Real Estate • May 19, 2025

A Consumer’s Guide to Homeowners Insurance

by Windermere MI

If you’re a homeowner or looking to buy a home, insuring your property is critical to protecting your investment—and if you’re getting a mortgage, it’s a must. It can be daunting trying to navigate the many options available to you. What does your policy cover…and what isn’t covered? What does the insurance company provide if your property is damaged or destroyed? Recently, the National Association of REALTORS^® released this helpful guide on understanding the ins and outs of homeowners insurance. Here is a quick rundown of what you need to know…

How does property insurance work?

For certain unexpected events that cause a loss to your home or property, homeowner’s insurance can cover the cost to repair/rebuild the property and other structures like fences or garages. Most policies also cover personal belongings within the home, legal/medical fees for accidents occurring on the property, and temporary housing if a covered event (like a house fire) makes your home uninhabitable.

What losses are covered?

Your insurance policy will list the specific “perils” that are covered. The most common type of policy covers both the structure and personal assets for losses from house fires, storms, freezing, theft, vandalism, and sudden plumbing bursts—this is known as a HO-3 or “Special Form” policy. Most policies don’t cover earthquakes or natural floods (although you can get additional policies for those perils).

Is insurance required?

There are no laws requiring you to maintain homeowners insurance. However, most lenders require it for the duration of your mortgage. Required or not, it’s generally a good idea to protect your assets (especially if you have a lot of equity in your home).

What is the cost, and how is it paid?

As with many costs, insurance premiums are on the rise throughout the country (here’s how much, where, and why). Your individual policy’s cost will be based on your home’s age, size, condition, location, and other factors like whether you have a security system or have added on additional coverage. You may have the option to pay the premium annually or break it into smaller payments. If you have a mortgage, the lender usually collects a monthly “escrow” payment that they keep in an account to pay the insurance premiums and property taxes from on your behalf.

What happens in the event of a loss?

Most insurers will cover “replacement cost”—the amount needed to buy a new, comparable version of what you lost up to a dollar limit specified in the policy. It’s important to understand that replacement cost is not the same as market value; you’ll be compensated for the actual cost to repair/rebuild/replace your home regardless of what you paid for it or what you could sell it for. Typically the insurer will reimburse you to have your home repaired or replaced with comparable quality if it’s insured to at least 80% of it’s replacement cost, less any deductible that your policy has.

Alternatively, “actual cash value” is the current value of an item that depreciates over time or with use (often used for replacing personal or under-insured property). For example, if you paid $2,000 for your new couch but now it’s only worth $1,000 due to normal wear and tear, your insurer will only pay $1,000 less the deductible. You may choose to upgrade your personal property coverage to replacement cost instead for an extra fee.

For extra peace of mind, you can also purchase an extended replacement cost policy that provides extra coverage up to a set percentage above the policy limit. This can protect you if your home costs more than anticipated to rebuild.

Are the premiums tax deductible?

The short answer is no, unless you run a business from your home or it’s a rental property. However, you may be able to claim a casualty loss deduction if you suffered a loss due to a federally declared disaster (but check in with your tax pro for advice specific to your situation).

Because laws vary from state to state, it’s important to do your homework if you’re purchasing a home in an unfamiliar area. You can either connect with me or your attorney for advice.

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Real Estate • February 1, 2024

Tax Benefits Every Homeowner Should Know About

by Windermere MI

It’s tax season again, but being a homeowner might just make it rain at refund time. Check out the tax-deductible expenses, exemptions, and credits below. Whether you own a house, condo, or mobile home, they can save you big money when you file. Just be sure to compare your total itemized deductions against the standard deduction and see which is higher (you’ll have to choose between standard OR itemized on your return). It’s also good to know what you can’t deduct before you land in hot water with the IRS…

Mortgage Interest

A house payment is comprised of two parts: principal and interest. The principal goes toward reducing the amount you owe on your loan and is not deductible. However, the interest you pay is deductible as an itemized expense on your tax return. You can generally deduct interest on the first $750,000 of your mortgage (or $375,000 each if you’re married filing separately) if you purchased your home after December 15th 2017. Those who purchased earlier (10/14/1987 – 12/15/2017) can deduct interest paid on up to a $1m mortgage.

Property Taxes

You can deduct up to $10,000 of property taxes you paid (or $5,000 if you’re married filing separately). If you have a mortgage, the amount you paid in taxes will be included on the same annual lender statement that shows your loan interest information. If you paid the property taxes yourself but don’t have receipts, you should be able to locate the total tax amount on your county assessor’s website.

Home Improvements

Making improvements on a home can help you reduce your taxes in a few possible ways:

If using a home equity loan or other loan secured by a home to finance home improvements, these loans will qualify for the same mortgage interest deductions as the main mortgage. Only the interest associated with the first $100,000 is deductible (and if you’ve already maxed out the interest deduction on your main mortgage, you won’t be eligible for any additional deduction for this loan).

Tracking home improvements can help when the time comes to sell. If a home sells for more than it was purchased for, that extra money is considered taxable income. However, you are allowed to add capital improvements to the cost/tax basis of your home thereby reducing the amount of taxable income from the sale. Keep in mind that most taxpayers are exempted from paying taxes on the first $250,000 (for single filers) and $500,000 (for joint filers) of gains.

Home improvements made to accommodate a person with a disability (yourself, your spouse, or your dependents who live with you) may be deductible as medical expenses. Examples include adding ramps, widening doorways/hallways, installing handrails or grab bars, lowering kitchen cabinets, or other modifications to provide wheelchair access.

If you live in Washington State and apply with your county prior to construction, you may be able to get a 3-year property tax exemption for major home improvements (including an ADU or DADU) that add up to 30% of the original home’s value.

Home Office Deduction

If you run a business out of your home, you can take a deduction for the room or space used exclusively for work as your principal place of business. This includes working from a garage, as well as a typical office space. Unlike most of the other deductible expenses, you can deduct home office expenses even if you opt to take the standard deduction.

This deduction can include expenses like mortgage interest, insurance, utilities, and repairs, and is calculated based on “the percentage of your home devoted to business use,” according to the IRS.

Home Energy Tax Credits

For homeowners looking to make their primary home a little greener, either the Energy Efficient Home Improvement Credit or the Residential Energy Clean Property Credit can help offset the cost of energy efficiency improvements. Even better, these are credits, which means they directly lower your tax bill.

Energy Efficient Home Improvement Credit: 30% of the cost for qualified high-efficiency doors, window, insulation, air conditioners, water heaters, furnaces, heat pumps, etc. Maximum credit of $1,200 (heat pumps, biomass stoves and boilers have separate max of $2,000).

Residential Clean Energy Credit: 30% of the cost for adding qualified solar/wind/geothermal power generation, solar water heaters, fuel cells, and battery storage.

What You Can’t Deduct:

Mortgage Insurance (this is a change as of 2022)
Title Insurance
Closing Costs
Loan Origination Points
Down Payment
Lost Earnest Money
Homeowner’s Dues*
Homeowner’s/Fire Insurance*
Utilities*
Depreciation*
Domestic staff or services*

*Unless it’s related to your home-office deduction—contact your tax pro to see if it’s a qualified deduction for you.

Do you have a low-income, disabled or senior homeowner in your life? Check out this article on King County property tax relief.

Psst…every homeowner’s financial situation is different, so please consult with a tax professional regarding your individual tax liability.

© Copyright 2024, Windermere Real Estate/Mercer Island.
Adapted from an article that originally appeared on the Windermere Blog, written by: Chad Basinger.

Buying • Real Estate • May 19, 2023

Buying a Home: A Start-to-Finish Guide

by Windermere MI

You want to buy a home.

Where do you begin?

When you’re ready to buy—or maybe just ready to start seriously thinking about it—there’s a lot you can do to prepare. Here is a checklist to help you get started…

1. Determine a Price Range

Step one is finding out your budget for your new home. The best way to do that is to meet with a mortgage professional who will review your income, assets, and credit history in order to pre-approve you for a loan. Not only does getting pre-approved allow you to narrow your home search, but it also makes your offer stronger when it comes time buy. If you don’t currently have a mortgage professional, I would be happy to recommend one.

You can also use my Home Monthly Payment Calculator to experiment with different principal amounts, interest rates, down payments, taxes, and insurance to get an idea of what you can afford. Keep in mind that these calculations are meant to be estimates—interest rates change weekly and will be determined by your credit score.

2. Make a Wish List

Imagine your ideal home. How many beds/baths does it have? How big is the backyard? How close is it to the local park? Use our Wish List to guide you in your search online and with me.

3. Start Your Searching

Once you know how much you can afford and what you’re looking for in a home, it’s time to start your search. My online search tool makes it easy to search for homes, keep track of your favorites and subscribe to property alerts when a fitting listing hits the market in your area. I can also send you potential homes and take you to tour them in person once you’re ready to get serious.

4. Know What to Avoid

As you prepare to buy, knowing what not to do can often be just as helpful as knowing what to do. By understanding the pitfalls buyers can fall into, you can identify the signs of these common buying mistakes ahead of time. Check out this article on buying homes that have been flipped, too.

You’ve found the home.

What now?

Once you’ve found the home you can see yourself living in, what’s next? There are many steps to go through before you can officially call yourself a homeowner. I will guide you through this process, but in the meantime, here’s a preview of what you can expect.

1. Negotiation

When making an offer on a home, I will negotiate on your behalf in order to attain the best terms for you. This can include negotiating the price, repair costs, timelines, and contingencies.

2. Purchase & Sale Agreement (Contract)

This is the legal contract you and the seller will enter into once your offer has been accepted by the seller. It outlines the terms and conditions of the sale and is signed by both parties.

3. Inspection

Once the Purchase and Sale Agreement is signed, a home inspector is hired to examine the home’s health, safety, and major mechanical systems. If any issues arise from an inspection, you may be able to renegotiate.

In a competitive offer situation where you wish to waive your inspection contingency in order to make your offer more appealing, I may advise you to conduct a “pre-inspection”—that is, an inspection that is conducted before you put an offer in on the house.

4. Financing

After your offer is accepted, the next step is to get final loan approval. During this process the lender will decide if they’re willing to approve your mortgage based on things like your creditworthiness and the title history and appraisal of the home you want to buy.

5. Title Report

This is a report for you and your lender detailing the history of the home you’re buying to ensure there are no legal barriers to purchasing it.

6. Escrow

Escrow is an impartial third-party process in which documents and funds are deposited by buyers, sellers, and lenders to facilitate the closing of a transaction. To learn more, read this short guide to understanding escrow.

7. Closing

During this final step of the home buying process, ownership is transferred from the seller to the buyer, closing costs are paid, and several legal documents are prepared and signed, all leading to the closing date. After closing is finalized and recorded and the funds are disbursed, the home is yours!

8. Moving Day!

Check out my printable Moving Checklist as you get ready for the big day.

Buying • June 6, 2022

How to Avoid Overpaying for a Home in a Transitioning Market

by Windermere MI

How to Avoid Overpaying in a Transitioning Market

Look Carefully at the Home Itself

Here are four home attributes beyond the number of bedrooms and baths that you should have your eye on…

Home (building) quality: Very well-built homes are a rare find and typically worth every penny of their price. Don’t confuse them with so-so homes that just measure up to the city inspector’s threshold. Lesser quality homes will cost you more in upkeep and replacement as systems and components wear out. If you purchase a lesser quality home for less, the differential might just cover the added maintenance expense. But, if you purchase a fair quality home at the going rate of higher quality homes, you might likely be overpaying.

Deferred maintenance: Different than home quality, deferred maintenance includes the to-do list of items that need to be done to maintain a home’s integrity. A home that has been well maintained over its life typically is a better investment than one that hasn’t. The true cost of deferred maintenance often adds up to more than the cost of the repairs themselves. Don’t forget to factor in the reduced life span of other components—like replacement of damaged wood beneath peeling paint or mold remediation in a damp basement caused by a clogged foundation drain.

Setting: The saying “location, location, location” didn’t get its fame from out of nowhere. A home with an ideal setting on its lot and in the neighborhood—away from busy roads and utility poles/boxes, with adequate privacy, good topography, best positioned to capture views if available, and not adjacent to undesirable elements (poorly maintained homes, water towers or other unsightly public structures, high traffic facilities, etc.) will have more value than a less-ideally sited home. When deciding what to pay for a property it is critical that you evaluate these aspects and any others relevant to a specific neighborhood to determine the +/- effect on value.

Floor plan: How a home lives—flow from room to room, size of rooms, open/closed-off spaces, and below ground vs. above ground living are every bit as important as the total home square footage. You can change a lot of things about a home, but it is very difficult to change a bad floor plan. When you are deciding how high to make that multiple offer bid, consider factoring in the added value or take-away of the floor plan.

Beyond the Four Walls

Interest Rates: In addition to being more selective about the home itself, it pays off to understand how interest rates impact your monthly housing cost. It’s a bigger deal than you might think. Every 1% increase in interest rate equates to roughly a 10% decrease in buying power. Said differently, a 10% drop in home sale price would be wiped out by a subtle 1% increase in mortgage interest rate. This means you can obtain a much more expensive home when rates are low, whereas higher rates get you less home—even though you still pay the same monthly payment.

If you have $5,000 a month to budget for a house payment (before taxes and insurance), you could purchase a $931,000 house at a 5% mortgage rate. If rates went up to 6%, the same monthly payment would only get you an $834,000 home. Your buying power diminishes considerably with each bump up in rates.

This second chart below shows how interest rates impact monthly payments. If you’re purchasing a $950,000 house at a 5% interest rate, you’ll be paying $596 less every month than if rates were 6%. That adds up quick…$7,152 in one year alone!

Job and Location Stability: Like nearly any investment vehicle, being able to buy and sell on your own time allows you take advantage of ideal market conditions or hold until a more favorable market returns. In an uncertain market, you should plan to be able to stay put for a minimum of 5-7 years if needed. If relocation or job loss is a distinct possibility, waiting to buy might avoid loss as a result of an untimely sale.

Homeownership Lifestyle: For many, homeownership represents a life accomplishment, independence, and financial security. For others, one more thing requiring maintenance and upkeep. Knowing where you stand (at this moment in time anyway) when it comes to evaluating the pros and cons of homeownership as a lifestyle choice is a better first step than an afterthought.

Final Thoughts

Want to know how you can best protect yourself in a changing real estate market? Reach out to us for help evaluating whether it would make financial sense to buy now or wait.

2737 77^th Ave SE, Mercer Island, WA 98040 | (206) 232-0446
mercerisland@windermere.com