It's Picture Day!

Remember “Picture Day” back in school? Did you love it? Did you dread it? Well, one day we held “Picture Day” at work. Lucky you – the results will soon appear on our website. Here’s a preview…One of our more serious moments. Ain’t we cute??

Homeowners Insurance: Is your replacement cost still accurate?

In 2006, real estate prices were sky-rocketing, existing homes were selling quickly and new homes were popping up everywhere – at a rapid pace. Homebuilders attempted to keep up with skyrocketing demand. Model Home communities needed lotteries. Contractors, sub-contractors and manufacturers of building materials were trying to keep up. Home prices went up. Construction costs went up (although not as much). It was a booming industry and homeowner’s insurance policies were designed to keep up.

Imbedded in a homeowner’s insurance policy is replacement cost coverage. This covers the cost to re-construct your home in the event of a catastrophe (the amount is different than the market price of a home). Replacement costs in a 2006 policy were based on construction costs at the time and the primary concern (of homeowners) was insufficient coverage. Features alleviating these concerns included an annual increase in the replacement cost and in some cases, coverage up to 125% of replacement cost (in case the estimate turns out to be low). These were reasonable assumptions in 2006, but times have changed. Now, we have a new concern – excess coverage.

You know the story…

Fast forward to 2009. Home prices in our area have dropped 40% or more. New home construction is almost non-existent. Work for contractors and subcontractors is limited. There is less demand and less work for these industries. Would it cost less today to re-construct your home in the event of a catastrophe? You bet. How much less? It depends.

It’s always a good idea to review your policies. If you think this particular example may apply to you, take a look at your features and contact your agent. A good agent will run a replacement cost projection at your request. A comparison of those results against your current coverage level may reveal excess coverage. It may represent a modest reduction in premium, but every little bit helps.

If you run into difficulties pursuing this issue, please let us know.

First-time Home Buyer Tax Credit

Amid all the debate about the stimulus packages and the mounting federal deficit, we may be able to find a few good opportunities. Although the job market is saturated and zero down home loans are a thing of the past, homes are remarkably affordable. The recent waive of college graduates (apartment dwellers for the past five years) may be able to find a great deal on a new or existing home and the First Time Homebuyer Tax Credit of $8,000 can help pay for it.

Although an $8,000 credit is not a reason to buy a home, it could be a reason to accelerate your search if you are in the market. A deeper look at the tax credit reveals a surprisingly diverse group of people with an opportunity - those who have been in between homes long enough may qualify.

Here are the rules:
1) The deadline is December 1st 2009. The credit can be used to purchase a new or an existing home – but must be your principal residence.
2) There is an Adjusted Gross Income (AGI) phase-out for eligibility. Single taxpayers who exceed $95,000 AGI and Married filing Joint taxpayers who exceed $170,000 do not qualify.
3) The $8,000 tax credit is claimed on your 2009 tax return. It can, however, be claimed on your 2008 tax return to accelerate the benefit or to ensure AGI qualification.
4) It’s refundable. If your total tax for the year is zero, you will receive the $8,000 by check.
5) And the most surprising rule – they define a first time homebuyer as someone who has not owned a principal residence for the past three years.

As with any tax credit, we try to keep an eye out for opportunities that apply to specific clients. However, we would be happy to discuss it if you think this may apply to you (or, more likely, your children or grandchildren). As taxpayers, we all pay for programs like these, so why not take advantage. We know we would feel much better knowing that our tax dollars helped some of you.

Please check with your accountant for all specifics.