FHA regulations that will be in force beginning on October 4th.

Beginning with this change, upfront costs of the MIP factor will increase from the current .55 to .90. The premium, which is usually financed into the loan, will be reduced from the present 2.25 percent to 1 percent, which would allow the buyer to finance a smaller mortgage. Applying for an FHA loan prior to October 4th would save the buyer the cost of paying the MIP increase.

Under FHA financing regulations, the seller must pay certain closing costs, such as the underwriting fee, document preparation fee, courier and assignment fees. Contract wording will specifically designate buyer and seller payment responsibilities.

It is a common misconception that the federal government finances an FHA loan, when in fact, FHA loans are actually brokered to the secondary market as are conventional loans. Quicker appraisals mean that closings can be accomplished in thirty days or less since loan officers can use an FHA appraiser of their choice.

It’s important to point out that sellers are not as reluctant as they were in the past to accept buyers who were planning to finance through an FHA loan, since once stringent repair requirements have softened over the past few years.

Furthermore, depending on how the contract is written, the seller and buyer can share some of the responsibility for affecting certain repairs, and/or the seller could request that a dollar cap on the cost of repairs be written into the contract in order for the seller to accept a buyer’s FHA loan purchase proposal.

It is also important to remember that the FHA requires any and all additions, renovations, upgrades, etc. be up to code or brought up to code, and that any health and safety issues have been addressed, and the building is structurally sound.

Looking for information for an FHA loan in the Las Vegas market? Please feel free to give us a call at 702.376.7379 so we can answer any questions you may have.

When a person buys a home, they are making what is for most people, the largest financial commitment of their lives. Unless you are buying a home that you know is in need of repair, you will want to make absolutely sure that the property you are buying has no problems –obvious or underlying – that should be taken care of by the seller prior to closing.

However, a walk-through is not a substitute for a home inspection. Home inspections are done by licensed professionals who are trained to examine a property and either give the home a clean bill of health or make note of current or possibly potential problems that would require repair or replacement.

The walk-through is a cursory inspection by the buyer that can be performed a few days or a few hours prior to closing. The buyer should not underestimate the importance of a walk-through, and it is never a good idea to forego this step in the home-buying process.

Certainly, it would be in the buyer’s best interests to arrange a final walk-through as early as conveniently possible, so that in the event some problem is uncovered, the seller would have ample time to correct the problem without delaying the closing.

To avoid any complications, the buyer and seller should have agreed in writing that any problems found during the walk- through must be corrected prior to closing, and should additionally specify who will fix the problem and a deadline for completion of repair.

The walk-through could uncover a problem that had been overlooked by the home inspector, or find a problem that arose after a professional home inspection.

The walk-through can also uncover problems that home inspectors do not concern themselves with, such as windows that won’t stay opened or closed, toilets not flushing properly, etc.

A Walk-through is also important to assure the buyer that all the items that the seller has agreed will remain in the home are still there, such as appliances, window treatments, etc.

A walk-through should include checking the following:

• Check appliances for proper functioning
• Open all sink faucets and check under sinks for leaks
• Turn on bathtub faucet and showers
• Open and close windows
• Run garbage disposal
• Turn on heating and air conditioning
• Open and close all doors
• Check garage door functionality
• Turn all lights on and off
• Check outlets by plugging in a small lamp, such as a desk lamp
• Check for exhaust fan functionality
• Scan ceilings walls and floors for any signs of damage such as cracks, water stains, etc. that could have been overlooked, or water damage that might show up if the walk-through was done right after a heavy rain, for example

If problems are uncovered during the walk-through that are more than minor in nature, the buyer should postpone the closing until all issues have been satisfactorily resolved.

This is typically the number one question mortgage professionals are asked by new clients.

Of critical importance when considering mortgage financing: There is sometimes a difference between what a client ***can*** borrow and what they ***should*** borrow.

In other words, what makes for a comfortable long-term mortgage payment?

The Quick Answer:

If we’re simply considering the financial math, lenders will calculate your Debt-to-Income Ratio and generally allow for 28-31% of your gross income to be used for the new house payment with up to 43% of your gross income to be used for all consumer related debts combined.

Sample Mortgage Scenario:

Let’s use a gross monthly income of $3000 and a qualifying factor of 30% Debt-to-Income Ratio:

$3000 multiplied by .3 (30%) = $900 max monthly mortgage payment

This means that your mortgage payment (Principal, Interest, Taxes, Hazard Insurance) cannot exceed $900 a month.

“Ballparking” a Qualifying Loan Amount:

Simple step:  We use a safe average of $7 per month in payment for every $1000 in purchase price so…

Step 1)  $900 a month divided by $7 = $128.50

Step 2) $128.50 multiplied by 1000 = $128,500 loan amount.

Remember, these are average ratios and guidelines set by most lenders for common mortgage programs.

Keep in mind, while most consumer debts are listed on a credit report, there are some additional monthly liabilities that may contribute to the overall qualifying percentages as well.

Regardless of how your personal income and credit scenarios factor in, it is important to consider your overall budget when trying to determine how much of a mortgage you should qualify for.

Other items to consider in your monthly budget:

1. Confirm all debts are taken into account
2. Any private notes or family loans
3. Short-term expenses – medical, auto repairs, travel, emergencies
4. Plan on additional expenses for the home such as water, electric, maintenance, etc…
5. Keep a cushion for savings and financial planning

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Related Articles – Mortgage Approval Process:

• Basic Mortgage Terms
• Common Documents Required For A Mortgage Pre-Approval
• Top 8 Questions To Ask Your Lender During Application Process
• What’s The Difference Between An Investment Property, Second Home and Primary Residence?
• Seven Items Real Estate Agents Need To Know About Your Mortgage Approval

When buyer and seller have agreed upon a price to purchase a property, and the financing is in place, the deal is done, right? Not quite! Rarely would a buyer and seller agree to a contract without certain contingency clauses, and for good reason.

Contingency clauses offer protections for buyer and/or seller against situations or occurrences that would make the transfer of ownership problematic.

Contingency clauses included within the purchase agreement, for example, specify the conditions under which either buyer or seller could cancel the sale, with or without penalties, depending on the specific contingency terms.

Among the contingency clauses that can be included in a contract are:

• Home Inspection: The seller could be required to correct any problems found during the inspection prior to finalization of the sale.
• Termite Inspection: The contingency clause should specify who will pay for this service, or will the cost be split between buyer and seller?
• Roof Inspection: Although this inspection is typically handled by a home inspector, most inspections are cursory due to the inspector not wanting to walk on the roof. This inspection is best handled by a roofing contractor.
• Radon, Mold and Asbestos Inspections: Best handled by specialists.
• Early Occupancy: This contingency allows the buyer to occupy the property prior to escrow upon the seller’s prior approval of this contract clause.
• Preliminary Title Search:  This clause requires the seller to provide clean title to the property.
• Contingency to Sell Existing Home: Not all sellers will agree to this clause. If this clause is agreed to by the seller, the buyer will be given a certain number of days to finalize the sale of his residence.
• Appraisal Contingency: Buyer could cancel the contract or renegotiate terms of purchase in the event of a low appraisal.
• Some contingencies can be waived and others added during the negotiations between buyer and seller; it all depends on various circumstances that may or may not affect either or both parties to the contract.
• Dependent upon contract terms, either party could cancel the sale upon violation of any contingency.
• Violation of a contract contingency by the seller could allow the buyer to walk away from the sale without penalty, and require the seller to return the buyer’s earnest money deposit in full.
• Violation of a contingency clause by the buyer could allow the seller to cancel the sale and legally retain the buyer’s earnest money deposit.

Contract contingencies keep everyone honest. The buyer is assured that everything specified in the sales contract will be strictly adhered to by the seller or the buyer can legally walk away without penalty and receive a refund of deposit monies.

Some contingencies favor the seller, such as sale subject to buyer’s obtaining funding or selling a current residence within a limited time period.

Contingencies are an important addition to any property sales contract due to the fact that the sole purpose of these additions is to eliminate risk. How can anyone disagree with that?

Investors are interested in purchasing Real Estate Owned properties (REOs) because they know that the lending institutions who own these properties, banks, for example, or government agencies such as HUD or FHA  are anxious to clear their books and rid themselves of negative inventory.

As a result, many of these properties will be sold at attractive, below-market prices, especially when REO inventories are exceptionally high, as they are at this point in time.

However, if a deal is made in which the investor and the lender have agreed upon a sale price, there could –dependent upon the sale price as opposed to prevailing market conditions- be a problem with the appraisal.

An appraisal could come in low due to any number of reasons, including the possibility of the appraiser being inexperienced or unfamiliar with the area, the selling price being out of line with declining market values due to fallout as a result of an excessive number of distressed properties, etc.

In such cases the buyer can request a second-opinion appraisal, make up the difference in cash, walk away from the deal, ask the seller to lower the selling price, or possibly offer to make up the difference with a second mortgage as an example.

Dependent upon the lender and market conditions, an estimated cost of repair presented to the lender might be a negotiation bargaining point. Very often, there are repair issues with REO properties primarily due to the fact that the former owners would have little incentive in maintaining the home during a foreclosure proceeding.

During these uncertain times, the investor should be wary of being lured by an attractive considerably below market priced foreclosure offered for a property that is located in a depressed, or likely to become depressed neighborhood.

Because of current market conditions which are causing loan defaults in record numbers, depressed areas will likely take years to recover, and buying an REO property in such a neighborhood would seem unsuitable for investment purposes.

Although they are much less in number, and as a result, would be harder to find, there are some properties that may be loosely termed Individually owned REOs.

That  would refer to landlords, who have taken back lease-optioned properties or properties that were  lender financed and the deals have fallen through due to the tenant or buyer’s financial difficulties, and are now themselves in need to sell circumstances.

It’s best to remember that despite the hype, institutional and government lenders aren’t going to give their REO properties away, and most foreclosures will be priced at very near market value. Disclosure of defects isn’t mandatory, and it is often a “buyer beware” situation when it comes to purchasing an REO.

But even though REO asking prices may soften somewhat as new REO properties are released to the marketplace, smart home sellers in good standing with their lenders, with well-maintained property in good repair, a realistic selling price and a savvy agent, will prove to be a very competitive force that should easily attract buyers who are not willing to hassle with countless rules and regulations in order to pursue a “bargain” property and still possibly end up with a fixer-upper headache.

If you have any questions about investing in Las Vegas Real Estate, feel free to give us a call at 702-376-0088.

Las Vegas REOs are a less complex and often better way to purchase distressed properties than having to deal with a seller facing foreclosure, or at auction. There are some real bargains out there, and many Real Estate Owned properties can be found that are under-priced and marketed at attractive under comparable sales discounts.

No question, but that the really “hot” properties, in other words, true bargains, will receive multiple offers. In order to tempt the lender with the most attractive offer –while still maintaining a healthy profit margin- is to have your Realtor check the bank’s purchase price on the deed.

That is the figure that you need in order to compare figures with the price the bank now wants for the property. Certainly some competitors for the property will offer more than list price, so you need to be careful to avoid a bid that will negate your profit margin if you are buying the property as an investment.

Your Las Vegas real estate agents will guide you in the right direction as far as arriving at an offer that is profitable to you and simultaneously acceptable to the lender.

Your agent will run a neighborhood Comparative Market Analysis check (CMA) on the property, interact with other agents for information on pending sales prices, if possible, check on the lender’s listing agent’s  recent MLS postings and through these investigations, determine a list-price to sales-price ratio. Offering a percentage or two over that figure might be a deal closer as far as the lender is concerned.

Another thing to keep in mind is that although the lender certainly will not give the property away, bids are welcomed and appreciated. REOs are loans gone bad. REOs don’t pay interest, and the bank has an even lesser interest in owning property. They are not in the real estate business.

Even if you are an experienced investor, the agent representing you should be experienced in the bidding process, and rules and regulations governing the purchasing of REO properties, whether they are bank-owned, HUD, VA, etc.

For example, an experienced investor/agent team will know that an all cash offer has the best chance of beating out the competition. If financing, a lender’s pre-approval letter is a must. It’s a good idea to get a pre-approval not only from your lender, but from the lender who is selling the property as well, even though the seller will not be financing the property sale.

Other procedures required to finalize an REO purchase will include a limited-time inspection period, transfer fees, title insurance, and an appraisal.

Although REOs can have downsides and may not always be a super bargain in terms of price and profit, when REO inventories are high the profits can get better.

If you have any questions about investing in Las Vegas Real Estate, feel free to give us a call at 702-376-0088.

Under today’s marketplace conditions, with the availability of so many Las Vegas distressed properties, foreclosures, short sales and motivated sellers in abundance, offering properties that can be purchased at considerably under market prices, why would anyone consider making an offer on a home that is unquestioningly over priced?

The overpriced home is probably in excellent ready to move in condition, has desirable upgrades, and is most likely located in a stable and well-maintained neighborhood.

Certainly, the overpriced, but well maintained home looks very good compared to distressed properties that may be in variable states of disrepair. Many buyers might be inclined to pay a little bit more for a property that has passed inspection with high marks.

Comparisons may be made between the true cost of buying a property needing repairs and upgrades and a property that is ready and waiting for you and your furniture, with no additional fix-up expenses, and the answer to this comparison might well be surprising.

Of course, all is not so simple. In the first place, most buyers will not even bother to look at an overpriced home, much less make an offer for the property.

Additionally, the question to be asked is; why would the listing agent not advise the client that the home is overvalued? The listing agent cannot use inquiries about the home to divert buyers to less expensive properties since no one will be calling.

However, the overpriced home may be the dream home some buyer has been looking for, and the buyer’s agent can use some strategic negotiating tactics to try and work out a deal that would be agreeable to all parties.

First of all the buyer and his/her representing agent needs to find out why the home has been priced out of market.

Could be that as mentioned previously, the listing agent might be inexperienced, and neglected to do a comparative Market Analysis (CMA) to aid the seller in setting a realistic at or under market price for the home. As a result, the buyer might be unaware of how far out of line the asking price might be.

Could be that the seller has an inflated view of what the property is actually worth, and has refused to consider the advice of his agent.

A savvy buyer’s agent, knowing that his/her client really loves this property, would offer to provide the seller and listing agent with a CMA, and an estimate of what a fair price for the property would be, and would follow-up by making an offer that would be closely in line with the market analysis.

By pointing out market conditions to the seller, and affirming that the buyer has been pre-approved by a lender and is in a position to purchase, particularly if there are no contingencies to complicate the deal, the buyer may now be in a position to buy that dream home at a mutually agreeable price.

If you are interested in selling your Las Vegas Home and have any questions about the process or the need to do a short sale, feel free to give us a call at 702.376.0088 or fill out the form below or to the right.

Las Vegas Investors, small and large, can only prosper when they are totally flexible and adaptable to market changes, and, to be sure, the market is and will always be in a state of flux. Some changes may linger for awhile but to be sure, change is inevitable.

To be successful, the investor must keep up with and take advantage of the global changes brought on by the integration of many international economies. The current value of the U.S. dollar in comparison to the Euro for instance, has continued to attract international investors interested in properties within the United States, particularly Las Vegas.

Tax shelters designed to shield capital gains are less effective when market prices are falling, and sound, fundamental management is what is required to maximize property income during both good times and bad.

The astute investor in real estate must keep up with the way in which advances in communication can affect demands for certain kinds of investments.

Will the ability to complete entire transactions on the world-wide web have serious implications in regard to the demand for office space and traditional brick and mortar retail stores?

There will always be opportunities for the small investor in good times and bad, particularly since larger investment firms are rarely interested in smaller apartment houses, office buildings and single family home properties.

The small real estate investor must be sure of the kinds of investments he/she are most knowledgeable about, and most comfortable with. What are the goals?

What is your risk tolerance? Are you investing for Capital appreciation, current or tax-free income? What are your exit strategies, and time frame?

Additionally, the investor must estimate a time frame for return OF investment (return of the originally invested funds) and the return ON investment (profit.)

Investors in general look for properties which are easiest to convert to cash, (investment liquidity) at market values.

Liquidity is certainly very important, but location is one of THE most important factors in determining a property’s overall performance.

Evaluating trends in the local market and surrounding areas are a crucial part of deciding the worthiness of a particular property as an investment objective.

The investor must also examine possible restrictions as to use of the property, such as zoning laws, how demand for the property may be enhanced or diminished by interest rates, building codes and environmental laws, an oversupply of similar properties in the area, and such.

All of the above constitute greater or lesser risk factors. A certain amount of risk is an unavoidable factor in any investment, whether it be real estate or a new business start-up. However, the successful investor knowingly assumes only “calculated” risks, factors in the investment that have been carefully thought out and investigated before making a commitment.

If you have any questions about investing in Las Vegas Real Estate, feel free to give us a call at 702-376-0088.

The negotiation process between buyer and seller that begins with the buyer’s initial price offering, is an emotional and very stressful time for both parties. Las Vegas Real Estate Agents naturally go through this process with their clients time and again, but first time buyers and sellers may need a lot of hand-holding to keep calm and think rationally.

Since each and every transaction is unique in its own way, the listing and buyer’s agents must help their clients to plan properly, fully understand the process, and how to react to each others negotiating tactics.

Agents for both sides could close deals faster and more often if they would educate their clients about fair market values, and explain how the results of a Comprehensive Market Analysis (CMA) can help establish a realistic price that would assure both buyer and seller that they are in a win-win situation.

Once an agreeable price is established, the buyer has already been lender approved, and the house passes its appraisal and home inspections, the deal is just about done.

Establishing a selling price for a property could be fairly easy to determine if all factors were ideal, which is generally not the case.

Ideally, the home would be in good physical shape, and well cared-for, both inside and out. There would be no encumbrances other than a first mortgage, or none at all if the home was paid off. No liens of any kind, unpaid taxes, etc.

A CMA taking into consideration any upgrades to the home and similar neighborhood properties that might be considered competition, should be a reliable guide to establishing fair market value for the seller.

The buyer should also be made to understand the relevance of a CMA, which would serve as a guideline for the seller’s offering bid. If negotiations are to get off to a promising start, the buyer –in consultation with his/her agent – should offer a first bid that would seem fair to the seller. A bid so low as to be insulting will not receive a counteroffer.

When the seller and buyer realize that the seller will make an acceptable, but not unreasonable profit, and the buyer is paying no more and most likely less than fair market value, then you have the win-win situation that will result in a done deal.

Of course, that is a perfect scenario, and does not take into consideration all of the complexities involved in the sale and purchase of distressed properties.

However, in any case, particularly with first time buyers and sellers involved in property sale negotiations, the listing and buyer’s real estate agent’s should provide the education and communication that will prove beneficial to all involved.

If you are interested in purchasing a home in Las Vegas and have any questions about the Las Vegas Market or would like to set up a time to view properties, feel free to give us a call at 702.376.0088 or fill out the form below or to the right.

Often, first-time home buyers neglect to consider the costs involved in purchasing insurance, and/or how the cost of property taxes will impact their mortgage payments. Likewise, someone selling their first home may not be fully aware of how much of an impact taxes levied on the sale of the home will have on the seller’s net profit.

A first-time buyer may be unaware that the property taxes paid by the seller will most often differ from the property taxes paid by the new owner. Property taxes are  based upon the assessed value of the property, and may be higher or lower for the new owner.

When Homestead exemptions are allowed, in accordance with governing state laws, the new homeowner can apply for and receive a tax reduction. In some municipalities a further age-related property tax deduction can be applied for if the home owner is in the sixty-two to sixty-five year old range.

Home Owner’s Insurance

Although a new home buyer may surely be aware of the importance of having adequate homeowners insurance coverage to protect the home against catastrophic damage resulting in a total loss of property, such as from fire, flood, hurricanes, etc., or lesser but major problems within the home, liability coverage and the like, many people still purchase insurance based on cost rather than on the reputation for quality service of a company.

Case in point; in the aftermath of the devastation caused by Hurricane Andrew in South Florida in 1992, some companies –which will remain nameless- refused to pay the full amount of damages incurred by many of these homes by second guessing reputable and reliable contractors. However, some lesser-known and smaller companies accepted the damage claims of reliable contractors and paid in full to repair and often fully restore these homes up to current code.

That is why it is so important to be sure you are covered by an insurance company with a reputation for standing by its customers in time of need. Ask your friends and neighbors about their experiences with their companies, and do some research before you commit to a company which may add to your grief at a difficult time.

Of course other insurance costs may involve title insurance which protects the borrower against ownership challenges, flood insurance (a federal program,) which could be mandatory if the property is located in a flood risk area, and FHA loan required mortgage insurance, which protects the lender against the risk of foreclosure.

A full understanding of all the details involved in buying insurance can save you big dollars. For example, the higher your deductible –the amount of the claim you are personally responsible for – the lower your insurance premium.

At least a 20 per cent down payment on an FHA backed mortgage loan will save the expense of carrying mandatory mortgage insurance coverage. Other arrangements can be made so that the insured can pay a slightly higher interest rate and have the insurance built into the loan. An additional benefit of this arrangement is that it is tax deductible, which the separate mortgage insurance is not.