Category: Real Estate

Home Buyers’ Biggest Regrets and How to Avoid Them

Buying a home has its vastly rewarding moments, of course, but it can also be a long road paved with sinkhole-size regrets. And no one knows this better than homeowners who’ve been through the process of buying a home (or renting an apartment) and, now looking back, have the perspective to see what they did right—and what they did desperately, disastrously wrong.

So if you’re in that oh-so-exciting phase where you’re home shopping, be sure to check out these stories of home buyers’ biggest areas of remorse. And avoid stumbling into the same traps!

Regret No. 1: Putting off house hunting until the last minute

“My biggest mistake was not starting the search for a house sooner,” declares Washington, DC, resident Aimee Agresti. “We didn’t begin until we had really already outgrown our condo.”

Two young sons, ages 4 and 1, were crammed with her and her husband into a one-bedroom, one-bath apartment that had gotten chaotic fast. Yet their “speed house searching” in suburban Maryland was more like a crawl.

“It took so long that at one point, we actually made an offer on a house we didn’t love just because we were so desperate to get out of our place,” she says. “We were definitely not in the best state of mind to be making huge life-changing decisions. Thankfully we managed to get out of that deal and waited a little longer, and the right place finally came along.” But it could have easily gone the other way.

Regret No. 2: Overlooking schools, even if you don’t have kids

Despite a long list of wants for their first home, Kim Maggio and her husband didn’t prioritize finding a property in a top public school system when they moved from Boston to Haverhill, MA in 2006—after all, she had just become pregnant.

“We went into our purchase thinking it was our five-year home,” she explains. Nearly a decade later, they were still there—paying for their two kids to attend pricey private school. “I just had to have country air, a driveway, and a yard,” Maggio says. “Clearly we bought this home to fulfill some emotional needs. But I regret buying for the short term and not thinking about resale value—and the schools.”

Regret No. 3: Caving to a seller’s every demand

Afraid to ruin her chance at landing their dream home in Chelmsford, MA, Michelle Downs agreed to adopt a stray cat that considered the place its home. OK, let’s back up for a moment.

 

“My husband and I bought our house from an old lady who was selling to live in a senior housing apartment building that prohibited cats,” Downs explains. “The woman said that there was a cat that basically lived outside and would come in the house through a cat door in the basement. She asked us to keep the cat with the house, and I was so desperate to buy the place I said yes, even though I am severely allergic to cats!”

It didn’t take long before Downs’ cat-induced sniffling got the best of her, prompting an awkward conversation with the seller, whose granddaughter finally agreed to take the feline.

Regret No. 4: Buying too big

When Kim King and her husband built their house in New Hampshire as newlyweds, she “thought for sure we would have two or three children.”

To accommodate their future brood, the couple constructed a nearly 6,000-square-foot, five-bedroom home. “But based on the years it took us to get pregnant and the complications during pregnancy, we decided that one child was the right number for us,” she says. “And that left us rolling around this huge house with one small child and a tiny dog. We certainly would not have built that size of home if we had a crystal ball and could have known what the future held.” 

Regret No. 5: Overlooking small details

Moving to Hopkinton, MA, Liz Meehan wishes she’d looked more closely at her property before she purchased it.

“It is clear now, seven years later, that the seller did a quick, cheap refinish of the kitchen cabinets to sell the house, because he used low-quality laminate cabinet covers that are now peeling!”

She regrets not having the cabinet doors replaced when they bought the house. “It’s $7,000 to resurface them,” says Meehan. “And I would have been able to fold the improvements into our mortgage.”

Regret No. 6: Skimping on the number of bedrooms you actually need

Meehan, who has twin boys, was also hoping for a home with four bedrooms, one of which she could turn into a guest room. But she didn’t stay firm on room No. 4 during their property search, and she regrets it to this day.

“We thought three bedrooms would be fine enough for the four of us,” says the homeowner. “But as the boys get bigger, it’s clear they are going to need their own rooms, so we’ll need to add one if we stay here.” It’s an expense and inconvenience she could have avoided had she stuck to her original plan.

Regret No. 7: Underestimating walkability

“I really regret not factoring location into the equation more thoroughly,” says Andover, MA, resident Simone Cote. “We got the school district and the proximity to town that we wanted. But coming from a city, where walkability was part of daily life, moving to a house in the suburbs where we couldn’t walk outside safely was a mistake. The isolation we felt really impacts our experience in the community and our ability to be part of the town.” Bummer.

7 Reasons to Buy a House in the Fall – 24/7 Wall St.

Home sales typically begin picking up in the spring of the year and reach their peak in the summer. That makes a lot of sense, of course, because the weather in most parts of the country is a lot better in the spring and summer than it is in the winter.

But, wait, what about autumn? Again generally speaking, there are fewer homes for sale and fewer buyers looking primarily because a new school year has started and families don’t want to uproot their children in the middle of a school year if they can avoid it.

But there can be good reasons for buyers to keep looking for the right home through the fall. At the National Association of Realtors website, Margaret Heidenry presents several reasons why fall may be the best season to find that new home.

 

Here are seven reasons why buying a house in the fall may be to your advantage.

1. Lower home prices. This is based on data, not anecdote. RealtyTrac analyzed 32 million home sales over 15 years and found that buyers paid 2.6% below market value for new homes purchased in October. By the way, April is the cruelest month for buyers, with sales averaging about 1.2% above market value.
2. Less competition. Buyers are just not as thick on the ground after Labor Day.
3. Worn-out sellers. If a house has been on the market through the spring and summer, and it is still on the market in the fall, chances are the sellers are more willing to negotiate.
4. Holidays are coming. Again, this works to a buyer’s favor, especially if the seller wants to be in a new home in time for the holiday season.
5. Tax credits. All those fees and costs that go along with getting a mortgage and buying a house can be used to offset taxable earnings in the current year.
6. More attention from your real-estate pros. With fewer buyers out there, agents, mortgage brokers and other professionals are more likely to focus on the buyers they have and work harder to make the sale.
7. Home improvement bargains. If you are interested in upgrading appliances, December is the time of year to do it. If you get that new house in the fall — and you have some cash left — this is a good time of year to make the changes and improvements you want to that new house.

4 Lawn Maintenance Tips for Fall | Realtor Magazine

Fall lawn maintenance isn’t just about clearing away leaves, says The National Association of Landscape Professionals. Your clients will want to do a few things in their yard not only to prep it for the colder months, but to ensure that it’s in good shape for spring.

Maintaining a healthy lawn is also great for a home’s curb appeal, and just adopting a standard lawn care program can recover 303 percent of the project cost, according to the 2016 Remodeling Impact Report: Outdoor Features.

Share these lawn tips with your clients to remind them that lawn care is something they need to think about throughout the year:

1. Rake. Fall leaves are colorful and fun to jump in of course, but they also can damage the lawn if they’re not removed in a timely matter. NALP also points out that in the winter, freezing and thawing leaves can actually release soluble forms of phosphate that can eventually end up in surface water.

2. Seed & Fertilize. Home owners will want to fertilize their lawn from September throughout November, and should seed dead areas as well as the rest of the yard so it will look full and healthy for spring. 

3. Trim. Ideally grass should be between 2 to 2 1/2 inches tall during the fall months. Any taller and it could actually cause mold to grow during the winter. Shorter grass will only encourage weeds to grow.

4. Out with the Old. Trim the perennials so they’re close to the ground and make sure all of the weeds in the yard are pulled. Pulling weeds now will cause less to grow in the spring.

5 Tax Breaks You Could Get for Buying a Home — The Motley Fool

For many people, buying a home is the single best thing you can do to save money on your taxes. While most are only available if you itemize, there are five major tax breaks homeowners may be able to use. Here are the details on each so you can estimate your annual tax savings if you take the plunge into homeownership.

1. Mortgage interest (the big one)

If you itemize deductions on your tax return, you can deduct the interest you pay on your mortgage. The deduction is valid for mortgages on a first and/or second home, and can be used for interest paid on up to $1,000,000 of outstanding loans. The deduction is not allowed on investment properties, as these have their own special tax treatment.

Just to give you an idea of how big this deduction can be, let’s say that you take out a $300,000 mortgage at 4% interest to buy a home. For simplicity, we’ll say you make your first mortgage payment on Jan. 1, and on the first day of every month thereafter. This translates to a mortgage payment of $1,432 per month, or $17,184 for the year.

Of this amount, $11,904 will be interest. That’s a pretty big amount of money. If you’re in the 25% tax bracket, this could save you up to $2,976 over your first year of homeownership.

2. Property taxes

In addition to your mortgage interest, you can also deduct the property taxes you pay to state and local governments. This deduction can be big or small, depending on where you live. For example, if you live in New Jersey, where the average property tax is 2.38% of the home’s value, this can be worth thousands of dollars per year on even a modest home.

On the other hand, if you live in a low-tax location, like my home state of South Carolina with a 0.57% average property tax rate, it could be worth just a few hundred. Of course, this is more than offset by the fact that you paid less property tax in the first place.

 

3. Mortgage insurance

If you put less than 20% down when you buy your home, you’ll most likely be required to pay mortgage insurance, at least until you get the balance paid down to 80% of your home’s value.

While nobody likes paying mortgage insurance, fortunately this is another expense that’s tax-deductible, if you qualify. Unlike the first two deductions, the ability to deduct mortgage insurance phases out for adjusted gross income (AGI) above $100,000 and disappears completely for AGI above $109,000.

4. Gains on the sale of your home

If you eventually sell your home for a profit, or sold your last one at a profit, the gains could be tax-exempt. As long as you meet three conditions, you can exclude up to $250,000 of gains if you’re single and $500,000 if you’re married.

1.     You owned the home for a total of at least two years of the five-year period before the sale.

2.     The home was your primary residence for two or more years within that five-year period.

3.     You haven’t excluded another gain that resulted from selling a home within two years.

5. Did you move for a job?

If you move for job-related purposes, you can deduct your expenses related to moving into your new home. And, you don’t even need to have a job lined up before you move. As long as you pass two IRS tests, you qualify for the deduction.

·        The “time test” says that you need to work full time for 39 out of the 52 weeks immediately following the move.

·        The “distance test” says that your new workplace must be “at least 50 miles farther from your old home than your old job was from your old home.”

If you qualify, you can deduct the expenses of driving yourself and your belongings to your new home, the costs of storing, packing, and shipping your belongings, lodging expenses on the way, and the cost of a mover or rental truck.

Best of all, this is an above-the-line deduction, meaning that you can take it even if you don’t itemize. Moving can be pretty costly, so if you qualify, we’re talking about some serious tax savings here.

The million-dollar question: Do you itemize on your tax return?

The gain on the sale of a house can be taken advantage of by anyone, regardless of whether or not you itemize. It’s an exemption, not a deduction, so it doesn’t matter how many other deductions you take. And, moving expenses qualify for an above-the-line deduction, so you should certainly take advantage if you qualify. On the other hand, the three other deductions are available only if you itemize on your tax return. If you choose to take the standard deduction, you won’t be able to use them.

If you buy an expensive home or live in a high-cost area, the interest and tax expense can result in a huge tax break. However, if you buy an inexpensive home, don’t have mortgage insurance, and don’t have any other major deductible items, buying a home might not save you anything at all. So, if you don’t already itemize, it may be a good idea to calculate the impact of buying a home on your taxes.

 

6 Things You Must Know When Buying Your Next House

Have you decided to take the plunge and buy? With interest rates hovering at historically low rates, you’re not alone. Buying a home is a major life decision, and for many people, it can also be a stressful one. With so many things to consider, it is easy to feel overwhelmed. While I can’t promise a completely stress-free experience, these tips will definitely help your home-buying process go more smoothly.

Financial Preparation

Finances are one of the biggest worries when buying a new home, so it’s good to sort them out before you begin house hunting. First, check your FICO score; lenders use this as a factor in your loans and loan rate.

Next, meet with a financial advisor and have them calculate a financial plan for you.

A financial advisor can help you figure out how much your budget can handle so that you don’t overstretch yourself.

If you’re planning to use a mortgage loan to buy your new home, research lending rates and get pre-qualified. This will save you a lot of headaches later. Don’t spend more than you can afford, regardless of the actual amount you’re pre-qualified for. In fact, I recommend buying a house that’s less expensive than your pre-qualified amount so that you can have some savings for incidentals and other important things like retirement

I reached out to Ivan Choi, a 19-year mortgage banker, past chairman of The Asian Real Estate Association of America (AREAA), Past Board Member, National Association of Realtors (NAR) for his best “insider” tips. “Know the strengths of a federally-chartered bank lender versus a “non-bank”/independent mortgage lender. If you’re buying a higher end home and need a jumbo loan, federally-chartered banks generally have the best rate and terms.  When it comes to conventional and government loans, independent lenders will sometimes compete harder for the business due to profit, especially on government loans.  On jumbo loans, independents typically don’t have good control on underwriting nor can they make much money,” he shares.

Working with Realtors

Choosing a realtor is one of the most important aspects of the home-buying process.  It’s really important to find someone with whom you feel comfortable. Ask friends and family for referrals. If you don’t have any contacts in the area, start your search online. Either way, make sure you research the realtor’s background and go to one of their open house showings if possible — there’s really no substitute for seeing them in action! Narrow your list down to three potential realtors and then interview all of them before deciding.

After you’ve chosen a realtor, remember to negotiate your terms with him or her beforehand. If you’re going to do much of the search by yourself, and just need the realtor for the final negotiation and closing, discuss terms that would be acceptable to both of you. In most cases, if you only use the realtor for finishing the contract, it’s acceptable to ask for a discount. On the other hand, if your realtor helps you with full service, the 3% full commission may be warranted. But, if you’re buying one of your realtor’s own listings, he or she would be eligible to earn a double commission (6%), so he or she may be open to a discount in this particular circumstance.

Location, Location

If feasible, start your house search by renting or living in the area before buying. Make sure you’re familiar with any area in which you’re considering buying a home since it is a long-term investment. To get the broadest perspective, try to live there through all four seasons.

Ask locals questions about the safety of the neighborhoods and check the local crime data with the police department. Always visit any potential neighborhoods at night as well as during daylight hours, and do this on more than one day. If you have children or are planning a family, consider the local public school districts when you pick a neighborhood. Check online to see where schools rank, and ask locals about their school experiences and recommendations.

When searching for the perfect location, think about the amenities in the area. Is it close to everything you need? Factor in the commuting time from work and other places you may visit frequently like grocery stores, schools, and medical facilities.

House Hints

Once you’ve narrowed it down to a specific neighborhood, it helps to make a list of your “must haves” when choosing a house. Stay flexible and keep an open mind. Think about your needs and what you consider “non-negotiable.” For example, if you’re retired, having a downstairs bedroom may be on your list of “must haves,” while a pet owner may need a large backyard.

When choosing a home, consider how easily you could re-sell it.  Homes that would be good rental properties are always a bonus. Don’t buy a home just because it has a lovely view out of the window.  Unless you own the land with the beautiful view or it’s on the edge of a protected area, your picture-perfect view could be marred in the future by new construction.

“When it comes to home features, it’s best to consult with an experienced realtor. From a mortgage standpoint, home valuations and appraisals are driven by closed sales of homes in your local neighborhood. Contrary to intuition, attributes like an amazing kitchen with marble floors doesn’t necessarily drive the valuation of your home; recent sales of comparable homes do,” adds Choi.

Inspection and Final Details

After you’ve found a house you love, be sure to get it inspected for hidden problems before purchasing. Get recommendations for independent, licensed contractors or inspectors and choose two of them to inspect your home. This is particularly important for older or historical homes.

Whatever the age of the home you’re buying, make sure you review property taxes, fault lines, and HOA costs and include these in your budget and financial plans.

The Contract

Before you sign your contract, be certain you understand it. Have your realtor explain it to you line-by-line if needed.  Realtors often have relationships with escrow and title companies, and they may be able to offer benefits or discounts for using someone they recommend, so ask about this. Before you sign your contract, ask about all the fees that are involved. For example, using a traveling notary may cost more than $100, while signing the documents at your local escrow company is free. Make sure you investigate all your options.

I hope these tips help you on your way to finding your perfect home. Always ask your financial advisor for help with any questions you have throughout the home-buying process.  They can really streamline your home-buying experience and ensure you’re well-prepared at every stage of the process.  Happy house hunting!

Down Payment Mistakes That Will Kill Your Home Buying Chances

So you finally saved up a good chunk of change for your down payment, and now you think you’re in the clear. Savings goals (and #lifegoals) = reached.

But hold it right there. You haven’t actually bought a home yet, and a lot of terrible things could happen to your hard-earned money between now and then.

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How? Poor money management, of course! Do the wrong thing, and you might end up in a paperwork nightmare. Or worse, denied a loan altogether.

So what’s the wrong thing? Glad you asked.

1. Stuff it under your mattress

It might sound like we’re just trying to be clever, and we are (always), but there is a very real concern here—especially if you earn tips and bring home cash money every night. As a former waitress, I can honestly say it happens. You get home, and you stuff whatever you want to save in a jar, or the dresser, or under the mattress—and then you forget about it.

But leaving those funds lying around isn’t just risky in the event of your forgetting or, worse, experiencing a break-in. You’re also losing out on money. The sooner you put your cash reserves in an interest-bearing account, the sooner your down payment can start making you money. Neat, huh?

There’s also another very good reason to deposit early and often.

“If you have large deposits into your accounts before escrow, the bank will assume it’s a loan from someone unless you can document that it is not,” says Casey Fleming, mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage.” “Since you can’t document that a cash deposit is not a loan, it could force the lender to decline your loan.”

2. Make large deposits at the last minute

If you’re planning on getting part of your down payment in the form of a gift from Mom and Dad, don’t wait until you’re headed to the loan office to ask for a check. As we mentioned above, lenders will assume a large recent deposit is a loan that you need to pay back. But if you “season” the funds by letting them sit for a while, the extra money won’t set off alarm bells.

Generally, lenders collect two months of bank statements before approving you for a mortgage, Fleming says. So if you make any big deposits before the 60 days during which they research, you win!

3. Make high-risk investments

 

Still a few months out from buying a home? You might get the burning temptation to do something with those down payment funds. After all, if you can use that money to make more money, that means more equity upfront. Um, right?

We’re not going to tell you it’s a bad idea. Actually, scratch that, we will: It’s a bad idea! No matter what, steer clear of riskier investments such as stocks. If the stock tanks, you’ll end up losing and waiting even longer to build things up again. A better option? A CD or money market account.

“A high-interest money market doesn’t pay much, but it’s probably the best place to park money you’ll need soon,” Fleming says.

4. Store your down payment in someone else’s account

If you’re stashing your cash in someone else’s bank account—say, Mom and Dad’s or your significant other’s—that could create big problems when you go to buy; it could cause the lender to run for the hills.

“The lender wants to make sure the buyer is the one coming up with the down payment funds,” Fleming says. (See Nos. 1 and 2!)

If your down payment savings are in a joint account and you’re both going in on the mortgage, then you’re safe. But if, say, you have stellar credit and your partner’s is in the toilet, play it safe: Make the switch to an account in your name only at least two months before you apply.

5. Wait until the last minute to consolidate funds

Let’s say all your cash is in different accounts or perhaps not liquidated yet. But you’ve got the money, so it’ll be NBD, right? Not so fast.

“Don’t leave it until the last minute, or you’ll create a paper trail nightmare for the lender,” Fleming says.

Instead, consolidate everything you need for a down payment, closing costs, and some extra reserves into one account a month or two before you apply. It’ll help things move along more smoothly.

Bottom line: Keep a good eye on those funds in the few months leading up to applying for a loan. If you don’t, it might not cause you to get denied, but at best, you’re looking at a serious financial headache for you and your lender.

Down-Payment Flubs That Delay Transactions | Realtor Magazine

 

• Making a large deposit at the last minute. Lenders collect two months’ worth of bank statements before approving a borrower for a mortgage, and a big deposit in the 11th hour could give them the impression your buyer’s financial stability isn’t consistent. Tell your clients to keep large deposits outside the lender’s 60-day window.
• Keeping money in someone else’s account. “The lender wants to make sure the buyer is the one coming up with the down payment funds,” says Casey Fleming, author of The Loan Guide: How to Get the Best Possible Mortgage. So your client’s payment should be coming from mom and dad’s account. If the buyer has a joint account with someone, that’s OK — as long as the names of both account holders are on the mortgage. Otherwise, have your buyers switch the money to an account in their name at least two months before they apply for a loan.
• Consolidating funds in the final hour. If your buyer’s savings are in different checking accounts, don’t let them consolidate the funds into one account at the last minute. They will create “a paper trail nightmare for the lender,” Fleming says. To avoid delays, they should consolidate a month or two before they apply for a loan.

The Hot Colors, Materials for Kitchens | Realtor Magazine

What colors and materials are hot in kitchen countertops, backsplashes, and appliances? To find out, the National Association of Home Builders culled the data from its own surveys as well as from Houzz, a remodeling website, and the Home Innovation Research Labs’ 2016 Builder Practices Survey, a survey of more than 1,300 homebuilders.

The surveys provide insight into what new kitchens look like, NAHB notes on its blog, Eye on Housing. “New kitchens tend to have granite countertops, raised panel wood cabinets, and come with a standard set of appliances, such as cooktops and ranges, microwaves, dishwashers, and garbage disposals. New kitchens also have white, multi-colored, or wood-based color themes, and are complemented by stainless steel appliances.”

Take a look at some of the findings.

The most popular countertops for new homes are:

• 64% granite countertops
• 14% laminate countertops
• 9% engineered stone and solid-surface countertops

*The least desired kitchen feature: Laminate countertops, according to NAHB’s Consumer Preference Survey. The affordability of laminate may be a reason why they still remain popular, the survey speculates.

The most popular countertop colors, according to Houzz consumer surveys, are:

• 30% multi-colored
• 26% white
• 18% black

The most popular backsplash colors:

• 26% white backsplashes
• 13% beige
• 12% multi-colored
• 6% gray

The most popular color for cabinetry:

• 34% white
• 20% wood – medium tone
• 9% gray
• 7% wood – dark tone
• 6% multi-colored

The most popular colors of appliances:

• 79% stainless steel
• 6% black
• 4% white

Predictions Roll in: 2017 Housing Forecasts | Realtor Magazine

We can expect a hot year for home sales in 2017, according to recent forecasts from the National Association of REALTORS®, the Mortgage Bankers’ Association, Freddie Mac and Fannie Mae, and more.

NAR is predicting existing-home sales to reach 6 million in 2017, higher than its 5.8 million forecast for this year. But other entities are even more bullish. MBA is predicting home sales to eclipse 6.5 million next year, while Fannie Mae and Freddie Mac are both predicting 6.2 million.

A huge wave of Generation Yers, who have delayed home buying, are emerging into their key buying years. They are predicted to keep home sales and condo sales strong well into 2020, according to economists.

The top markets for price appreciation likely will be in Seattle, Wash.; Portland, Ore.; Denver, Colo.; and Boston, predicts Eric Fox, vice president of statistical and economic modeling at VeroForecast. These markets’ robust economies have growing populations but a tight supply of homes for sale on the market that will likely lead to some of the largest price increases across the country.

Meanwhile, new-home construction starts likely will tick up to about 1.5 million per year to 2024, predicts Forisk Research.

Home builders likely will continue to be more subdued, despite calls for more inventory.

“Home builders behavior likely is a continuing echo of their experience during the crash,” Pantheon Macro Chief Economist Ian Shepherdson told MarketWatch. “No one wants to be caught with excess inventory during a sudden downshift in demand. In this cycle, the pursuit of market share and volumes is less important than profitability and balance sheet resistance.”

5 Insurance Tips for Home Renovation Projects | Realtor Magazine

A home renovation can be an overwhelming experience with high stakes for your clients. There’s creating the overall vision of the project, gauging its financial feasibility, finding a reliable contractor, and hoping for a smooth construction process. But an important consideration that often falls by the wayside is making sure the project is adequately insured.

Whatever a home remodel entails, it’s important that all the players involved are insured—from the homeowner, to the general contractor, to any subcontractors involved, says Mark Komiskey, Director of Homeowners Products at Esurance. He recently shared five insurance tips that you can pass on to your clients to help keep them financially sound as they consider a home renovation.

1. Notify the insurance company before the renovation.

Home remodels, big or small, typically increase the value of the home and the risk borne by it—and the homeowners insurance policy should reflect this. Advise your clients that if they fail to notify the insurer and don’t reconsider coverage offerings for the home, they could be surprised by more than the “big reveal.”

Once the project’s completed, homeowners should make sure that their policy aligns with the home’s new replacement value. They should also account for any new items purchased for the renovation, like appliances or furniture.

Moreover, it’ll likely be necessary to increase the liability coverage limit for the duration of the project. If, for instance, a neighbor is injured on the worksite, the homeowner could be exposed to unforeseen legal and medical fees.

2. Confirm the general contractor is licensed and bonded.

Before your clients greenlight a project, advise them to check that the general contractor is licensed and carries a surety bond. If the contractor fails to complete the project per the contracted agreement, the surety bond could cover the financial losses incurred as a result. The agreement should also mandate the compliance of building codes and proper permits.

Additionally, it’s critical that a contractor carries workers’ compensation and liability insurance, and that your clients ask to see both certificates. The contractor should be responsible for not only property damage, but also negligent workmanship and injuries sustained on the job.

Like every insurance policy, a general contractor’s coverage has limits, and, therefore, shouldn’t preclude increasing the limits on a homeowners policy.

3. Confirm coverage for any subcontracted workers.

For many home renovations, general contractors will subcontract builders, electricians and plumbers. Because these employees don’t work for the contractor full-time, they’re typically not included in their workers’ compensation policy. As with a contractor, a homeowner should verify that subcontractors have liability insurance.

4. Consider purchasing builder’s risk insurance.

Building materials and equipment belonging to the contractor or subcontractors aren’t covered by homeowners insurance.

A builder’s risk insurance policy, however, extends coverage to equipment or building materials that have yet to be installed or transported to the work area on the property. It’s not uncommon for thieves to target construction sites, particularly if there are valuable materials, like copper plumbing pipe. In addition, builder’s risk coverage offers financial protection for the portion of property undergoing construction.

5. Confirm the contractor has completed operations insurance.

Completed operations insurance offers a safety net for things that go awry once the project is considered complete. Say your clients had an overhead door installed, and one day the door malfunctions and closes on top of their car. If carried by the contractor, completed operations insurance could help pay to repair or replace damaged property resulting from faulty work.

Home improvement projects invoke a multitude of insurance concerns, but keeping the homeowners insurance company in the loop—and being proactive from start to finish—can do much to close coverage gaps and turn your clients’ long-coveted dream home into a reality.