Since purchasing their home two years ago, Cora and Cary Johnson have done close to $10,000 worth of property improvements that have increased the value of their home by $100,000. “We paid $275,000 [for our home], and recently we were offered $376,000,” says Cora.
The Johnsons, both 38, are beneficiaries of a recent surge in southern California property values, and the work they’ve put into their house has given it added value.
“We had the backyard landscaped and we installed indoor ceiling sprinklers and a security system with monitors on all the doors, as well as sensors throughout the house,” says Cora of her Inglewood, California, home. “This system is connected to a central station, which will call the police in case of an emergency. I wouldn’t stay in a house without a security system.”
Other enhancements include new kitchen cabinets, tile flooring, renovated bathrooms, and a paint job. “We have tried to keep our house in good condition by checking on things such as the roof and the electrical system,” says Cora. “That’s what you need to do in order to maintain your investment.”
Indeed, if you’re a homeowner, your house is a major investment. Failure to “mend your fences” can cost you money and lifestyle comforts. Paying attention to the home front can produce precious property value appreciation. Once you’ve made the investment in a new home or decided to do improvements on your existing property, you can protect it and increase its value by doing the following:
Add value with additions. One way to increase your home’s re-sale price is by making major improvements. It’s important to remember that some projects will increase in value more than others. According to Remodeling magazine’s latest cost-versus-value report, bathroom improvements tend to rate the highest, in terms of payback.
However, “it’s the quality of the home improvements, not the category, that add the most value,” says Roderick McDaniel, a real estate broker and co-founder of Huntingron Browne Real Estate in Inglewood. “Cora and Cary Johnson, for example, used high-quality, long-lasting tiles and durable fixtures. These features make their home stand out.” Similar upgrades could include light fixtures, doorknobs, and faucets with nontarnishing warranties.
Buyers are a lot smarter today, says McDaniel. “People know what they should look for when they shop for a home,” he says. “It pays to go for top quality with home improvements because your own lifestyle will be enhanced while you’re in the house, and the re-sale value will also increase.”
McDaniel says built-in additions are preferable to anything movable, which should be taken into consideration when adding bookshelves, benches, or a home theater system. An exception: “Don’t put bars on your windows,” he advises, “because that may detract from a home’s value. Instead, install a sophisticated home security system.”
Count on curb appeal. Your home’s exterior should create a desire to own the home, which is why it’s vital to schedule regular paint jobs and keep up on yard work. Edging your lawn, mulching, and planting some shrubs are all worthwhile activities. “The Johnsons put the most expensive year-round grass in the yard,” McDaniel says, “which now looks great. Installing a new garage door also helped to make their house more attractive.”
Hire quality workers. If you have to hire a contractor for your home improvements, it’s best to get a referral from friends or family. “I work for the building and safety department of the city of Los Angeles,” says Cora, “so I asked my friends there for leads. They knew contractors who have been hired frequently, and they gave me leads to reliable workers. It has worked out very well.”
McDaniel says the buildings department in your local community may supply leads to contractors, but you should also look at the work they’ve done. The general contractor will be your key hire because he or she most likely will hire subcontractors, such as electricians, to help with the work. “You’ll want to make sure the general contractor pulls all the required permits on your job,” says McDaniel, “otherwise, a follow-up appraisal won’t reflect the value you’ve put into the job.”
Take care of your investment. If you make major improvements to your home, you must provide routine care. In terms of maintenance, McDaniel says you need to make sure your plumbing, electrical system, and roof are in excellent condition. “Everything else can wait. Once those basics are in place, you can move onto other projects, such as stripping and refinishing your hardwood floors.”
Of course, taking care of plumbing may be easier said than done. “I’d have leaks every time it rained,” says Johnnie Mae Atkins, a hospital technician in St. Louis. “I kept calling plumbers every two months. It was very expensive and nothing really got accomplished.”
Fortunately, Atkins, 40, qualified for assistance from Beyond Housing/Neighborhood Housing Services, a local affiliate of the National Insurance Task Force (NITF) that offers affordable insurance coverage to low-income and minority homeowners through a loss prevention program. Atkins received counseling and a forgivable loan of $10,000 for much-needed home repairs (If she stays in her home five years after improvements are made, she owes nothing). “Not only did they discover the problem with my plumbing and install a new drain to help, they also installed a new roof and upgraded my electrical system,” she says. “That work definitely increased the value of my home.”
Todd Pittman, national director of NITF, says his group works with the NeighborWorks network of community-based organizations to help homeowners with housing issues. “At the NeighborWorks Website (www .nw.org), you can find a directory of local organizations. The one in your area can provide you with educational materials for keeping your home properly maintained. Key items include the care of your foundation, basement, electrical systems, roof, and the grounds surrounding your home.”
Get the right insurance. There’s always
the chance that your home’s value can decrease due to unforeseen events. “You should have replacement cost coverage — enough to completely rebuild your house, if necessary,” says Jeanne Salvatore, vice president of consumer affairs at the Insurance Information Institute in New York City. If you have an “actual cash value” policy, if your house is damaged, you will receive the property’s value minus depreciation. That amount typically will be far less than the cost to replace or rebuild what is damaged.MAINTAINING AND PROTECTING YOUR HOME
“However, we’ve seen some fires, such as those in Oakland, California, that melted homes’ foundations,” says Salvatore. Older homes, she says, should have enough coverage to rebuild in compliance with modern building codes, which may require greater outlays.
Jerald Tillman, who heads an insurance agency in Cincinnati, agrees that replacement cost coverage is vital; he advises homeowners to buy “special, all-risk” policies, which are usually not much more expensive than other types of replacement cost coverage. “Options you might consider,” he says, “depending on where you live, include earthquake, flooding, and water backup protection. These types of coverage are not automatic with a standard homeowners policy.”
Cut insurance costs. As you might expect, a replacement cost policy can be pricey, especially if you add extra coverage. Nevertheless, there are ways to pare your premiums and still buy adequate protection for your home.
Raise the deductible. One way to cut your premium is to raise your deductible — the amount you have to pay out o
f your own pocket before the insurance kicks in. “Most homeowners insurance policies have deductibles of $250 or $500,” says Tillman, “but I suggest a $1,000 deductible. The higher the deductible, the lower your premiums will be.” A higher deductible may mean you’ll have to cover more incidents yourself, but you still will have protection against catastrophes.
File fewer claims. “To an insurance company’s claims department, ‘frequency’ is a key word,” says Tillman. “You’re more apt to have a policy canceled after filing three claims for a few hundred dollars a piece than for filing one claim for $200,000.”
Tillman advised one client, Dwight Parks,
a CPA who runs an accounting firm in Cincinnati, not to file claims for $600 or $700, even though his policy has a $500 deductible. “He told me not to keep filing minor insurance claims because that makes me seem like a high risk,” says Parks. “We live in an area that residents call tornado alley. When storms come through, they rarely miss this part of town. I filed a claim after shingles came off my roof and when my home computer suffered a power spike and my motherboard was fried. However, Jerald advised me to do without filing claims for a few years, unless it was for something really serious.”Install a home security system. Install a system that is monitored at a central station, says Pittman, “because if there’s a problem at your home, seconds make a difference. Your insurance agent can help you select a system that will qualify for a discount on your homeowners policy.” Salvatore says installing a system can save you as much as 20% on your annual premiums.
High-tech security systems have their place, says Salvatore, but you should not neglect low-tech protection either. “Your house should have working fire extinguishers and high-quality locks,” she says. “But don’t make the common mistake of installing great locks on bad doors. That’s just wasting money on locks.” Make sure that all of your external doors are solid wood.
Buy in bulk. By buying homeowners and auto insurance through the same agent, you can qualify for additional discounts. As part of her Beyond Housing/Neighborhood Housing Services program, Atkins received insurance counseling. Acting on advice, she combined her auto and home insurance plans to save about $300 each year.
Home Maintenance Checklist
Maintenance is vital year-round, but it is especially important during the fall if you live in colder climates. Busted pipes, frozen gutters, and wind-driven snow or rain cause billions of dollars in weather-related damages to homes each winter. “Homeowners need to get ready for severe winter weather when the leaves start to turn, not when the snow is beginning to fall,” says Jeanne Salvatore, vice president of consumer affairs at the Insurance Information Institute (III) in New York City. Some timely precautions from III can keep your home warm and dry, while preventing your checkbook from dropping below zero:
Maintain gutters. Remove leaves, acorns, sticks, and other debris from gutters so melting snow and ice can flow freely. If water is unable to properly drain through the gutters, it can seep into your house and damage the ceiling and walls.
Install gutter guards. Available in most hardware and home stores, these screens prevent debris from entering the gutter.
Trim trees and remove dead branches. Ice, snow, and wind can cause weak trees or branches to fall onto your home, your car, or someone walking on your property.
Check insulation. Extra insulation in your attic, basement, and crawl spaces will keep heat from escaping and help protect pipes from freezing. Heat escaping from your attic can lead to a roof collapse if snow or ice melts and re-freezes.
Maintain pipes. Wrap pipes with heating tape and insulate unfinished rooms (such as garages) that have exposed pipes. Repair cracked and leaky pipes immediately.
According to III, standard homeowners insurance policies cover winter-related disasters, such as busted pipes, ice dams, and wind damage caused by ice or snow. Damage caused by water should be repaired to prevent potential mold buildup; mold cannot survive without moisture. Caught early, mold can usually be removed by a thorough cleaning with bleach.
Spring clean. When the worst of winter ebbs, it’s time for another round of home maintenance. April showers may bring May flowers, but they can also bring leaky basements, moldy
walls, and costly cleanup. “You can take a few hours to do a spring maintenance check or you can wait for a storm to come along and show you where your home’s weaknesses are,” says Jeff Sciaudone, director of engineering for the Institute for Business & Home Safety (IBHS). When you start your spring-cleaning, check the outside of your home to make sure it’s protected from water damage and natural disasters.Examine the boards covering the joints between the top of a wall and the projecting eaves. If they are rotting or soft, they may allow rain to enter your attic or atop interior walls.
Protect your house against water damage. Confirm that your downspouts are sloping away from the house and carrying water at least five feet away from foundation walls.
Position your lawn sprinkler heads so they don’t spray the walls of your house. This moisture can erode the foundation.
Inspect everything. Examine your roof carefully, looking for worn, curled, or missing shingles.
Examine window and door flashing, seals, or weather stripping. If sealants around those openings are no longer pliable, re-seal and caulk them.
More information on increasing your home’s disaster protection from hail, hurricanes, tornadoes, earthquakes, wildfire, flooding, and water damage is available at the IBHS Website, www.disaster safety.org, or by calling 1-866-657-4247.
Routine care cuts costs. “Routine maintenance not only can protect your home’s value,” says Pittman, “it also can hold down insurance costs.”
Tillman suggests an “annual checkup” to keep your house and yard in shape. “Look at the gutters to see that they’re clear,” he says. “Check for leaky pipes, peeling paint, loose floor boards, and any signs of roof curling that may indicate rot. If someone from the insurance company comes to your house and notices these conditions, your policy could be canceled.”
You need to be especially careful about mold, which has received a lot of publicity lately as a threat to health — and has cost insurance companies hundreds of millions of dollars in claims. “Mold is a covered peril,” says Salvatore. “Nevertheless, it makes sense to take steps to keep mold under control. Mold needs water, so you should keep your eye out for water buildup. If you see it, get rid of it.”
Pay your bills. “Insurers are beginning to use credit scoring when they set rates,” says Tillman. “If you have a poor credit score, you may be considered a poor risk for homeowners insurance and have to pay higher premiums. So it’s important to pay your bills on time and maintain your credit rating.”
Keep current. “The greatest error people make with their homeowners insurance is not keeping it up to date,” says Salvatore. “They buy it and forget it. However, if you make significant additions or improvements to your home, you should buy additional insurance coverage, too.” The more valuable your home, the more insurance you should have.