Anyone who has owned a home has undoubtedly in the past scratched their head in disbelief as to why their homeowner’s insurance premium always seems to increase when policy renewal time comes around. You may also think that your homeowners insurance agent is in your corner when you find yourself in this predicament.

Let’s get one thing straight to start: Your insurance agent does not work for you. They work for themselves and their business which is selling insurance. I have heard more lines of bovine excrement from insurance agents than I can shake a stick at (except, of course, maybe from real estate agents.)

Ok, now that we have that straight…I have a friend who recently bought a single-family home and paid cash for it (not hard in today’s real estate market.) My friend, of course wanted to insure the property against fire, weather and the ever looming threat of a liability (slip and fall) lawsuit. When he received the proposal for the new insurance policy, the replacement cost of the property was roughly double what it would actually cost to rebuild the property from the ground up.

When he inquired with the insurance agent as to why the agent “passed the buck” saying that  they use a company who provides a “replacement cost estimator” calculation based on local construction costs and materials. The insurance agent also mentioned that there is nothing they could do to reduce that amount. For the uninitiated, the replacement cost of a building is usually an amount the whole policy premium is based on. Most of the premium line item amounts are simply a percentage of the replacement cost. So by keeping that amount high (and increasing it every year), the insurance agent and insurance provider is assured of higher and higher premiums. I should also mentioned that the agent handed my friend a line of garbage which included the fact that she, the insurance agent, was “in the same boat” and there was nothing she could do about it either, as if that was any consolation. When my friend looked into the company providing the “replacement cost estimator” the company’s main selling point was to “increase the premiums” charged by the insurance agency and “insure a more stable cash flow” for the business. That nugget was stated right on their web site, not hidden in the fine print of a contract. By the way consumers have no choice in the matter either. As in, they can’t demand that the insurance agent use a different company’s “replacement cost estimator.”

Not wanting to play that game, my friend asked the agent about increasing the “hurricane deductible” (windstorm coverage) as a way to reduce the premium. In Florida, the “windstorm portion” of a homeowners insurance policy is a large part of the premium. By doubling the windstorm deductible, the agent was able to reduce the premium by only by about 10%. Typically, in Florida anyway, the windstorm insurance will be used to replace your roof if it’s damaged in a storm. Well, by reducing the policy premium by 10%, my friend’s windstorm deductible was double what it would cost to replace the entire roof.

In the end, my friend opted for a liability only policy and decided to “self insure” the property itself thereby reducing his premium by 75%. Now the reason I call this a “racket” is because my friend owned this property outright, as in, without a mortgage. If he had a mortgage, he would have had no choice BUT to buy full insurance coverage thereby perpetuating this huge money suck. Just lovely, isn’t it?

Before venturing out to purchase real estate,

whether it is vacant land or existing homes, get pre-qualified by the lender of your choosing. Nothing pains me more than to watch perspective buyers find exactly what they want, only to find out that they are not qualified for the purchase. Not to mention that, in this day and age, many sellers are requiring that an Offer To Purchase is accompanied by a pre-qualification letter.

Talk to a Mortgage Specialist

DO NOT GO IT ALONE, sit down and talk to a loan officer, whether it is at the bank where you do business already or with a company that specializes in home mortgage lending. When you have this sit down, be frank and honest, do not embellish on any of your financial details. The loan officer can only help you if they have the correct information. When you leave this meeting, you should be armed with the knowledge of knowing exactly where you stand. If you are capable of purchasing, you will have the number that you can spend, and if you are not capable of purchasing at the moment you should have the information and a step-by-step approach to get yourself to where you can buy. Keep in mind that during this initial conversation it is not necessary, nor should you give permission, for your credit history and other vital stats to be verified. Most loan officers will give the information you need to begin your search without verifying those details. If the mortgage broker or loan officer will not do this for you, find a different mortgage broker or loan officer.

Find a Buyer’s Agent

Your second hurdle to cross, is to find an experienced real estate agent, knowledgeable in the selected area’s real estate market, to represent you and help in your search. Speaking of search, your buyers agent must also be a member of the National Association of Realtors in order to have access to the MLS system. DO NOT GO IT ALONE! In this day and age of the internet, many buyers take it upon themselves to do all their own searching and investigating of the real estate market in an area. If you are just looking around a city or area to see what it has to offer, that’s great. If you are serious about buying a home, find a Realtor in that market and put them to work. Having a buyer’s agent in most scenarios costs you the buyer absolutely nothing and the seller of a listed property has their agent aggressively representing them. Remember that all listings in the Multiple Listing Service already have an agreed upon commission split between the Realtors involved in the transaction that is paid by the seller.

How Real Estate Agency Works

Here is how real estate agency works. A listed property that you have found on an area MLS search or through some other form of advertising has the commissions the real estate agents are to be paid already built into it. When that property is sold the listing agent and the buyer’s agent split this commission, which is paid by the seller of the property. The fee is already included and being paid out whether you have an agent representing you or not. Sometimes you and your agent look through what is currently listed without finding a suitable property. However, we still have the For Sale By Owners (FSBO’s) to go. In the event, you look at FSBO’s, having a buyer’s agent becomes even more beneficial because the seller is not under any obligation to disclose facts to you. While you may end up having to pay your real estate agents commission, he/she will earn every penny of it by making sure the price you pay is relative to the fair market pricing. They will assist in drafting the Offer To Purchase and Contract that protects you in the transaction, make sure all the appropriate home inspections are completed on time, help you hire an attorney to close the transaction and help you avoid all the stress.

Hiring a Real Estate Agent
 Florida Trend Staff | 3/27/2012

Inventory is down, but prices are anemic in the Treasure Coast. For the year, single-family home sales fell 6%, but the median price stayed level at $108,200. Condos saw just a slight dip in sales volume and a 6% rise to $85,600 in median sales price. “It’s stabilized,” says Sarah Taylor of RE/MAX Masterpiece Realty in Port St. Lucie. Taylor reports seeing a fair number of out-of-state people in their 50s buying now while prices are low. Buyers plan to rent their new purchases until they’re ready to retire.


    As a seasoned real estate investor I have used bank financing, hard money financing, mortgage loan brokers to fund my deals. Because these are very limited in the type of "loans" they are allowed to sell they can only accommodate a certain few types of real estate deals.

    For individuals who like to "keep their money working" through these "lenders", thinking that their investment money is more secure through them miss out on investments "secured by real estate", (just as secure as the lenders deals) some deals will have much greater returns under terms that can keep your money longer and that you decided upon.


    January 2014