Save on Home Insurance & Taxes

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The latest bad news for the housing market, a halt in foreclosures, makes a quick rebound in home prices look less and less likely. Homeowners with properties worth 20% or 30% less than a few years ago might therefore be wise to look for savings on homeowner’s insurance and property taxes.

Most homeowners have insurance against fire and other catastrophes. In fact, if you have a mortgage, the lender probably requires that you have a policy. Because premiums are typically part of the monthly mortgage payment, it’s easy to forget that a homeowner’s policy, like any other financial product, should be reviewed from time to time.

A key question: if your home is now worth less than it was when you got the policy, are you paying for more protection than you need?

The first step is to get a handle on your property’s current value. Services like Zillow.com can estimate your home’s value and furnish data on recent sales of comparable homes in your area.

Take the figures with a grain of salt, though. Values are based on average prices per square foot in recent sales, but data may not reflect current prices if it’s more than a few months old. It may be worthwhile to drive around and look at the “comparable sales” generated by the service, to weed out homes that don’t look much like yours.

Of course, these computer data bases don’t account for your home’s condition. If it needs tender loving care, it’s probably worth less than the computer says, and upgrades and additions may not be reflected, either, meaning it could be worth more.

Once you’re convinced the property is worth less that it used to be, talk to your insurer about the coverage. Homeowner’s policies generally don’t cover the full value of the property, just the estimated cost of replacing the home itself. Presumably, the land would retain its value even if the house burned down.

If there are vacant lots for sale in your area, you can get an idea of the raw value of the land. If not, local real estate agents, the town’s building and zoning officials and your insurer may be able to help you figure it out, so you can subtract the land value to get at the value of the building itself.

If the building is worth a lot less than it’s covered for, you might well be able to reduce your insurance premium. But if you do, remember to reassess the situation every year, so you’re sure to have adequate coverage after home prices recover.

Falling home prices have also led many homeowners to seek property tax reductions. Your town officials can tell you how to appeal your assessment. Obviously, the town won’t want to give up tax revenue, so the burden of proof is on you. Arm yourself with solid, defendable comparable sales data. It may be worth a few hundred dollars to hire a professional property appraiser.

Also get a good explanation of how your town figures its property tax bills. In many towns, properties’ official assessments are far lower than their current market values. That doesn’t necessarily mean you’ve been getting a break, though, as the system may deliberately list all properties at some fraction of their true value.

It’s generally not necessary to have a lawyer accompany you on a property tax appeal, but a lawyer might improve your chances of success. Lawyers who specialize in this area are listed in the Yellow Pages as real estate attorneys. There are some firms that specialize in appealing assessments, and many are eagerly soliciting clients today. Before signing up, get a clear description, in writing, of the service you will receive and what it will cost, and steer clear of any firm that demands a large upfront payment.

If you succeed in getting your assessment reduced, don’t spend the savings too quickly. Many local governments face big budget troubles, and some are sure to respond by raising tax rates.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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