Here we go again!
I know, I know you have been waiting on the edge of your seat, refreshing our page waiting for the follow up post to our last blog! I mean how can your Home Insurance have anything to do with the Hot Real Estate Market in Columbus, Ohio.....?
WELL... believe it or not, it has a lot to do with the buying power that YOU have!
I know you are sitting there thinking "this guy has fell off his rocker." Well if you stop reading right now then you will certainly think that, but I will venture to say that if you stick around and read what I have to say then you will be pleasantly surprised!
HERE WE GO....
We all know that people in this market are losing their minds with pricing their homes, and that Real Estate agents are pushing higher values by disputing appraisals and becoming more clever when listing properties. Its unreal to see a property that hasn't had updates in over 20 yrs. go into a bidding war and sale for 10K over listing price. Now don't get me wrong I am all for sellers taking advantage of the market and RE Agents pushing the limits.
I am not a fan of agents bringing individuals to the table that have no business putting a bid in on a home. I feel as if we are constantly watching an HGTV show where the husband is a finger painter and the wife walks dogs for a living but their budget is $1.2 million in the heart of Columbus, Ohio! With the new DTI (debt-to-income) ratios being raised from %45 to %50, and the promise of "Stated-income" coming back into play end of 17-18, there are some real issues that are looming and dare I say we are running down the road of another housing boom. People are buying houses at an alarming rate and the prices are higher then ever before. I know people that purchased their home last year for $249,999 and they are looking to sale this year for $315,000. That is a huge difference. There is a good chance that the people that buy this home will lose equity within the first few years.
So what does this have to do with your Home Insurance? Since home values are sky-rocketing people are maximizing more of their monthly budget in order to purchase their dream home. The mortgage payment that should be $1200 is now $1500. Everyone is now looking for additional ways to cut costs on a monthly basis. They look at their Home Insurance first especially when they are in contract on their dream home. Their mortgage advisor told them it had to be under $600 for the year on a home that is costing them $500K. Does that really make sense?
No, it does not!
Instead of trying to cut costs on their insurance they should be increasing it so that if something would happen to this over paid for investment they wouldn't lose everything! They are looking at higher deductibles..... deductibles that they cannot afford! We all know that you should have an emergency fund just in case an emergency happens but when the average American household only has <$2500 in savings, the thought of a deductible higher then that clearly does not make sense.
Residents are looking to cut corners at all costs just to make sure that they can get the loan approved. Its not enough for the DTI to be increased, the are cutting insurance polices in the following areas:
- Removal of Roof Replacement Cost
- Removal of Extended Replacement Cost of Dwelling Coverage
- No Water Back-up or Sewer and Drain's coverage
- No Building Ordinance Coverage
- Decreasing Liability Limits
- Removal of Personal Property Replacement Cost
- Increasing Deductibles- 1%, 1.5%, 2%, $2500, $5000, $10000
The list goes on and on. Now don't get me wrong, if you can afford it then buy it, we are not stopping you. We are insurance agents that specialize in taking care of our customers needs. We have had to tell customers to walk away from purchasing a home because the insurance was simply too much. People are desperate, and believe it or not there will be other homes, and when you least think it that perfect home will hit the market for you to bid on! We work with the best in the business when it comes to Real Estate, Mortgage Brokers, Home Inspectors, and we are the best when it comes to Home Insurance. So let us know how we can help. Remember.....