House Wreck: Home Investment Mistakes

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When it comes to home renovation, there are two schools of thought. In the first, homeowners make changes that make their homes more livable and personally appealing without worrying about how those changes affect the value of the house. In the second school of thought, all changes are made with an eye toward how they will affect the home's value. If you fall into the category, or simply worry about how renovations will affect your home's value, then be sure to avoid the following costly mistakes.

Overbuilding

This is the most common mistake that homeowners make when trying to improve value. Before you make too many improvements, you have to consider how your home compares to all of the rest in the houses in your neighborhood. There are two important reasons why you must make this appraisal.

The first reason for considering the value of homes in your neighborhood is because real estate managers, like Kevin Kerekes, will use the value of those homes to help determine the value of yours. This is called the "comparable sales method," and it uses information about recent, nearby sales to determine how your home stacks up. This means that your house may be worth more or less depending on the neighborhood in which it is found. The bottom line is that this method puts a kind of upper limit on how much a home can sell for based on its location. No matter how many improvements are made, the value just won't go up by much.

The second reason that neighborhood is so important in determining home value is that like-minded people tend to want to live together. That means that people who shop in your neighborhood probably like the look and feel of it. If you have bucked that trend you not only won't get any interest from people who like your neighborhood but not your house, you also won't get much interest from people who like your house but not your neighborhood.

Landscaping

A little landscaping is a good thing, but too much can turn a potential buyer off. The best way to think about landscape is as curb appeal. It should encourage people to take a closer look at your home, but it shouldn't be the major selling point. What is more, extensive landscaping can be a turn off because most people aren't interested in maintaining it.

Swimming Pools

Swimming pools are a personal preference. Some people like them, but they generally won't increase your home's value much. They certainly won't increase the value enough to offset the cost of installing the pool. The reason pools are not selling points comes down to insurance and maintenance.

Pools are dangerous. To many people they are an accident, or a lawsuit, waiting to happen. Insurance companies are well aware of the danger that pools pose and they compensate for that danger with higher premiums.

Beyond insurance costs, pools are also maintenance headaches, requiring the use of chemicals and eating up time that could be spent doing other things. The costs of maintenance, when added to the costs of insurance, are enough to explain why many potential buyers actually make their purchase contingent on removal of a pool. Most people don't get enough use out of a pool to justify the high costs associated with them.

Carpet

Like landscaping, carpet is a thing people can appreciate in moderation, but quickly come to hate when it is used to excess. Wall-to-wall carpeting is a major turnoff for buyers because it is hard to keep clean, wreaks havoc with allergies, needs to be replaced much sooner than other coverings, and is generally perceived as being "dated" no matter how new it is. Hardwood, tile, and even linoleum are better investments than carpet.

High-End Mismatch

High-end appliances and fixtures can really increase the value of your home, but not when they are paired with mid-range flooring or an average house. In general, functionality will trump fashion in the real estate market every time, so it is better to go for a fully functional home than one that has a fancy stove but could use some TLC otherwise. The general rule is to void upgrading odds and ends in several rooms and instead focus on a full upgrade for a single room. Bathroom and kitchen remodels are most likely to have a positive impact on home value and benefit from higher-end items.

The Bottom Line

When planning a home renovation, first decide if you are doing it for personal enjoyment or for financial gain. If it is the latter, then you need to do your homework. Find out what houses in your neighborhood are like and look into what features sell. In some cases you may find that renovations won't do anything to help increase the value of your home. In those cases, you can dodge an expensive bullet just by doing a little reconnaissance. Remember to research before renovating to avoid the costly mistakes discussed above.

Kevin Kerekes writes about baseball, real estate, motivation, and urban development. Read his blog, which focuses on the State of New Jersey, baseball, and investing.

Servicing Patient Accounts is NOT the Same as Bill Collecting

Today, more than ever, health insurance is both a necessity and a hot button issue. Even families with adequate and above adequate incomes struggle to find decent health insurance plans and be able to afford them. In some families only the children are insured, and the parents take their chances while trying to save up some funds for that proverbial rainy day. In other families, even when both of the parents are working, it is not possible to purchase much health insurance, and so when a major medical crisis occurs, there is a substantial bill that needs to be paid after the emergency is over and all available insurance has been utilized.

It seems to be part of human nature to put our heads in the sand when bad news arrives; this is especially true of past due notices. These ominous-looking missives tend to be put in some kind of “I’ll look at it later” pile and then ignored until forgotten. But in the famous words of J. Reuben Clark, “Debt never sleeps, never tires, is never laid off or sick, and works every day of the week with no holidays or break.” Those who have received services from the hospital that have not yet been paid for don’t seem to realize that it’s always in their best interest to work with the hospital immediately after the bill arrives in order to make arrangements. The longer a former patient ignores his or her account, the harder it becomes to rectify it easily, without hard feelings on both sides.

That is why a patient accounts servicing company, such as Financial Health, can be such a valuable asset in the management of patient receivables. Such a service works with BOTH the hospital and the patient to ensure that the patient continues to receive the same kind of respect and empathy after they are discharged as they experienced while they were in the hospital. This is a basic tenet of all good account management services. The cliched bill collector, heaping abuse and threats on the debtor over the phone, has no place in modern account management practice.

This is something that lawyers have learned as well -- the adversarial mindset is less profitable in the long run than working as a mediator. In dealing with patient accounts, the accounts receivable professional is not only working for and on behalf of the hospital but also working for and on behalf of the patient. It’s not a question of guilt, shame, or threats. The professional account manager is a knowledgeable and dispassionate third party who is there to help both sides negotiate a mutually agreeable payment schedule.

Healthcare receivable management is not a profession for amateurs. There are state and federal laws specifically governing the treatment of past due accounts, as well as innumerable rules and regulations set by the insurance companies. A professional accounts manager must be familiar with all of this, becoming, in the process, part accountant, part lawyer, part negotiator, and part financial advisor.

A professional servicing company like Financial Health will begin interacting with patients who have account issues very early on in the process; this is a proven way to increase receivables and to lessen tension. So if you are a hospital or clinic looking to increase your bottom line, you should look into an account servicing agency soon -- and if you are a patient who is worrying about your bill, you should know that most hospitals today enlist the aid of a professional account servicing company that will treat you with respect and courtesy and have at its fingertips many resources to help you settle your debt in a fair and comfortable manner.

The Top 5 Tips to Refinance Your Mortgage

In efforts to improve lending in the struggling U.S. economy, the government has begun to reduce the federal interest rate by buying bonds. This has created a lending environment which is very favorable towards the borrower. Since it has become less expensive to borrow money, lenders can provide great interest rates for home owners to refinance. In addition to taking advantage of the currently low rates, there are a few other things a homeowner can do to reduce their interest rates, reduce cost and fees, and save time overall.

Here are the top 5 ways to reduce your costs and expenses when refinancing: 

Reduce Closing Costs - there are a bevy of "fees and expenses" that can be tacked on when you apply for a mortgage or refinance. Closing costs usually amount to about 2 - 5% of the total cost of your home. These expenses include things like appraisals, title search fees, pest inspections, origination fees, broker fees, etc. In your GFE, or good faith estimate of fees (when you apply for your refinance), brokers or lenders will include an itemized list of these expenses. 

This list will include all the necessary fees as well as extra expense which pay the broker or lender. It is possible to reduce closing costs by negotiating with your mortgage broker or lender. Ask a lender to explain the fees and see if they can "waive" application fees, underwriting fees, and processing fees. Buyers may negotiate with the sellers to absorb some of the closing costs. You can also opt for a no closing cost refinance. Sometimes this type of mortgage does pass the costs and fees into the mortgage at a higher interest rate. 

Refi to get rid of Private Mortgage Insurance - PMI or private mortgage insurance is required if you have lower than 20% equity in your home. PMI can be expensive and can cost in the range of $50 per every $100,000 borrowed. For many homeowners, this amount can mean the difference between buying and renting. If the expense of PMI is too large, a borrower can refinance in order to get rid of it. A lender can get rid of your PMI by re-appraising your home and determining whether or not you have 20% equity in it. If you believe that your home values have improved, and that your equity position is 20% or better, refinancing to get rid of PMI might be a good step to take. 

Improve Credit to get Better Interest Rates - having pristine credit will always improve your access to loans and cheap money. There are ways that you can actively improve your credit score. Ways you can improve your credit include pulling your own report and clearing any mistakes which may be pulling your credit number down. 

Experts estimate that over 30% of credit reports contain inaccurate data that could negatively affect a borrowers ability to get a loan. Since all U.S. citizens get access to 1 free credit report per year at annualcreditreport.com, it is very easy to pull this report and check for any bad data. If you see anything that look inaccurate, you can write a letter disputing the inaccurate information. 

If your report seems up to date and accurate, but your score still needs help you may need to take a more active role to improve your score. In this case, you may consider a "credit builder loan" from a credit union. This type of loan is a small easy to re-pay loan, designed specifically to improve a borrower credit score. It usually takes around 6 months to repay and can improve a borrowers credit a number of points. 

Shop Online For The Best Interest Rates - since the online marketplace for loans is one of the easiest ways to find rates, you can compare multiple lenders fairly easy. There will still be a fairly large difference in rates and expenses from lender to lender. Some lender costs ranges from $100's - $1000 for the fees that compensated to each broker or lender. By searching online, you can quickly determine which lenders are charging the most in fees. You should also contact multiple lenders to let them know you are working with other companies to get the best rates. This will give you some leverage and you may be able to negotiate to get the best rates possible. 

Reduce the Amortization Period (shorten loan term to save) - most mortgages come with a repayment (or amortization period) of 15 to 30 years. The simple fact is that, the longer the amortization period, the more money you will repay in interest. Even though a longer repayment term will come with a lower monthly payment, you will still end up paying more money in the long run. 

By reducing this repayment period, you will end up paying SIGNIFICANTLY less interest on your mortgage. The difference of 5 years on a $200,000 mortgage (at 4%) can amount to as high as $25,000 in total interest payments. You need to decide whether or not a lower monthly payment or less in the total amount of interest payments is better for you.

A Smarter Way to See the World

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Money, the great inhibitor to traveling abroad. But if you’ve got to a stage in life where you have a little more free time to see the world, then it shouldn’t be wasted. With some careful planning, it doesn’t have to be: the key is knowing where to look and being flexible with your time. Here are some money-saving holiday tips for smart seniors who want to stretch their travel savings further this year…

How to Save

It’s now a well-known fact that the cheapest flights to any destination are often the last minute ones. When airlines are scrambling to fill those unused seats, that’s when you can save up to 70% off your ticket. The key, and this is difficult for most, is being able to leave on short notice. One way to get around this is to have multiple destinations in mind, along with a block of time you’ve put aside for traveling. That way when the time gets closer you have options to choose from, and are prepared for a trip.

If you prefer the certainty of an airline ticket beforehand, savings can still be had, depending on when you book your flight. Flying during the holidays is going to be the most expensive, but there is a benefit to that. The week before and after major holidays see a major drop-off in numbers of people traveling, therefore tickets will be cheaper as well.

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Where to go

These destinations are relatively inexpensive to get to, but more importantly where a dollar gets you a lot, not a little. That leaves London and Paris off the list, but there are still many beautiful places to go.

While the Caribbean is not generally known for being a budget-friendly location, this picturesque island is the most geared up towards tourists and can be very affordable, as long as you know where to look. Generally, the cheapest holidays to Barbados tend to happen in the off-season. May is the best month to go, sandwiched between the end of peak season (December to April) and the start of hurricane season (June). Once you get here, the all-inclusive resorts are a very good value, since much of the cost of visiting Barbados is tied to the cost of food.

The East has long been a top destination for backpackers, due to how cheap it is. Take Bangkok, for instance. $50 gets you at least a 3 star hotel, with more than enough money for three decent meals and almost any attraction around. Speaking of attractions, a big draw is the Buddha park, where less than $3 gains you access. Once inside you’ll see over 200 Buddhist and Hindu statues; to say that there is nothing remotely like that in America would be an understatement and it’s well worth seeing once in your lifetime. A visit to any eastern country affords a valuable glimpse into a culture and lifestyle most Westerners are unfamiliar with.

Of course, these are just a couple of suggestions for cheaper destinations. Depending on where you’re based, you might also want to check out Eastern Europe, which has opened up to tourism in recent years but remains a surprisingly good-value region to travel within, as well being home to many cultural treasures like the walled city of Dubrovnik (Croatia) and the Bridge of Mostar (Bosnia-Herzegovina).

In short, there are plenty of ways to make your golden years ones of discovery, so start planning and you can soon start saving…

Images by David, Bergin, Emmett and Elliott, and Arian Zwegers, used under Creative Comms license