“Besides knowing the basics of what a standard homeowners insurance policy covers, consumers should ask a series of questions – and receive satisfactory answers to each of them – before buying a new policy or renewing an existing one,” says Michael Barry, vice president, media relations, Insurance Information Institute (I.I.I.). I.I.I. is a nonprofit, communications organization supported by the insurance industry.

According to I.I.I., there are six basic questions everyone should ask before buying or renewing a homeowners insurance policy:

1. How much would it cost to rebuild my home in its current location in the event of a total loss? Ideally, a homeowners insurance policy should cover the cost of building a new home from scratch. In general, homeowners policies cover partial or total damages caused by fire, hurricane, hail, lightning or any other disaster if it’s listed in the policy. Flood and earthquake-related losses must be insured separately because both perils are excluded in standard homeowners insurance policies.

2. How much is my personal property worth in the event of a total loss? A homeowners insurance policy should cover the cost of replacing all personal property (furniture, appliances, clothing) should it be stolen or destroyed by fire, hurricane or another insured disaster. Most companies provide personal property coverage equal to about 50 to 70 percent of the amount of insurance on the home’s structure. (A $100,000 policy for the structure would have perhaps $50,000 to $70,000 worth of personal property coverage.)

However, the best way to determine personal property coverage in a specific situation is to conduct a home inventory. I.I.I. provides online software to help homeowners catalog and value possessions (link underlined to: https://www.knowyourstuff.org/iii/login.html) as well as an iPhone app.

3. How much liability protection do I need? Liability covers homeowners against lawsuits for bodily injury or property damage caused to other people, including damage caused by pets. The liability portion of a policy pays legal defense costs and any court awards – but only up to the limit set in the policy. It’s effective not just inside the home but also anywhere in the world. Liability limits generally start at about $100,000, and many insurance agents will recommend at least $300,000. Homeowners with significant assets may want more; others may want less.

4. What level of additional living expense coverage do I need? The Additional Living Expenses (ALE) provision is found in standard homeowners insurance policies. It pays for the costs of living away from home if damage from an insured disaster makes the house uninhabitable. ALE covers hotel bills, meals and other expenses above customary living expenses.

ALE coverage differs from company to company. Many policies provide coverage equal to about 20 percent of dwelling protection. For example, if the structure of your home is insured for $100,000, you would have $20,000 of ALE coverage. Some companies impose a time limitation, such as 12 to 24 months.

5. Should I buy a separate flood and/or earthquake insurance policy? Flood coverage is available from the federal government’s National Flood Insurance Program (NFIP) and from a few private insurers. Earthquake coverage is usually available in the form of a supplemental policy.

6. Do I qualify for any discounts? Homes with smoke detectors, burglar alarms or dead-bolt locks often get a premium rate discount. Sophisticated sprinkler systems and alarms that ring at monitoring stations often reduce homeowners insurance premiums too. Ask an agent. If you are at least 55 years old and retired, for instance, you may qualify for a discount of up to 10 percent at some companies. If you have completely modernized your plumbing or electrical system recently, a few companies may provide a price break.

Source: Florida Realtors   Reprinted with permission. Florida Realtors® All Rights Reserved

Many homeowners have been surprised at banks’ recent willingness to approve short sales.

“Initially, the homeowners are skeptical,” says Elizabeth Weintraub, a real estate professional in Sacramento, Calif. “The bank may have already turned down their request for a modification. Then, one day, they call and say, ‘Let us give you some cash.’”

For banks, the incentives have proven to be a smarter move than letting a property fall into foreclosure.

“The first choice is a modification, but if that’s impossible, then a short sale is a faster, more efficient solution,” says Tom Kelly, a spokesman for Chase Mortgage.

With a foreclosure, homeowners stop making their mortgage payments and usually property taxes as well. They also often put off maintenance issues, which can cause the home to lose value even more. Foreclosed homes sold, on average, for 22 percent less than homes not in foreclosure in December, according to National Association of Realtors®’ data. For comparison, discounts for short sales were about 14 percent.

“I’ve seen a lot of foreclosures for sale where it would cost a lot more than $20,000 to get them into condition to sell again,” says John Hayton, a short sale specialist.

Source: Florida Realtors   Reprinted with permission. Florida Realtors® All Rights Reserved

Technically, that may be true. In 2010, the IRS audited 1.0 percent of taxpayers. For middle-income taxpayers, the percentage was even lower. Only 0.6 percent with adjusted gross income of $25,000 to $75,000 were audited, according to the IRS.

But traditional audits are just one way the IRS enforces the tax laws. Increasingly, the IRS is relying on what IRS Taxpayer Advocate Nina Olson calls “unreal” audits. These typically come in the form of a letter alerting you to errors or omissions on your return. While these audits are less intrusive than full-scale audits, they can still cost you real money.

In 2010, more than 9.2 million individual taxpayers were subjected to “unreal” audits, according to an analysis by the Taxpayer Advocate Service. When combined with full-scale examinations, that boosts the percentage of individual taxpayers audited to 7.4 percent.

Moreover, while real audits tend to target the wealthy, the majority of individuals who are subject to unreal audits are low- or middle-income taxpayers, Olson says. (For more details, go to taxpayeradvocate.irs.gov/blog.)

Unreal audits fall into three categories:

• Automated Underreporter (AUR). Income on a taxpayer’s return doesn’t match income reported to the IRS by third parties, such as financial institutions and employers.

• Math error notices. These inform the taxpayer that the IRS has corrected mathematical or inconsistent entries on his or her tax return.

• Automated Substitute for Returns. These are typically sent to taxpayers who didn’t file a return. The IRS uses information from third parties to create a return and calculate how much the taxpayer owes.

What to do

Typically, these IRS notices include a bill for unpaid taxes, which means you should never ignore them, says Edward Karl, vice president-taxation for the American Institute of Certified Public Accountants. But you shouldn’t automatically assume the IRS is right, either, he says.

For example, incorrect information provided to the IRS by your bank or other financial institution could trigger an AUR, says Benson Goldstein, senior technical manager for the AICPA.

Likewise, a substitute return may not include all of the deductions and credits you’re entitled to receive, Karl says. For example, a substitute return will typically use the standard deduction, even if the taxpayer has a mortgage.

You should file a return even if it won’t give you a better outcome than the one provided by the IRS, Goldstein says. Once you file, the IRS has 10 years to collect unpaid taxes, he says. If you don’t file your return, the IRS will be able to pursue you indefinitely, even if it files a return on your behalf.

Fighting an unreal audit requires perseverance, Olson says. Be prepared to provide documents supporting your case, and plan to spend a lot of time on the phone, she says. If you’re unable to resolve the issue, contact the IRS Taxpayer Advocate Service. 

Avoiding trouble

How to avoid a notice from the IRS:

• Check Social Security numbers. If you provide an incorrect Social Security number for a dependent – or fail to provide one at all – the IRS will disallow the exemption. In tax year 2009, nearly 300,000 tax returns contained incorrect identification numbers for dependents, according to the Taxpayer Advocate’s Office.

• Don’t ignore third-party errors. If you receive a tax form with incorrect information from a financial institution or other third party, try to get it fixed before you file your taxes. If that’s not possible, report the amount on your tax return and make an adjustment to correct the error. Most tax software programs provide a way to explain the discrepancy

Source: Florida Realtors   Reprinted with permission. Florida Realtors® All Rights Reserved

“As the nation’s leading advocate for homeownership and housing issues, NAR knows that stabilizing the housing market is key to the health of our economy and communities across the country,” says NAR President Moe Veissi, broker-owner of Veissi & Associates Inc. in Miami and 2002 president of Florida Realtors. “We are pleased that the president released a plan to help America’s struggling housing market and homeowners. Improving access to simple, low-cost refinancing and streamlining the process will help hardworking families who have stayed current on their mortgage payments and will go a long way to helping keep more families in their homes.”

Obama’s plan would help eligible, underwater homeowners who are current on their mortgage payments to refinance or modify their loan into safer, more affordable mortgages at today’s historically low interest rates. Homeowners could potentially save hundreds of dollars each month, and it could reduce foreclosure rates.

The plan also announced a Federal Housing Finance Administration (FHFA) pilot program to transition Real Estate Owned (REO) properties into rental housing. However, NAR urged FHFA to proceed cautiously with any REO-to-rental program, pointing out that the nation’s housing markets are complex and varied. According to NAR, any REO-to-rental program should involve substantial participation of local market experts, especially licensed real estate professionals.

The plan needs Congress’ approval to move forward, however. To pay the $5 to $10 billion cost, Obama recommends a new fee on large banks that failed to pass when recommended earlier. Obama, though, says he’s also willing to consider other ways to pay for the program.

“Realtors are eager to work with Congress and the administration to put the plan into action,” said Veissi. “We hope that the president and Congress will work together to pass the necessary legislation.”

Source: Florida Realtors   Reprinted with permission. Florida Realtors® All Rights Reserved

“Realtors that understand military issues will get this market and be able to better serve those who served us,” said Buddy West, a Delaware Realtor who discussed how to meet the challenges facing the military when it comes to real estate transactions during Florida Realtors® Mid-Winter Business Meetings in Orlando last Friday.

From dealing with upside-down mortgages to helping a serviceman or woman find a first home, working with veterans presents unique circumstances for a Realtor. When West began working with military personnel years ago, he found a market niche that truly appreciated a Realtor who took the time to understand its needs.

West asked, “Why should Realtors – particularly in Florida where you have military all over the place – care about this market? No. 1, it’s underserved. They need our expertise and help; and, it’s one of the few growth areas in the housing market right now.”

How big is the military market? While the numbers vary greatly from survey to survey, according to veteran statistics presented by West, there currently are 22.3 million veterans: 1,445,000 active military, 833,000 reservists and 1,325,000 families connected with the military. West cited statistics sourced from NPR or National Public Radio.

Florida has the second largest per capita veteran population in the nation, he said.

Key to working with the military is getting to know them and understanding who they are, their circumstances and their needs, West said. Volunteering is a good way to begin. For example, he often hosts a mixer for military families and outside sponsors help cover the costs of the event.

“I believe it’s OK to do well, but you have to do good,” West said. “And working with the military, helping those who have served us – that’s the ‘do good’ part.”

Source: Florida Realtors   Reprinted with permission. Florida Realtors® All Rights Reserved

Home sales and homebuilding are forecast to rise this year after sliding steeply the past five years in housing’s worst downturn since the Great Depression.

Recovery is expected to be slow, and home prices are widely expected to fall this year. But investors are betting on the start of an upturn, bidding up home builder stocks and causing them to outperform the broader stock market.

Chief executives are more positive. JPMorgan Chase’s Jamie Dimon said last week that housing is near its bottom but could stay there a year. Stuart Miller, CEO of home builder Lennar, said the market has started to stabilize because of low prices and record-low interest rates.

Market researcher RBC Capital Markets has also turned from a “bearish” view on housing to saying that 2012 “will mark a step in the right direction.”

Many economists expect home prices to fall more this year because of foreclosures and other properties sold at very low prices.

As foreclosures pick up this year, “prices will drop,” says Stan Humphries, Zillow chief economist. He says home prices won’t bottom until later in 2012 or next year.

On average, prices have fallen by about a third since 2006.

“This year will feel a lot better to builders, investors and real estate agents than to consumers,” says Jed Kolko, economist for real estate website Trulia.

Housing’s outlook is brightening with signs of a better economy. Last month, U.S. employers added 200,000 jobs, and the unemployment rate fell to 8.5 percent, lowest in nearly three years.

While an economic shock could derail progress, “there’s now more evidence of improvement in the economy, and housing will follow the economy,” says David Crowe, chief economist at the National Association of Home Builders. More improvement is expected for:

Sales. Existing home sales will rise 12 percent this year after a 2 percent increase last year, and new home sales, coming off a horrid year, will jump 74 percent this year, Moody’s Analytics predicts.

November’s existing home sales hit their highest mark in 10 months, and new home sales were the year’s second best, IHS Global Insight says.

Construction. Single-family housing starts will rise 37 percent this year, Moody’s predicts, after falling 9 percent last year.

Home builder stocks are on a run. The S&P 1500 homebuilding index is up 38 percent since mid-October, vs. 7 percent for the S&P 500.

Source: Florida Realtors   Reprinted with permission. Florida Realtors® All Rights Reserved

Uncle Sam is still giving homeowners until Dec. 31, 2012, to go through a short sale or foreclosure without tax consequences – as long as the lender officially releases the debt.

But on Jan. 1, 2013, the rules change: The amount a lender forgives, ether in a short sale or foreclosure, on a primary residence will be taxable on federal income taxes.

So if a house sold $50,000 short of what is owed on the mortgage, then the selling homeowners will owe federal income taxes on that $50,000. Homeowners would owe $12,500 if they’re in the 25 percent bracket; $7,500 if in the 15 percent tax section.

Homeowners would be on the hook even if the house sold but the bank had not formally forgiven the loan in a letter: The banks must officially sign off in writing before Dec. 31.

“It’s a huge issue – it will be a shock to many taxpayers after 2012,” said Mark Steber, the Florida-based chief tax officer for Jackson Hewitt Tax Service.

The law first came into affect five years ago as the housing market went bust nationwide.

The Mortgage Debt Relief Act of 2007 “generally allows taxpayers to exclude income from the discharge of debt on their principal residence,” according to the Internal Revenue Service. “Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.”

Up to $2 million of forgiven debt can be forgiven this year, $1 million if married and filing separately, according to the IRS.

Homeowners declaring bankruptcy could escape paying income taxes on any cancellation of debt income if the debt is forgiven in the bankruptcy even if the debtor is solvent, said Nick Jovanovich, a board-certified tax attorney in Fort Lauderdale, Fla.

“Bankruptcy trumps everything,” he said.

Or homeowners might not have to pay income taxes on any cancellation of debt income to the extent that they are insolvent immediately before the cancellation – that is, their debts exceed the value of their assets, Jovanovich added.

Steber and Jovanovich said homeowners should decide now what they are going to do – to give themselves time.

Short sales can take a long time, said Timothy Singer of Coldwell Banker in Fort Lauderdale.

He said he knows of one that had been pending for three years.

But lenders “have been gearing up” and speeding up the process, Singer added.

But even if banks quickly approve a short sale, the would-be buyer may get cold feet and the deal fall through, Singer said.

Then the sellers have to begin again, he said.

Source: Florida Realtors   Reprinted with permission. Florida Realtors® All Rights Reserved

Buyers must plan to live in the home and pay full list price. They must also take out an FHA loan, and standard underwriting rules apply. FHA loans typically require a 3.5 percent downpayment.

The deal also helps buyers who want to buy a home that needs repairs. The $100 downpayment offer can also be applied to FHA’s 203k loans, which allow a buyer to borrow more than the list price and use the extra money to fix it up. By rolling the loan money plus fix-up costs into a single loan, buyers can pay it off over time with one monthly payment.

In most cases, HUD will also cover up to 3 percent of closing costs.

Source: Florida Realtors   Reprinted with permission. Florida Realtors® All Rights Reserved

Another 68 percent of those polled plan to help their children or grandchildren become homeowners down the road.

Experts attribute the trend to low home prices, parents wanting to provide some stability in their children’s lives and the fact that their children lack the necessary cash to make home purchases. These parents recognize that cash transactions offer better deals and quicker closings, or they know their children cannot afford a 20 percent downpayment or have a type of job, such as freelance or part-time, frowned upon by lenders.

However, experts insist that parents should not jeopardize their budgets or their retirement by helping offspring become homeowners, and they should make sure their children can afford the monthly costs and other expenses that accompany homeownership.

Moreover, if a parent is offering a loan – not a gift – it should be in writing.

Source: Florida Realtors   Reprinted with permission. Florida Realtors® All Rights Reserved

For example, Lori Ordover marketed a condo building in New York by setting up a neighborhood blog that highlighted the nearby attractions to the condo, including profiles of local businesses, guides to the neighborhood, and a panel discussion on the financial district’s future.

Such “meet-the-neighbors” blogs can help acquaint buyers with an area, an article in The New York Times notes.

The neighborhood blogs may highlight nearby businesses and reveal distances to schools, shopping, and parks as well as respond to questions from prospective buyers – which is what a blog for The Azure condo unit in New York city does.

Some blogs may also solidify the connection between a familiar neighborhood and the home. The Carriage House is located in a popular neighborhood in New York, so marketers are using the blog to highlight the building’s connection to the area. The blog is featured on the Warburg Realty website, which markets the building, and also serves as cross-promotion for local businesses.

Source: Florida Realtors   Reprinted with permission. Florida Realtors® All Rights Reserved