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HSBC launches sale of non-life insurance business: sources

Posted by GuruDan on September 13, 2011

By Denny Thomas and Kelvin Soh
HONG KONG | Mon Sep 12, 2011 6:56am EDT



(Reuters) – HSBC Holdings Plc (HSBA.L)(0005.HK) has launched the sale of its non-life insurance business, sources told Reuters on Monday, a global division worth about $1 billion and now part of the bank’s plan to strip away non-core units.

HSBC, Europe’s biggest bank with a large presence across Asia, had sent out an information memorandum to potential buyers, with first round bids due by mid-October, a source said.

HSBC operates non-life insurance businesses in Britain, France, Hong Kong and Singapore. The Hong Kong and Singapore operations alone bring about $400 million in annual premiums, the source said.

HSBC’s non-life insurance businesses earned profit before tax of about $1 billion in 2010, according to a presentation made by HSBC in June.

"We do not comment on market rumors or speculation," a Hong Kong-based HSBC spokeswoman said.

The sources declined to be identified as the sale process was not public.

HSBC’s 16 percent stake in Ping An Insurance (Group) Co of China Ltd (2318.HK)(601318.SS) and 18 percent stake in Bao Vietnam, a domestic financial institution, were not part of the sale, the source said.

HSBC’s investment banking arm was running the sale process, the source added.

In May, HSBC announced plans to sell non-core businesses, which included shrinking its network of 475 U.S. branches to focus on the international business of U.S. clients and the sale of several European retail banking businesses including those in Poland and Russia.

(Reporting by Denny Thomas; Additional reporting by Kelvin Soh; Editing by Michael Flaherty and Chris Lewis)


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Pet Insurance

Posted by GuruDan on September 12, 2011

Is Pet Insurance Really Worth It?

by Dr. Doug Kenney, PetMD.

If you listen to consumer watch groups or read publications like Consumer Reports, you might decide that pet insurance just isn’t worth it.


In their latest study, Consumer Reports concluded that pet owners with mostly healthy dogs or cats will not receive back in reimbursements what they pay in premiums. But, pet owners with dogs or cats that have major illnesses or chronic diseases that result in large or frequent claims are more likely to benefit from pet insurance. Is a study really needed to figure that out?

It is true that most pet owners who purchase pet insurance will not receive back in benefits what they pay in premiums. Pet insurance companies have to take in (premiums) more than they pay out (reimbursements). Otherwise, they couldn’t stay in business. But, this is true with virtually every other type of insurance you buy.

Then why buy pet insurance? You purchase pet insurance for the unexpected major or chronic problems that you would have trouble paying for out-of-pocket, like a fracture that requires surgery, gastrointestinal foreign body, Cushings disease, diabetes or arthritis. I often tell pet owners that pet insurance isn’t for the $150 urinary tract infection, but for the $3500 fracture repair, etc.

In the study, Consumer Reports compared premiums with reimbursements, from puppyhood until Roxy was ten years old. But many of the chronic and costly diseases that pets get occur during their senior years. Remember, if your pet lives long enough, it is inevitable that he or she will develop one or more chronic diseases that can usually be managed successfully with either surgery or medication — sometimes over several years. Cumulatively, this can sometimes add up to a significant expense.

Trupanion was the only newer company that they included in the study, and they reimbursed the most when compared to the other three companies. I think it would have been interesting to see how all of the newer companies would have fared in the study.

Consumer Report’s overall recommendation is that pet owners should open a savings account to pay for their pet’s healthcare expenses instead of buying a pet insurance policy. People who have lost sight of the primary purpose of pet insurance usually make this recommendation. I addressed this in a previous blog post.

Is the decision to purchase pet insurance always just a matter of dollars and cents? I think not, because many pet owners who purchase pet insurance realize that it’s possible they won’t ever be reimbursed the amount they pay in premiums. They do it for the peace of mind – knowing that they will be able to treat their beloved pet just in case something unexpected and costly does occur.

If we could just get Consumer Reports to use their crystal ball to forecast for pet owners who may be interested in purchasing pet insurance whether their pet will be mostly healthy or not — now that would be really helpful!

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Signs of a Stable Economy…

Posted by GuruDan on September 1, 2011

June home price index rises for 7th month

(Reporting by Andrea Hopkins; editing by Janet Guttsman)
On Wednesday August 31, 2011, 9:25 am EDT

TORONTO (Reuters) – Canadian home resale prices rose in June, their seventh consecutive monthly rise and the biggest jump since August 2009, according to a report on Wednesday.

The Teranet-National Bank Composite House Price Index, which measures price changes for repeat sales of single-family homes in six metropolitan areas, showed overall prices were up 1.7 percent in June from May.

Overall prices were up 4.5 percent from a year earlier.

The gain took the index to a new high of 144.27, with prices up for the third straight month in all six of the metropolitan markets surveyed.

"What is new is that in all six markets the June monthly rise was at least 1 percent, a first since April 2005. It was 2.0 percent in Toronto, 1.7 percent in Vancouver and Ottawa, 1.6 percent in Calgary, 1.1 percent in Montreal and 1.0 percent in Halifax," Marc Pinsonneault, senior economist at National Bank Financial, wrote in the report.

For five of the six metropolitan areas, the indexes were at all-time highs. The exception was Calgary, which is still 10.9 percent off the high of August 2007.

The 12-month gain of 4.5 percent, barely more than the 4.4 percent of April and May.

"It may seem surprising that 12-month inflation has not been accelerating in step with the recent pace of monthly increases. The reason is that in May and June 2010 the composite index was gaining more than 1 percent monthly," Pinsonneault noted.

In July, according to seasonally adjusted data from the Canadian Real Estate Association, market conditions were balanced in the country as a whole, but tight in Toronto.

The index tracks home prices over time for repeat sales, so properties with at least two sales are required in the calculations. The report did not provide actual prices.

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London unemployment surpasses Windsor

Posted by GuruDan on August 12, 2011

Windsor StarWindsor Star – Wed, 10 Aug, 2011


London has eclipsed Windsor as a poster child for high unemployment in Canada and officials here say they feel that city’s pain.

"We’ve had the dubious distinction of having the highest large urban unemployment rate in Canada for quite awhile and we can certainly empathize," said Ron Gaudet, CEO of the Windsor-Essex Economic Development Corporation.

London Mayor Joe Fontana has called an emergency jobs summit for Friday in response to a rising unemployment rate, which is now higher than Windsor’s.

London’s jobless rate was 9.1 per cent in July, which was the highest of any large urban centre in Canada, while Windsor’s had dropped to eight per cent.

"We’ve been there and we don’t want to go back," said Mayor Eddie Francis. "But when our rate was climbing, we made some very strategic decisions.

"We could have buried our heads in the sand and waited it out but instead we decided to reposition this region for future growth by reducing our debt, holding the line on taxes and modernizing our transportation infrastructure to make us more attractive to outside investment."

While Fontana couldn’t be reached for comment Tuesday, a spokeswoman for the London Economic Development Corporation said the summit is designed as a brainstorming session to develop some short-term strategies but that in the long term, London will be looking for provincial and federal job creation funding.

"We’re been relatively thriving in our region but now with modest declines in our employment numbers, we have to redouble our efforts to develop long-term job creation strategies and the summit is the first step in that process," said Kadie Ward, director of marketing and communications for the LEDC.

Francis said he reacts cautiously to unemployment numbers "because they can turn on a dime but the biggest mistake we can make now is to think we’ve turned the corner and take our foot off the gas.

"We have to remain aggressive and continue to focus on our job creation and investment strategies."

Francis, who was out of the country on economic development-related business, declined to say where he was travelling but said he expects the trip to bear investment fruit by the fall.

In July 2009, Windsor’s jobless rate peaked at 15.2 per cent and has been either the worst or second-worst in Canada for most of the last 24 months, until Friday’s surprising figures were announced.

In the past 12 months, Windsor’s unemployment rate has fallen by 3.4 percentage points while London’s has increased by 0.9 percentage points.

Gaudet said the temptation is to "start high fiving when the rate drops and going into deep bouts of depression when it increases, but job creation is a long term process because it’s very difficult to move the numbers in any appreciable way in the short term.

"The important thing is to avoid finger pointing and to tap into municipal, provincial and federal job-creation strategies as much as possible.

"And what we have to remember is that we are all part of the Southwestern Ontario economic region and when one community hurts, we all share that pain," said Gaudet.

While some point to the fact that Windsor’s labour force has fallen by nine per cent in the past 12 months, suggesting that people have either left the city or given up on finding employment, which can have a positive impact on the unemployment rate, StatsCan’s figures are generated by the same method in every city across Canada.

In July there were 1,200 fewer people in Windsor’s workforce compared to June, 900 more people working and 2,000 fewer people unemployed.

In London, there were 300 more people in the workforce compared to June, 800 fewer people employed and 1,000 more people unemployed.

It’s expected that London’s unemployment rate may get worse before it improves, with Ford planning to close its St. Thomas assembly plant in September, throwing an additional 900 area residents out of work.

Closure of a parts supplier which builds seats for Ford is expected to cost the area a further 400 jobs.

London’s unemployment figres includes St. Thomas.

Fontana’s summit is scheduled for Friday and will include London region politicians, labour officials and representatives of business, manufacturers, post-secondary institutions, health care, home building and real estate.

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Rent or Buy?

Posted by GuruDan on August 11, 2011

Posted in the Canadian Press by Joanna Pachner, On Tuesday July 26, 2011, 11:03 am EDT

Home ownership, the Canadian Dream—Barry Bradey lived it with gusto. Over the past decade, the health and finance entrepreneur owned three houses in the affluent Toronto suburb of Oakville, and watched each soar in value. But after a divorce and a business failure, he needed cash on hand. So last fall Bradey (who asked that we use a pseudonym) did some back-of-a-napkin math. The 3,500-square-foot house he wanted would cost about $850,000. Even with $400,000 down, the mortgage would cost him roughly $3,000 a month. Add property tax and maintenance and "that’s $5,000 a month before you turn on the lights." Utilities, insurance and various amenities would be another grand. He also figured the downpayment came at an opportunity cost of about six per cent, equivalent to another $2,000 or so a month. He bounced these numbers off a local realtor friend; she thought the carrying cost should be closer to $12,000. Nevertheless, she insisted the house was worth the money because it was "an investment."


Bradey didn’t buy that. To rent that same house would cost him—all in, and worry-free—about $3,500 a month. A 53-year-old father of two with a startup venture underway, Bradey did the financially prudent thing. He now rents a large townhouse in the same neighbourhood for $2,200 a month. "With a house, its market value might go up or down, but it would cost me $8,000 to live there," he says. "My logic is, renting gives me flexibility. I won’t have to pay five per cent [commission] if I want to leave."

This is not yet another story about the real estate bubble. It’s a story about why more of us don’t do what Bradey did. The belief that we’re not responsible adults until we own our home, whether or not we can afford it, has distorted and stigmatized the cheaper and safer alternative: renting. And we’re literally paying the price.

Over the past decade, as the value of the average Canadian home doubled, and tripled in some areas, rents remained stable or even declined. As a result, it now costs more than twice as much to own that average home as it does to rent it. In May, Ben Rabidoux, an Ontario financial adviser (and an unapologetic renter) who runs the Economic Analyst blog, illustrated the unprecedented gap that’s opened between the cost of renting and owning with a series of fever graphs charting rents and housing prices in seven cities across the country. The lines track more or less in sync until a decade ago, when they diverge as home prices shoot toward the stratosphere, the gap growing wider with each year, like huge jaws swallowing homeowners’ retirement savings and vacation budgets and pushing them further into debt.


Even before the recent run-up, renting suffered under the perception it’s money thrown away that could be put toward building equity—a myth the surging home values have transformed into a near religion. Fed by this belief, Canada’s home ownership rate rose to eclipse most other rich nations’, up almost 10 per cent since 2000. Today, two-thirds of households live in privately owned homes, rising to 70 per cent in Vancouver and 74 per cent in Calgary. In New York, Paris or San Francisco, that proportion is closer to a third. In fact, in much of Europe, lifelong renting is the socially respectable norm, backed by rent controls and tenant protection laws.

With widespread warnings that we’re approaching the peak of the housing boom, with Canadians more indebted than ever, largely due to their outsize home investments, and with cities like Toronto boasting some of the lowest rents among major world centres, why aren’t more of us re-examining the math? The reasons are cultural and emotional, backed by ill-conceived public policy. This Canadian Dream is an expensive delusion. There’s never been a better time to rent.

Every asset class has standard ways to measure value. For stocks, there’s the price-to-earnings ratio; for bonds, there are different yields. For real estate, the typical valuation ratios are price to income (what you can afford to buy) and price or buy to rent (what you could make in cash flow). According to Ed Sollbach, a Desjardins Securities strategist, the buy-rent ratio for the four biggest Canadian cities is currently above 2:1 —meaning it costs twice as much to buy as to rent the average home—and 3.1:1 in Vancouver. That ratio, it bears noting, only compares rent to mortgage costs; it doesn’t include the various expenses entailed in home ownership—taxes, maintenance, insurance—that can more than double the monthly outlay.

It’s long been established that, over the long term and after adjusting for inflation, housing produces almost no return on investment. The calculus looks even bleaker for people who don’t hold on to their properties for long. And that’s most of us. In Vancouver, for example, a recent survey found that half of new condo buyers expected to live in their units less than six years. When commission and closing costs, maintenance, moving and other expenses are added up, the sum can easily eclipse any equity amassed in that short time—even in a city with a skyrocketing condo market. What’s more, in the first years of ownership, your mortgage payments are going primarily to paying interest on the loan. Renters and owners both "throw money away"; the former just toss it to landlords and the latter to bankers. Or as Rabidoux, who’s writing a book about our housing obsession, puts it, "the majority of new homeowners are still renters; they’ve just gone from renting space to renting money."


While financial gains from home ownership are iffy at best, the opportunity cost is significant. When Alexandre Pestov, a strategic consultant and research associate at York University’s Schulich School of Business, compared buying a two-bedroom Toronto condominium to renting it over the past 25 years, he found that the renter ended up $600,000 richer than the owner if he invested the spare cash in low-risk bonds. Several other studies have reached similar conclusions: renting while you conservatively invest your savings is financially smarter than buying a home.

"We have a very distorted picture right now," says Pestov, "because of the very low interest rates and the influx of speculative capital." While these factors have propelled the buying spree, they’ve also been great boons to renters. The condo boom, for example, owes a lot to "specuvestors" who rent their units before flipping them. Since they’re looking to cash in on the price appreciation, as long as the rent covers their mortgage payments, they figure they’re ahead. Cheap mortgages, combined with rent control laws in most large provinces (except Alberta), have meant that this new stockpile of condos has suppressed rental prices. "In Toronto, it’s a big factor," says Vince Brescia, president of the Federation of Rental-housing Providers of Ontario (FRPO). "This is brand new product, so it’s very competitive."

Rents were also hit by a drop in demand as most people who could scrape together a downpayment rushed to buy. For example, in Ontario between 1996 and 2006, and especially in the last decade, tenant households dropped by 84,000. "It’s unprecedented," says Brescia. "You have to go back to the 1940s to find the last time tenant numbers declined." Facing sliding demand and a surging supply, landlords refrained from jacking up rents. As a result, the growth in rents in Ontario has not even kept pace with increases allowed by rent control laws.

This confluence of trends has made renting uncommonly affordable. In fact, recent studies by both the International Monetary Fund and the Organization of Economic Co-operation and Development concluded that Canadian renters get a better deal compared to their owner counterparts than renters in almost every other wealthy country.


Still, many people factor in an ownership premium—the amount they’d pay over and above the cost of renting for the freedom, stability and simple bragging rights of having their own place. But it doesn’t take a new homeowner long to discover just how large that premium can be in money and time: the constant outlays on maintenance and repairs (at least one per cent of the purchase price per year, experts estimate, and as much as four per cent), the chores and DIY projects that eat up weekends, the pressure to keep up with the ever-gentrifying Joneses. In fact, studies find that homeowners are no happier than renters and have higher levels of stress, largely due to the financial burden and greater time constraints.

Your lifestyle suffers, your worries mount—and yet, no matter how much data you throw at people, there’s an ingrained belief that being a homeowner signifies maturity and that renting connotes instability and transience. Moshe Milevsky, a finance professor at Schulich and one of Canada’s best-known home-ownership skeptics, has long argued that for young people with limited means and unrealized career potential, stowing most of their wealth in a single illiquid asset is foolhardy. Today, he thinks just about anyone would be better off renting. "I really wish I could sell my house and rent. Immediately!" he says. "The market is so overvalued. I’d sell to the biggest sucker. But my wife and kids would kill me." That’s because, for most of us, financial considerations are only part of the equation. "The decision to purchase a house goes well beyond the practical," says Milevsky. "It’s part of people’s identity."

This feeling is particularly pronounced in the cities that have seen the biggest migration to ownership. Take Vancouver: "There’s always been a high home-ownerships rate here, but through this recent mania, the stigma on renting has grown more extreme," explains the Vancouver Real Estate Anecdote Archivist (VREAA), a blogger who’s tracked the housing run-up since early 2008 (and whose unpopular opinions have led to a carefully guarded anonymity). "It’s very [common] for renters to go to a barbecue and feel sheepish when they speak to the brother-in-law or colleagues. And if you claim online that you can afford to buy but choose not to, you’re jeered as clearly lying."


While the average price of a Vancouver home is now more than 11 times the average family’s income, the rental market has stayed earthbound. But VREAA notes that the bubble has raised the "social cost" of renting. "[It’s] become broadly socially synonymous with being relatively impoverished and disenfranchised," he wrote in a post that drew passionate debate. One respondent noted that people are renting luxury units in new buildings they can barely afford to give the illusion they own. Another said that even though renting saves him and his wife $4,000 per month, in social terms, "we’ve never felt poorer."

Vancouver may be extreme, but the stigma is just as real elsewhere. Bradey, the new convert to renting in Oakville, knows that his friends, who are largely well-to-do and own their homes, see his move as a regression. "Even in my own mind, I probably downgraded [my social status] from an A+ to a B+," he says. Still, he believes that, were most people who may pity him now forced to go without income for three months, they’d be in trouble.

Canadians’ attitudes about housing have long been shaped by government policies and the tax system. There is a large discrepancy in taxpayer subsidies for owners and tenants, according to a study released last fall by the FRPO and the Canadian Federation of Apartment Associations (CFAA). The average homeowner receives $1,823 a year through programs such as tax-free capital gains on the sale of principal residences and the Home Buyers Plan that lets first-time buyers withdraw money from their RRSPs for down payment. Renters, meanwhile, get $308—even though, on average, they have half the income of owners. CFAA president John Dickie argues that this situations benefits neither taxpayers nor the economy. "The government should get out of the business of encouraging people to own," he says.

There’s a broader economic case for encouraging more people to rent. Aside from consumers’ dangerously high levels of debt, having so much money concentrated in housing makes the whole economy less efficient. In his 2010 manifesto Renting the Dream: Housing in America after the Great Reset, University of Toronto professor Richard Florida goes so far as to paint home ownership as a relic of a different time. "Owning your home made sense when people could hope to hold a job for most or all of their lives," he writes. "But in an economy that revolves around mobility and flexibility, a house that can’t be sold becomes an economic trap," preventing people from moving to where the jobs are. Studies in both Europe and the U.S. corroborate this argument, showing linkages between high home ownership rates and unemployment.

In the glow of our pride of ownership, we tend to forget that owning your residence is hardly the global norm. Quebec, where home ownership rates have been rising, remains a renting-friendly society, at least in the urban centres, and Montrealers who move to Toronto are often shocked by the pressure they feel to buy. In Switzerland, Sweden and other parts of Europe, particularly where rental markets are highly regulated, the majority rents. In fact, Germany, Europe’s economic engine, has the European Union’s highest proportion of renters, according to London-based property research firm RICS. In Berlin, 90 per cent of residents rent; in Hamburg, the share is 80 per cent. And renters aren’t the lower-income contingent: professionals who spend half their earnings on rent are not uncommon. While Germans do want to own, they don’t feel pressed to buy when they can’t afford to, the way Americans, Canadians and Britons do. The difference can be traced to real estate market trajectories: Over the past decade, while housing bubbles percolated through much of Europe and in North America, home values rose less than three per cent in Germany. Renting has no stigma because Germans don’t think of home ownership as an investment opportunity of a lifetime.

European governments are also less in-clined toward home ownership boosterism. In parts of Europe where renters dominate, tax regulations don’t favour owners, rents are tightly controlled, unlimited-length leases are common, and supply of attractive apartments is plentiful. As a result, notes Dickie of the CFAA, European renters don’t move as often as North Americans.


The European attitude is in line with the broader social trend of consumers focusing more on services rather than assets. Ten years ago, American economist Jeremy Rifkin predicted the onset of "the age of access," where we’d pay to use things, not own them. We already see this in other sectors, from the rapid growth of car-sharing to tech tools being rented off the Internet cloud. Richard Florida, for one, advocates what he calls "plug-and-play" housing, where flexible rental arrangements of furnished and unfurnished residences with hotel-style amenities will serve the increasingly mobile workforce.

In the U.S., after the fiasco of George W. Bush’s "ownership society," a shift in mentality has already started. Home ownership has experienced the biggest decline in two decades, and the number of renting households has been growing by about 700,000 a year since 2006. In New York, San Francisco and other thriving cities, brokers are reporting sharply rising demand for luxury rentals, as affluent people who could afford to own decide there’s no cachet anymore in being a homeowner, and lots of risk. Indeed, in a recent poll, 71 per cent of Americans conceded that renting has advantages over buying.

"Renting has become culturally accepted in the U.S.," says Desjardins strategist Sollbach, who’s tracking the market correction. Ironically, this shift is happening at a time when the plunging prices in some regions make buying advantageous. "But Americans have had such dramatic losses that the whole idea of owning has been drummed out of people’s minds," he says. "They’ve gone through a life-death experience." The equity markets have taken notice: the values of American apartment REITs have risen 72 per cent since early 2010.

Even in Canada, real estate dropouts seem to be on the rise. In the past year, major cities have occasionally seen bidding wars—not for homes but for prime rentals, with choice units renting for higher than asking price. But a broader shift likely won’t happen until some economic factors—most notably mortgage rates—change. We prefer owning—even though, at $366,000, the average Canadian home today costs more than twice as much as its U.S. equivalent; even though a small increase in the lending rates will push scores of over-leveraged homeowners into crisis; even though Bank of Canada governor Mark Carney is practically guaranteeing that those higher rates are coming. We’re still buying; in May, house prices rose 8.6 per cent nationally, and a stunning 25.7 per cent in Vancouver.

No one argues that owning a home is, in principle, a bad idea. But today, in this market, renting is a better one. After 12 years of rising real estate, a renter goes against a powerful cultural tide. But even if the housing bubble continues to inflate for months or years to come, it’s high time to recalculate the ownership premium we are willing to pay.

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Six things that won’t add to home value

Posted by GuruDan on October 3, 2010


Things you think add value to your home – but really don’t

by Jean Folger, Investopedia.com
Thursday, September 30, 2010

Every homeowner must pay for routine home maintenance, such as replacing worn-out plumbing components or staining the deck, but some choose to make improvements with the intention of increasing the home’s value.
Certain projects, such as adding a well thought-out family room – or other functional space – can be a wise investment, as they do add to the value of the home. Other projects, however, allow little opportunity to recover the costs when it’s time to sell.
Even though the current homeowner may greatly appreciate the improvement, a buyer could be unimpressed and unwilling to factor the upgrade into the purchase price. Homeowners, therefore, need to be careful with how they choose to spend their money if they are expecting the investment to pay off. Here are six things you think add value to your home, but really don’t.  

Swimming Pools
Swimming pools are one of those things that may be nice to enjoy at your friend’s or neighbour’s house, but that can be a hassle to have at your own home. Many potential homebuyers view swimming pools as dangerous, expensive to maintain and a lawsuit waiting to happen.
Families with young children in particular may turn down an otherwise perfect house because of the pool (and the fear of a child going in the pool unsupervised). In fact, a would-be buyer’s offer may be contingent on the home seller dismantling an above-ground pool or filling in an in-ground pool.
An in-ground pool costs anywhere from $10,000 to more than $100,000, and additional yearly maintenance expenses need to be considered. That’s a significant amount of money that might never be recouped if and when the house is sold.

Overbuilding for the Neighbourhood
Homeowners may, in an attempt to increase the value of a home, make improvements to the property that unintentionally make the home fall outside of the norm for the neighbourhood. While a large, expensive remodel, such as adding a second story with two bedrooms and a full bath, might make the home more appealing, it will not add significantly to the resale value if the house is in the midst of a neighbourhood of small, one-storey homes.
In general, homebuyers do not want to pay $250,000 for a house that sits in a neighbourhood with an average sales price of $150,000; the house will seem overpriced even if it is more desirable than the surrounding properties. The buyer will instead look to spend the $250,000 in a $250,000 neighbourhood. The house might be beautiful, but any money spent on overbuilding might be difficult to recover unless the other homes in the neighborhood follow suit.

Extensive Landscaping
Homebuyers may appreciate well-maintained or mature landscaping, but don’t expect the home’s value to increase because of it. A beautiful yard may encourage potential buyers to take a closer look at the property, but will probably not add to the selling price. If a buyer is unable or unwilling to put in the effort to maintain a garden, it will quickly become an eyesore, or the new homeowner might need to pay a qualified gardener to take charge. Either way, many buyers view elaborate landscaping as a burden (even though it might be attractive) and, as a result, are not likely to consider it when placing value on the home.

High-End Upgrades

Putting stainless steel appliances in your kitchen or imported tiles in your entryway may do little to increase the value of your home if the bathrooms are still vinyl-floored and the shag carpeting in the bedrooms is leftover from the ’60s. Upgrades should be consistent to maintain a similar style and quality throughout the home.
A home that has a beautifully remodeled and modern kitchen can be viewed as a work in project if the bathrooms remain functionally obsolete. The remodel, therefore, might not fetch as high a return as if the rest of the home were brought up to the same level. High-quality upgrades generally increase the value of high-end homes, but not necessarily mid-range houses where the upgrade may be inconsistent with the rest of the home.
In addition, specific high-end features such as media rooms with specialized audio, visual or gaming equipment may be appealing to a few prospective buyers, but many potential homebuyers would not consider paying more for the home simply because of this additional feature. Chances are that the room would be re-tasked to a more generic living space.

Wall-to-Wall Carpeting

While real estate listings may still boast "new carpeting throughout" as a selling point, potential homebuyers today may cringe at the idea of having wall-to-wall carpeting. Carpeting is expensive to purchase and install. In addition, there is growing concern over the healthfulness of carpeting due to the amount of chemicals used in its processing and the potential for allergens (a serious concern for families with children). Add to that the probability that the carpet style and colour that you thought was absolutely perfect might not be what someone else had in mind.
Because of these hurdles, wall-to-wall carpet is something on which it’s difficult to recoup the costs. Removing carpeting and restoring wood floors is usually a more profitable investment.

Invisible Improvements
Invisible improvements are those costly projects that you know make your house a better place to live in, but that nobody else would notice – or likely care about. A new plumbing system or HVAC unit (heating, venting and air conditioning) might be necessary, but don’t expect it to recover these costs when it comes time to sell.
Many homebuyers simply expect these systems to be in good working order and will not pay extra just because you recently installed a new heater. It may be better to think of these improvements in terms of regular maintenance, and not an investment in your home’s value.

The Bottom Line
It is difficult to imagine spending thousands of dollars on a home-improvement project that will not be reflected in the home’s value when it comes time to sell. There is no simple equation for determining which projects will garner the highest return, or the most bang for your buck.
Some of this depends on the local market and even the age and style of the house. Homeowners frequently must choose between an improvement that they would really love to have (the in-ground swimming pool) and one that would prove to be a better investment. A bit of research, or the advice of a qualified real estate professional, can help homeowners avoid costly projects that don’t really add value to a home.


More from Investopedia:
Home renovations that don’t pay
Top 5 home renos for your money
Will your home remodel pay off?

Posted in Uncategorized | 10 Comments »

What not to tell your insurer after an accident

Posted by GuruDan on August 19, 2010

Never admit fault, and always tread carefully
CHICAGO — Everyone knows, or should know, that you should never lie to your insurance company — that would be fraud — but what you say and what you do does matter.
Moreover, it could mean the difference between how much of, say, an automobile accident, is covered and what impact it will have on your premium… read more…


Insurance claims: Don’t worry, I’m covered

When does filing an insurance claim make sense?
Someone just backed into your car in a supermarket parking lot, then took off, leaving you with a dinged fender and a smashed taillight. Should you file an insurance claim and take the chance that your premiums will soar as a result?

Or maybe a storm toppled a tree and caused several hundred dollars worth of damage to your garage. Is that a worthwhile claim? Or will you just wind up giving the money back to the insurance company through increased premiums?

To find out, we canvassed insurance brokers across the country. Here’s what they told us: read more… 


Autos: Going for broker

You’ve heard of mortgage brokers, now meet the car broker. A good one can save you thousands on your next car.

You’ve heard of insurance brokers and mortgage brokers — but how about car brokers?

Well, they’re out there, and the right one could save you thousands on your next car.

If you’ve ever felt intimidated by a fast-talking car salesman, or bewildered by all the financing options, you may want to hire a pro to do your car buying for you. Jim Davidson says his Toronto company, Car Smart Inc., can even your odds against a professional salesperson by sending in an experienced negotiator to do battle for you… read more…

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Posted by GuruDan on August 10, 2010

HOW TO: Avoid a Social Media Disaster… http://ping.fm/Eej4X

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Posted by GuruDan on August 6, 2010

An ad of one’s own… http://ping.fm/wSE1h

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Posted by GuruDan on August 6, 2010

On Facebook, wife learns of husband’s 2nd wedding… http://ping.fm/cczZJ

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