DEAN GRAZIOSI: DEAN GRAZIOSI REVIEW – REAL ESTATE FEED BY DEAN GRAZIOSI

Homeowner’s Insurance is an inexpensive way to protect one of your largest investments. If you have mortgage, your lender will require you to purchase a Homeowner’s Insurance Policy. 

Homeowner’s Insurance is a contract between the owner and the insurance company.  In exchange for paying the premiums, the insurance company will pay the owner for damages caused by natural disasters or by human error.

Owners have protection against natural disasters like fire, lightning, wind or winter storms.  Damages caused by humans like theft and vandalism are also covered.  Most homeowner policies include liability coverage for persons that incur injuries on the property. The cost of legal defense in these instances is usually included in the coverage.

Homeowner Policies do not include coverage against floods or earthquakes.  If the property is located in an area where these natural disasters are common, the lending institution may insist that the owner acquire flood and/or earthquake insurance.  The cost of this coverage is more expensive than typical homeowners insurance.

As the mortgage company typically has a significant amount invested in the home, which is often more than the owner’s insurance, they will want their investment protected to the maximum amount.  Proof of this insurance will be required before the property will close.  Many mortgage companies will charge the homeowner for the insurance and then pay the premium themselves.

The premiums, like the real estate taxes, will be paid from the homeowner’s escrow account.  Proof of payment and coverage will be forwarded to the homeowner each year.  If the lender does not require premiums to be held in escrow, the mortgage company will send notice to the owner each year requiring a cop of the new coverage.

If the home s sold, the homeowner will receive a refund for the unused portion of the policy.  The same practice applies to unused real estate taxes that have been prepaid. 

Homeowner Insurance is provided at a reasonable rate.  The homeowner is free to seek competitive proposals for the insurance. The homeowner should make sure the coverage meets all the lender’s requirements and serves their best interests as well.

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The lax credit policies during the Bush Administration have come close to sinking the American Dream.  10.7 million Americans live in homes whose mortgage now exceeds the value of the real estate.  Another 2.3% or 2.3 million homeowners are within 5% of going underwater, or having an upside down mortgage.  That constitutes 28% of all American homeowners.

The five states with the most underwater mortgages are no surprise.  The ratio of upside down mortgages in these five states is staggering.

          *        Nevada        65%

*        Arizona        48%

          *        Florida         45%

          *        Michigan      37%

          *        California     35%

In all these states, many of the prime loans have gone bad.  The option-adjustable rate mortgages, where minimum down payments were used to purchase high-end homes, is as high as the lower priced mortgage failures.  In states where home values have begun to stabilize, the number of upside down mortgages is dramatically lower. 

If home equity credit lines are factored into the equation, it is estimated that 33.8% of mortgages would have been underwater in the third quarter compared to 32.2% in the second quarter.

Careful real estate investors read these trends and see opportunity.  Supply definitely outweighs demand.  Many investors have become familiar with foreclosure sales and short sales.

In fact the National Association of Realtors has begun to instruct agents in the procedures to transact short sales.  Thus far, in 2009, short sales account for approximately one-third of all the NAR’s pending sales.  Unfortunately, many of these transactions fail to close, a fact the NAR guards closely. 

By learning all the necessary steps, investors are able to capitalize on bulk transactions at a fraction of the value.  Banks do not like to take over real estate.  They often will take a loss rather than bear the expense of carrying costs, but investors must present a viable, convincing argument.  Sharpen up your short sales presentations and negotiate your way to profits.

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