How to Avoid Giving Your Estate to the State

For the vast majority of American homeowners, their home is the single largest asset they will ever own; and like the rest of their financial assets, upon their death, that asset will need to be dealt with. Most likely, if your spouse survives you, ownership of your property will be transferred to your spouse. Depending on how you hold title, this will either happen automatically or your poor spouse will have to deal with the hassle of probate (going through the court system to prove his or her right to your assets).

Before I go further, let me remind you that making decisions about how to hold title or make any decisions about estate planning should be done with the advice of your legal and tax advisor. While I have some experience in real estate, I know nothing about your financial or legal situation and that information is critical to making good decisions.

Now, if you and your spouse hold title as community property with the right of survivorship, then upon your death your spouse will automatically acquire your interest in the property. (If you do not have the right of survivorship clause, the transfer of ownership is not automatic.) If you hold title with anyone in a joint tenancy, then upon your death your interest in the property will be automatically vested with the surviving joint tenants without probate. A new form of ownership made possible by AB-139 is called a revocable transfer on death deed. It allows you to deed your single-family residence (with one to four units) to anyone and have that transfer take place the moment you die. It supersedes other legal documents including a will or trust, and while it shares some characteristics with joint tenancy and community property with right of survivorship, it is unique because the beneficiaries do not have any equity (ownership) in the property until the death of the grantor.

In today’s world, many homeowners have ex-spouses, children, stepchildren, and children who are half-siblings to one another. You need to give considerable thought to how you structure your estate when blended families are involved. For example, you may have significant assets and children, and then get remarried to someone with few assets and no children. Upon your death, do you want your surviving spouse thrown out on the street? Probably not. Generally, folks would like their spouses to be able to live out their days in the home they shared. The monkey wrench gets thrown in when your children resent the fact that your biggest asset does not benefit them until the spouse dies (especially if the spouse is significantly younger than you).

While I won’t recommend specific courses of action with regard to your estate planning, I will recommend that you don’t ignore the need to take care of it. It’s easy to postpone uncomfortable family discussions and spending significant sums on legal advice to make potentially difficult and unpopular decisions, but do you really want to leave such an important financial outcome affecting your entire family left unresolved? This can tear a family apart.

If you don’t have any children or relatives you care to bequeath your estate to, you can still name beneficiaries rather than allowing the state to end up with your hard-earned dollars. Choose your favorite charity, whether it’s a health care organization, the Humane Society, or an institution of higher learning, there’s no lack of options. Ukiah has many worthy causes to choose from. I just can’t see having the fruits of your labor go to the state coffers and that’s what can happen if you choose to skip the estate planning process.

Next week, I’ll share some information what to do before you die to avoid paying unnecessary inheritance tax.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

 

 

Making Sure You Record the Reconveyance

In California we have deeds of trust rather than mortgages, and when we get real estate loans, our lenders are typically the trustees who receive a deed of trust with the power of sale (since they put up the money to purchase the property). If all goes as it should, when you finish paying off the loan the trustee issues a reconveyance to remove their deed of trust. That reconveyance is then recorded at the county, and everyone lives happily ever after.

That is, unless something doesn’t go as planned.

If you default (stop paying) on your loan, or you don’t pay the required taxes and/or insurance, the trustee can exercise the “power of sale” and foreclose on your property. The trustee can also foreclose if you try to be sneaky and transfer the property to another owner without the lender’s consent (this is called “alienation” and it really makes lenders mad). Finally, if you create waste on the property, the trustee can foreclose. I’m not suggesting that if you throw a Popsicle wrapper on the lawn and forget to pick it up then you’ll lose your home. In this context, waste is more like a Superfund clean-up site. For example, if you dump 50 gallons of used motor oil or hit the house with a wrecking ball, then the trustee has a legal right to declare a default and start foreclosure.

Provided the proper procedures are followed, trustees can sell your property to the highest bidder at a foreclosure auction unless you fix whatever problem led to the foreclosure five days before the auction is scheduled to take place.

The deed of trust gives the trustee something called “bare legal title”—a purely legal, but not equitable, ownership interest in the property. If you pay off the loan early or refinance the property, the trustee still has bare legal title until a reconveyance is completed. To resolve this conflict, the original lender signs a full reconveyance that you must take to the county to record. This removes any interest or claim the original lender has on the property. Normally, this is something the escrow company handles for you if you’re refinancing.

Where this falls apart is with private party loans when the loans are paid off, not refinanced. If the reconveyance isn’t done right away, private lenders can be difficult to track down years (even decades) later. And if the original lender passes away and his or her estate is then divided among several heirs, things can get complicated in a hurry. Rather than dealing with John or Jane Doe, you’re dealing with John Doe Jr. and his 15 siblings, trying to get everyone to sign the reconveyance. If you didn’t keep good records, then John Doe Jr. and his siblings may not be convinced you paid off the loan. If things really go south, you may have to hire an attorney to go through something called “quiet title action.” This process determines who the rightful owner of a property is, as well as who may have claims on the property.

This is where I remind my readers to keep every scrap of paper pertaining to real estate payments and ownership. Another useful piece of advice is to follow up and make sure any reconveyance you’re entitled to is recorded at the county. Most escrow companies and lenders require final payment before issuing a reconveyance. Once they’ve received final payment, the motivation to do additional work (like head down to the county to formally record the reconveyance) can dwindle. Don’t let this one slip. Make sure if you pay off your real estate loan, that the deed of trust is removed.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

 

 

Ukiah’s Becoming More Business-Friendly

I don’t know if you’ve noticed, but the City of Ukiah and County of Mendocino have been actively promoting economic development lately. Whether these efforts are driven by the desire to make Ukiah a better place to live—with more jobs and more places to shop and dine—or simply a way to increase sales and property tax revenues, I’m thrilled with the noticeable shift in government attitudes toward encouraging business development.

Currently, several new businesses are either under construction or planning to set up shop here. A new Chipotle is being built at Orchard and Perkins, and rumor has it that In & Out Burger will be tearing down the old Fjords to build a new restaurant. I understand a high-end wool processing facility may open on Orchard Avenue, and a lumber mill in Oregon may lease some of the old Masonite property as a holding facility before they ship the lumber north. I’ve even heard Dunkin’ Donuts is coming to town, and it seems we will finally be getting the Costco we’ve heard so much about.

While it is wonderful to provide new shopping and dining opportunities, I am more focused on the new jobs these businesses will bring. When Ross Liberty purchased the 10-acre Masonite property three years ago, he dealt with political and administrative arms of county government, and he found them to be receptive and supportive of his business expansion. To be fair, his company—Factory Pipe—is a poster child for a business any community would welcome. He employs more than 50 people in an industrial capacity with wages commensurate with his industry and a generous benefits package. In addition, he took a prominent eyesore that community members and passers-by could see on Highway 101 and transformed it into an attractive, modern facility.

While it has been fantastic to see local government take strides to encourage economic development, our area still has some significant hurdles to jump, and it’s not going to be easy. We have utility hook-up rates that discourage development and we have infrastructure with significant deferred maintenance (if you don’t believe me, drive down Luce or Observatory—they’re almost down to the dirt in some places). With problems like these, I am puzzled by our city government’s decision to spend money on the walking trail along the railroad tracks. But I digress.

Another impediment to business development is the lack of housing. When business owners think about where to locate, they research a community’s housing situation to determine where they and their employees will live. A community cannot grow if people cannot find or afford a place to live. Right now in Ukiah, the median housing price is about $365,000. Without a down payment, a family would have to earn an annual combined income of about $85,000 to afford a house at that price. Even with a 20 percent down payment, the family would have to earn about $70,000 (that equates to $17.50 per hour for a dual-income household or one person making $35 per hour).

So how do we get more houses here? The cost of new construction is so high that developers tend to avoid Ukiah and Mendocino County. The reason, in a nutshell, is that new building codes requiring expensive additions like sprinkler systems dampen the enthusiasm of those who would create new subdivisions. And when the City of Ukiah built a new sewer plant, they required cutting-edge rather than conventional technology, significantly increasing the price tag. There are only two ways to recoup that money: increase rates and/or increase hook-up fees. Finally, the cost of labor for construction has to compete with the going rate in our underground economy.

These are tough problems, but I encourage local government to keep working on them.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

Ain’t Technology Grand?

While I am NOT a technology wizard, I do appreciate the convenience of having helpful information at my fingertips. It seems everyone has a cell phone these days, so it makes sense that companies have poured huge resources into creating mobile applications (apps). In the real estate business, we now have apps that allow you to find properties for sale near you (or near a specific location of your choosing). In addition, you can use quick response (QR) codes on “For Sale” signs to download an electronic flyer about the property you’re parked in front of.

To download the app so you can search for properties on the market from all the real estate companies in a given area, text the word “Selzer” to 87778 from your cell phone and a link will be texted to you. Follow the instructions and you’ll have a snazzy new app in about a minute. You can narrow your property search by the features that matter most to you: price, location, square footage, number of bedrooms and/or bathrooms, and other features. And if you find something you really like, it’s easy to share the information with friends and family via text.

If you’re not the type to download an app, but still want to know what properties are for sale in your price range, ask your Realtor to put you on an automatic e-mail notification list. As soon as a property that meets your criteria is listed on the Multiple Listing Service (MLS), you will receive an e-mail about it. Many of us are so used to e-mail, we don’t think of it as technology, but trust me, the speed with which we can communicate via email makes the 1970s and ‘80s seem like centuries ago. In fact, the MLS has changed dramatically, too. When I was first in real estate, the MLS consisted of a loose-leaf binder of mimeographed listing-information sheets restricted to the basic data about a property with one black and white photograph. Now, the computerized MLS allows vast amounts of information about each property along with dozens of color photos and sometimes even video footage!

Once information is entered into the MLS, the technology of the Internet allows us to broadcast that information to literally millions of people with the click of a few buttons. Virtually every day, I receive information about new investment properties all over California. I get far more information than anyone could possibly squeeze into a $1500 ad in the Wall Street Journal, and the cost to the listing agent borders on zero. Locally, any given listing in my office ends up published on more than 700 websites that prospective buyers can see when browsing around online.

For all the hype and hoopla over Internet marketing, the truth is, real estate has always been and continues to be a relationship-driven business. Marketing is important and technology is great, but choosing a good Realtor is still the most important step in buying or selling a property. As I’ve said before, the most convincing argument that hiring a Realtor is a worthwhile expense is that people in the industry hire them when they’re ready to buy or sell property. These industry experts (lenders, title officers, etc.) are the people who see the value of a good Realtor—the way Realtors can avoid lengthy delays and save money by getting the right inspections at the right time, the way they negotiate on your behalf and let you know which upgrades will pay for themselves and which ones won’t, the way they make sure the contract says everything it should and nothing it shouldn’t. I know I’m biased, but I’m also well informed.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

Ten Ways to Come Up With a Down Payment

Many people make enough money to afford monthly mortgage payments and household upkeep, but having enough cash for a down payment can be difficult. Here are some common ideas on where that money might be found.

  1. Sale of your current primary residence. Assuming you bought your house some time ago, the combination of its increase in market value and the decrease in the principal on your home loan should leave you with some cash to reinvest.
  2. Other real estate. If you own a rental or a 40-acre recreational property that no longer pays to grow local crops on, you can liquidate your holdings to generate cash for your down payment. If you don’t want to sell, you could consider borrowing against your property. Be careful, however, while capital gains exemptions are in effect when selling a primary residence, this is not the case for investment properties. If you sell something other than your primary residence, you’re likely facing capital gains taxes, which will have to be deducted from the proceeds before calculating the net cash. If you’re really clever, you could exchange the rental property into a house that could eventually become your primary residence (see my column on 1031 Exchanges). DON’T try this without talking to your accountant or tax advisor.
  3. Liquidate other assets. Investments of any variety can be liquidated. However, like real estate investments, the sale of other investments is likely to have capital gains consequences. Keep in mind that liquidating assets is good for raising cash, but to do so you must sacrifice investment income, which may impact the overall loan you can afford.
  4. If you’ve been really diligent and put away 10 percent or more of your annual earnings, you’ll have a sizable nest egg to pull from for your down payment. When I’m talking about savings, I’m not referring to your retirement (e.g., IRA, 401K). Some first-time homebuyer programs may allow a tax-free/penalty-free withdrawal from your retirement, but retirement cash is expensive. My CPA let me know you can typically withdraw $5000 without penalty for a down payment.
  5. If you’ve chosen your family correctly, you may have funds from Great Aunt Mathilda. While you’ll miss her, her legacy will live on in your new home.
  6. Family Gift. Your family doesn’t have to die to help you with a down payment. A gift from the Bank of Mom & Dad is a realistic and viable way to generate cash in today’s world.
  7. Executive-level employees can sometimes expect a company loan or gift, especially when relocating for the company. If a real estate loan or gift isn’t called by that name, you may see an increase in salary, part of which is considered a housing allowance.
  8. Lawsuit Settlement. While this is not my preferred way of gathering cash for a down payment, it can be effective. Serious injury cases sometimes have insurance settlements large enough for a down payment.
  9. No Need for a Down Payment. Some loans do not require a down payment, especially first-time homebuyer loans from the United States Department of Agriculture (USDA) or the Federal Housing Administration (FHA). While the monthly payment will reflect mortgage insurance payments, and the interest rate will be a bit higher, these loans have made it possible for many people to buy houses without out-of-pocket cash. You will need a verifiable source of income and good credit to qualify.
  10. Grant Program. From time to time state and federal programs to help first time homebuyers will include grants for down payments.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

Where do Lenders Get The Money to Make Loans?

In the days before giant federal lenders, local savings and loans (S&Ls) used money from depositors to make loans. S&Ls charged interest on the principal (i.e., original loan amount) and fees to cover the expenses of managing the loans, activities like collecting payments and keeping detailed records. They paid their depositors a little interest, and the money left over was profit. S&Ls were in the loan business and often didn’t mind making long-term loans, unlike most banks. It was the S&Ls who provided the loans that facilitated home ownership until Government-Sponsored Entities (GSEs) came onto the scene in the early 1970s.

GSEs are institutions that buy loans from loan originators on the secondary market with the goal of providing lower housing costs and better access to financing. The big players are referred to as Fannie Mae, Freddie Mac and Ginnie Mae. They are actually the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Association (FHLMA), and the Government National Mortgage Association (GNMA)—which is part of the US Department of Housing and Urban Development.

Until GSEs came into existence, the person determining whether to lend you money represented the S&L; he sat across a desk from you and looked you in the eye to see if you were a worthy risk. In 1973, I had a summer job and I wanted to use my earnings to buy a house. I needed an 80-percent loan: I could come up with 10 percent for a down payment and the seller agreed to carry a 10-percent second loan. The house cost $18,000 and rent covered the mortgage payment on the first and second loans, plus the expenses of upkeep and ownership with a little cash left over. The lender at the S&L sized me up and pegged me for a guy who could and would pay his debts. Those were the days.

The world has changed since then. Most lenders do not keep home loans in their portfolios. The vast majority are sold to GSEs or to private groups such as pension funds or insurance companies.

Before the housing market correction in 2008, these private groups would often buy a block of mortgages and then borrow against them. This is called mortgage securitization (when investors pool large numbers of loans with an interest rate of, say, 6 percent and then go to the publicly traded bond market and borrow money at 4½ percent). Risk-averse lenders did not show much interest in mortgage-backed securities until AIG agreed to guarantee the loans (for a fee). To prove the investments were safe, bond rating companies like Moody’s or Standard & Poor’s would rate the mortgages (for a fee).

As the housing bubble grew and mortgages became easier and easier to secure, mortgage-backed securities became riskier and riskier. AIG and the bond rating companies continued to offer their services, and no one questioned whether AIG could afford to guarantee these enormous loans or whether the bond rating companies would go out of business if they did not supply the desired ratings.

Today, many more safeguards are in place to assure that lenders do not loan to people who cannot afford to pay, so mortgage-backed securities are much safer. They got a bad reputation when irresponsible lending practices allowed inappropriate loans to be made, driving housing prices much higher than they should have been. This is no longer the case.

These days, while I regret the loss of the personal relationship with the S&L lender, I appreciate the fact that the GSEs have made loans for single-family homes more affordable and available to the general public, putting the American dream within reach of a tremendous number of people who would never have qualified otherwise.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

Home Warranties: an Excellent Investment

Most homeowners are familiar with homeowners insurance, which covers catastrophes like natural disasters or theft, but not everyone is familiar with home warranties, which cover normal wear and tear on common household appliances. Home warranties can be a great investment, especially if you are a new homeowner and you just spent all your cash when you purchased your home.

Home ownership requires a budget for upkeep and maintenance, because while you don’t know which appliance will break—or which plumbing or electrical fixture will suddenly stop working—you can be sure something will need repairing or replacing every year you own your home.

Home warranty specialist Kristy Militello from First American visited Realty World recently and shared excellent information about various home warranty options. She described the home warranty as a service contract with no limits on the number of calls you can make. She showed us that for less than $500 dollars a year (prices vary depending on plan), you could be covered if your refrigerator, oven, water heater, air conditioning, heater, plumbing or electrical systems go out (or all of them).

First American evaluates service people to make sure they are licensed and reputable. First American also buys equipment and replacement parts in bulk and passes those savings on to their customers. Kristy explained that most appliances have a lifespan of about five years, and that many of the appliances are computerized so technicians must have special training and tools to fix things. Gone are the days when a handyman could come in with a wrench and take care of business. Those old chest freezers your parents had in the garage for 30 years just aren’t available anymore (which is probably good, considering how energy inefficient they were).

As appliances become more energy efficient and new regulations require stricter environmental standards, home warranties can be particularly cost effective. For example, it is illegal to fix old refrigerators with ozone depleting refrigerants, so even if an old fridge simply needs a small replacement part, the whole appliance must be replaced. And as of 2016, air conditioners must meet SEER 14 regulations. SEER stands for “Seasonal Energy Efficiency Ratio,” and the Department of Energy will not allow older, less energy efficient air conditioners to be installed anymore. If you have a home warranty, a broken fridge or air conditioner would be covered, so you can get a new one without paying thousands of dollars.

Kristy did mention that while home warranties can save you thousands of dollars, they do require a little patience sometimes. While she referred to First American as the Nordstrom of home warranty companies because of its excellent service, she did admit that your idea of an emergency and the warranty company’s idea of an emergency may differ. For example, when you’re hosting a dinner party for 40 people and your oven goes out, the warranty company will not send a technician over on a Saturday. Kristy shared the importance of filing a claim right away, AND NOT going out and buying a new oven and expecting to get reimbursed for it.

“When we’ve got warehouses full of appliances, it doesn’t make sense to reimburse someone for an appliance they paid full price for at Home Depot,” she said.

When people buy a home, they may not use the home as the previous owners did—and that can cause appliances and systems to break down. Right now, many Baby Boomers are downsizing and their homes are being purchased by families with three or four or five people, putting considerably more strain on toilets, washers and dryers, dishwashers and more. That’s why I recommend home warranties for at least the first year after you move into a new place. Your Realtor can provide more information.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

Good Record Keeping Is Worth the Effort

Many of us are not as organized as we’d like to be, but sometimes it’s worth extra effort to organize records pertaining to real estate if you own any property. Why? Because not keeping records can cost you time and money.

Which records? I’m referring to those that pertain to buying or selling a property (purchase/sale agreements and escrow instructions), as well as any and all documents related to insuring or inspecting or improving your house. You never know when you’ll need to prove that you did things by the book (and how much they cost). You should also hold on to payment records for mortgage interest and property tax.

Take home improvements, for example. The Internal Revenue Service requires receipts that show how much things cost (not how much they were estimated to cost or what the market value was, but how many dollars exchanged hands). If you own your home for 20 years and then decide to sell, you’ll need to be able to show the cost of improvements. You may be thinking you’ll never sell your house—and that may be so—but I promise you’ll die someday, and your heirs will find it invaluable to have documents in a clear, legible format that are easy to find and easy to understand.

If you update your home in a way that requires a county permit, be sure to keep all the paperwork related to your permit, because people run the county and people make mistakes. Recently a homeowner was very grateful the previous owner had kept good records, including a final permit, because the county had no record of the permit for a room addition. If the homeowner had not been able to produce the permit, the county could have required that the addition be torn down or that the current homeowner pay to bring the addition up to current building codes.

Having good records can also protect you if someone believes you shirked your responsibilities in addressing problems discovered during the inspection process. If you have work records that outline all the work that was done (or supposed to be done), you can prove you acted in good faith. If a contractor does not do his part, keeping records allows you to go back and have a conversation about why work was not done as it should have been.

If you have an investment property, keeping records becomes even more critical. I know a woman who now owns a medium-sized apartment complex. Her basis for property tax purposes goes back 35 years and travels through several exchanges. Her entire basis starts with a small single-family home rental that was exchanged for a duplex; that was exchanged for a four-plex; that was exchanged for an eight-plex, and that was exchanged for a 16-unit apartment complex. Capital gains taxes are typically assessed on the value of a given property when it is purchased, but if you trade up via exchanges, your original basis remains unchanged (in this case, the original basis was only $4,000). If this client sold the apartment complex and did not have good records of the amount of money she spent on improvements to verify the tax basis through all the exchanges, the taxes would be calculated on the difference between the sales price today and the $4,000 property value 35 years ago.

While keeping good records is about as fun as watching paint dry, it is worth it. If you’re diligent and knowledgeable enough to weed through documents to keep only those you’re likely to need, more power to you. If you’re like the rest of us, just keep them all. Heck, scan them and save them electronically. You’ll be glad you did.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

What To Do After Suffering a House fire

Since the devastating fires in Lake County last year, posts about wildfire and house fire recovery tend to catch my eye. State Farm Insurance recently shared some tips that I’ll summarize below. The Federal Emergency Management Agency (FEMA) also has some excellent information online. No one ever thinks they will be the victim of a natural disaster, but it’s best to know what to do in case the unthinkable happens.

Lodging

First, you’ve got to figure out where to stay, whether it’s with friends or family, in a hotel, in a campground, or in a community shelter. If you have pets, this can be tricky. The Red Cross and Salvation Army can sometimes provide assistance, but rural areas can throw them curveballs. During the Lake County Valley Fire, for example, thousands of people were displaced, and many had animals that were a little bigger than dogs and cats—like horses and llamas.

Insurance Claim

Whether your home is the only one to burn or is one of hundreds, you should contact your insurance agent as soon as possible to file a claim. According to State Farm, “loss of use” funds from your insurance policy will cover living and other daily expenses. Keep receipts of your expenses while you’re dealing with the disaster (e.g., meals, lodging, necessities like clothing and toiletries), and some costs can be reimbursed. Your insurance agent should be able to help you secure your property and suggest ideas on how to clean up or restore salvageable items. Never enter a damaged home or apartment unless the fire department says it is safe to go in. Fire damage isn’t always obvious: roofs and floors may be damaged and could cave in.

Finances

Whether you have a house left standing or not, you still need to pay your mortgage. Depending on your homeowners’ insurance coverage, you will receive financial help to rebuild or purchase a different home, but that comes later. Initially, keep paying your mortgage. You should also continue to make payments on any car loans, even if your car was destroyed in the fire. Finally, don’t forget to cancel credit cards that didn’t make it out of the fire.

Inventory

I’ve said it before, and I’ll say it again—make a record of what you own. Include the date of purchase, cost at purchase and description of each item. For insurance to reimburse you for your possessions, you have to know what you possess. In most cases, when a loss occurs, you will receive the cash value of your damaged items at the time of settlement and may recover the replacement cost once the items have been replaced.

Emotional Recovery

While the physical recovery may seem onerous but straightforward, the emotional recovery may take longer and be more difficult to deal with. Some people benefit from counseling or talking about what happened with a trusted leader in their faith community. Post-traumatic stress can be difficult to manage, and self-medicating is typically a bad idea.

Rebuilding/Planning Ahead

Hopefully you’re reading this before you ever experience a house fire. If so, consider putting valuable documents in a fire safe or a safe deposit box. If documents were destroyed in the fire, here’s a list to review so you can start the process of replacing important records: driver’s license, auto registration; bankbooks (checking, savings, etc.); insurance policies; military discharge papers; passports; birth, death, and marriage certificates; divorce papers; Social Security or Medicare cards; credit cards; titles to deeds; stocks and bonds; wills; medical records; warranties; income tax records; citizenship papers; prepaid burial contract; animal registration papers; and mortgage papers.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

Avoid Pest and Fungus Problems – Part II

Last week, I reviewed several tips to avoid pest and fungus problems. This week, I’ll provide several more. As a reminder, when it’s time to sell your residential or commercial property, you’ll need a pest and fungus inspection.
The pest and fungus report outlines both problems and prospective problems, so while you may not have a pest problem now, the report will include conditions that could lead to one. If the lender becomes aware of the problems, the problems will have to be addressed before the close of escrow. Common problems include termites that need to be exterminated or rotted wood that needs to be replaced. Prospective problems should also be addressed, but they are more often a negotiation point for buyers and sellers. Prospective problems include things like a new leak under the bathroom sink that has not caused dry rot yet, but it will. As you can imagine, it is far cheaper to repair a leaky p-trap than to replace a whole bathroom vanity—in the ballpark of $50 versus $1500.
Even if you don’t plan to sell your house or commercial building, avoiding pest and fungus problems is essential to protect your investment. Here are some suggestions on how to do so.
1. Look for evidence of unwelcome guests. Termites create raised mounds, often found along cracks in the foundation. Woodpeckers leave holes in your siding or eaves. Carpenter ants and powder post beetles leave little piles of sawdust. Perfectly round ½-inch holes may mean you have carpenter bees. If you have any of these, seriously consider calling an exterminator.
2. Avoid dampness. If you have poor airflow in or around your house, you could be inviting mold to develop. If your bathrooms do not have a window to the exterior you can open, then they should have a fan. Be sure the exhaust vent is unblocked and exhausts to the outside not the attic, and that family members use the fan. In other rooms watch for condensation, especially behind furniture that rests against outside walls.
3. Inspect appliances. Dishwashers, refrigerators with ice makers, washing machines, and water heaters should all be inspected regularly, especially if your water bill jumps unexpectedly. These appliances can leak in areas that make them hard to detect, so listen carefully, look for wet spots, and trust your nose if something smells like mildew. To avoid a watery mess, replace washing machine hoses every five years, whether they appear worn or not.
4. Bathrooms. Bathrooms have several potential problem spots. Faucets and pipes can leak. Toilets can leak and they are connected to the wastewater system through a wax ring that can deteriorate. If the wax ring loses its seal, the subfloor can get wet. Look for discoloration on the floor around the toilet and pay attention to mildewy smells. Water can also get into the subfloor if there’s not a good seal between the shower or tub and the linoleum or tile. While it would be great not to have to deal with issues like these, I promise ignoring them doesn’t make repairs less expensive.
If you happen to own an investment property and you serve as landlord and property manager, here’s an important bit of news: if you are fighting pests with insecticides, new neighbor notification laws just went into effect. If you use RAID or ant traps or even a soap-based detergent to prevent bugs from infesting your property, you now need to share this information with your tenants and neighbors within a prescribed amount of time. There are several required forms and choosing the right one for each situation requires a little homework. While there are no pesticide police, keep your residents happy and protected by providing the appropriate notices.
If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.