What are the risks of owning a home?

cloud over home
Accepting the Risks of Home Ownership
by Dan Krell © 2009

For many, owning a home is part of their long term financial and personal plan. Unfortunately for some, the responsibilities and risks of home ownership are not well thought out; many first time home owners are unprepared. The benefits of home ownership are often presented to first time home buyers, how about the risks?

During the recent real estate market boon, it seemed as if there were no risks to home ownership. Homeowners, who felt that their home was too much of a financial burden, were able to sell their home quickly and sometimes made a profit. However, when home values began to depreciate, it become all too clear that there are inherent risks to being a home owner, which include decreasing property values, increasing home related expenses, and poor home maintenance.

The real estate market, like other financial markets, is cyclical. There have been escalating market cycles, like the recent “seller’s” market; and there have been depreciating market cycles, some down cycles being much like what we are currently experiencing. Many first time home buyers, who bought homes as a commodity often analyzing their purchases as if it were a mutual fund, are now finding that (unlike mutual funds) selling a home may not be as easy as previously thought. Selling a home in a down market has many considerations, such as an increased marketing time and the possibility of owing more on a mortgage than the value of the home.

During an escalating market, it is easy for people to talk about home value appreciation as one of the benefits of home ownership. Unfortunately, in the recent boon market, many home buyers were caught up in the exuberance of rapid appreciation such that they believed that home value appreciation is guaranteed- no matter the type or condition of the home. Some home buyers are now lamenting their purchases because they bought homes they did not much care to live in but rather for the perceived “investment” value.

Many first time home buyers are also not prepared for increasing monthly housing expenses. Keep in mind that a first time home buyer’s monthly mortgage payment is already more than their monthly rent. Because of rising property tax and increasing utility costs, home buyers need to consider that the associated cost of home ownership will most likely increase over time. Although some of the initial increase may be offset by an interest tax deduction, the increases often add more to monthly expenses than the savings of the deduction.

Maintenance is an ongoing expense that is often overlooked by home buyers; all homes, including new homes need regular maintenance. Lack of home maintenance becomes a threat to anyone’s home leaving the home’s systems, walls, and foundation vulnerable to the elements, which can erode the home’s value.

Be prepared to take on the risks of home ownership. Take into account the reasons for owning a home as well as the financial responsibility you place upon yourself. Although long term home ownership has proved to be a good investment for many, value appreciation is not guaranteed. Additionally, the cost of home ownership along with future increases should be anticipated. You can get more information about the benefits and risks of home ownership by visiting HUD (HUD.gov), Fannie Mae (FannieMae.com) and Freddie Mac (FreddieMac.com).

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 15, 2009. Copyright © 2009 Dan Krell.

Home Energy Audit: facilitate your sale and save money on utility bills

by Dan Krell

If you are planning to sell your home, you may want to begin to search for your last twelve months of utility (gas, electric, and/or oil) bills. As of January 1, 2008, the county will require a home seller to provide home energy efficiency information, which includes utility costs and any efficiency improvements or opportunities for energy efficiency improvements.

According to Montgomery County Bill 31-07, enacted into Montgomery County Code Real Property 40-13b earlier this year, a home seller must provide potential home buyers the last twelve months of utility bills and information approved by the Montgomery County Department of Environmental Protection (DEP) about home efficiency improvements including the “benefit of conducting a home energy audit” before entering into a sales contract. If you have a rental property, however, you must provide the information only if you have lived in the home anytime during those twelve months.

The law was actually scaled down from an additional requirement of conducting a home energy audit as part of a home inspection. Although the home energy audit is not required, it may be a good idea for a home owner to have one anyway. Information about conducting a home energy audit can be obtained form the Montgomery County Department of Environmental Protection (montgomerycountymd.gov) and The Residential Energy Services Network (RESNET; natresnet.org).

According to the DEP, a home energy audit will help identify inefficient energy consumption by appliances and systems as well as drains on heating and air systems created by holes and leaks. Addressing home energy efficiency issues can help you reduce utility costs, create a more comfortable home environment and help the environment.

According to the DEP, a home energy audit can be conducted by a professional or on your own. A professional energy audit can vary in scope and depth as well as price (estimated between $300 and $700). Programs offering certified energy auditors include the Maryland Home performance program with Energy Star (mdhomeperformance.org) and RESNET (resnet.us).

The Maryland Home Performance program is sponsored by the Maryland Energy Administration (MEA) and is part of Governor O’Malley’s EmPOWER Maryland initiative, which has a goal to reduce Maryland’s electricity consumption by 2015. The program offers MEA trained contractors to perform energy audits, as well as inspections on any improvements completed by the contractors.

The RESNET program is a non-profit organization that has created national standards for energy efficiency ratings. The program is recognized by the Federal Government, the mortgage industry, and states where there is minimum code compliance. RESNET certified auditors subscribe to RESNET’s code of ethics, standards of practice, financial interest disclosure, and complaint resolution process.

Although a professional energy audit may be more detailed, you can conduct your own energy audit as described by the US Department of Energy’s “A Consumer’s Guide to Energy Efficiency and Renewable Energy” (apps1.eere.energy.gov/consumer). The guide describes how you can identify and locate air leaks, check your home’s insulation, and discusses how to reduce your utility bills.

As States and local communities are moving towards requiring energy audits to increase home energy efficiency, why not start today and find out how your home rates? Who knows, you may end up with a more comfortable home and save money in the process.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of November 17, 2008. Copyright © 2008 Dan Krell.

Check your furnace!

by Dan Krell

As we head toward the winter months, our thoughts turn towards our home furnaces. Regular furnace maintenance by a licensed heating professional can save you money and keep your family safe.

Having a qualified and licensed heating professional service your furnace is highly recommended due to the nature and complexity of the system. Having your heating professional conduct an annual furnace check can ensure that your furnace is clean and operating safely and efficiently. An annual thorough assessment of your furnace includes (but is not limited to): looking at the burner and pilot assembles; checking the heat exchanger for cracks; looking at the pilot thermocouple; examining the filter; checking vent piping; testing gas piping for leaks; testing the electronic ignition; testing the fan; adjusting the burner for efficiency; testing the limit switch; measuring the manifold gas pressure; measuring the temperature rise; checking for carbon monoxide; setting the heat anticipator; checking belt/tension; examining the draft diverter and lubricate the fan motor.

Although, having a licensed professional check your furnace is highly recommended, your heating professional can provide you with a list of items that you can check regularly. The list of light maintenance items may include: changing filters, installing a carbon monoxide detector, clearing the area around the furnace, looking for soot, and looking for vent leaks.

Replacing the furnace air filters every month, as well as ensuring the area around the furnace is free of dust and debris can help increase efficiency by as much as 3%. Dust, dirt, and household debris (such as pet dander) can clog the furnace blower, thus reducing efficiency and eject particulate in the air.

Changing the air filter can help maintain your health too! Keeping dirt and debris out of the furnace and changing the air filter regularly can reduce particulate in the air you breathe. The American Lung Association (healthyhouse.org) recommends using filters with a high MERV rating; the American Lung Association also recommends a higher frequency of filter changes when family members have asthma and allergies.

If your furnace uses a combustible fuel, you should have a carbon monoxide detector installed in your home. Never operate your furnace without having a working carbon monoxide detector installed. Carbon monoxide can be produced by the combustion of fuels in your furnace. Normally, carbon monoxide is vented away safely. However if your furnace is operating properly, carbon monoxide can escape into your home causing illness or death.

Unfortunately, many of us use the areas around our furnaces for storage. Heating professionals recommend that the area around the furnace be clear of combustibles and other items because they may ignite or block air flow.

Soot on or around your furnace may be a sign that your furnace is not operating properly- you should contact a licensed heating professional immediately.

Leaks in duct work can cause a significant decrease in furnace efficiency. Regular checks of your ducts can help maintain your furnace’s peak efficiency. Heating professionals recommend leaks be sealed by a ductwork approved tape (usually foil).

Having a clean and efficient furnace will not only safely warm your family during winter, but may possibly save you money in heating costs. If you are unsure about your furnace’s maintenance, always consult a licensed professional heating contractor.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of October 20, 2008. Copyright © 2008 Dan Krell.

Is Your Home Ready for the Rains?

by Dan Krell

With spring’s arrival come blooming cherry blossoms and flowers, nesting birds, and the light yellow haze of pollen on your car. Additionally, springtime means there will be sustained rains and water saturated lawns. Is your home ready for the springtime showers? With regular maintenance and scheduled inspections, your home’s roof, gutters and downspouts, sump pump and windows will withstand the springtime showers (as well as year round rains and snow) and prevent your home from becoming a water hazard.

Obviously, a leaking roof can be problematic. However, with proper maintenance, you can prevent any major leaks; regular checks can determine the condition of the roof system including the shingles and flashing. Roof systems and materials vary from home to home and wear may vary. However, curling, lifting, broken and missing shingles as well as failing flashing should be repaired as soon as possible to prevent ice dams and water penetration through sheaving and membranes.

A common cause of outside water penetration into a basement is due to clogged gutters and downspouts. When gutters and downspouts become blocked, water is not efficiently carried away from the home. Instead the water pools around the home’s foundation. Debris on the roof can not only damage the roofing material, it will clog the gutters and downspouts and should be removed immediately. You should have the gutters cleaned and inspected at least twice a year to ensure proper function.

Water may also enter your home because of a failed sump pump. The purpose of the sump pump is to remove excess water from the home that has collected in the sump pit from excess drainage around the foundation. A sump pump has a typical life span of ten years, and because parts often need servicing it should be tested regularly. If your sump pump is connected to the home’s electric system, you might consider having a battery backup system to ensure the pump is operative when you need it the most.

Windows are often overlooked when there is a leaking problem. However, water can enter around windows and seep down the walls of your home. This can happen if windows are sealed or installed improperly. A visual inspection of the window exterior can determine if the caulking or sealant around the windows is cracked or missing and in need of repair.

If you find that water has infiltrated your home, call a professional immediately- waiting can make the damage more extensive. If it is safe to do so, you may want to remove your valuables from the water. You should refrain from using any electrical equipment in and around the water; don’t use your household vacuum to clear excess water, nor should you use electrical appliances while standing in the water.

Once the source of the water penetration has been repaired, your focus will be on water removal and cleanup. To ensure proper cleanup, you might consider one of the many professional cleanup and restoration services; proper cleanup can reduce incidences of mold and mildew that arise from water damage.

Regular inspection and maintenance can prevent water damage to your home. To prevent injury, it is recommended you hire a professional for inspections and repairs.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of April 28, 2008. Copyright © 2008 Dan Krell.

Keep an Eye on Your Pipes

by Dan Krell  © 2007

Whether you own an old home or a new home, maintenance is the key to keep your home in top condition. Obviously older homes require a different level of maintenance compared to a new home. However, no matter how old your home may be, you want to keep an eye on your pipes.

If your home was built in the early part of last century, your pipes could be lead or galvanized steel. Lead pipes have the tendency to leach lead in your drinking water. Since lead has been identified as a hazardous material, it is not an ideal for indoor water delivery. Because of the inherent dangers, most lead pipes have already been replaced; however if you still have lead pipes in your home, you should consider having the pipes replaced. You can access a wealth of information about lead at the EPA website: www.EPA.gov/lead.

Another type of pipe used in older homes is galvanized steel pipes. Steel pipes that were used at the time had a tendency to rust, so the thought was that by galvanizing the steel pipes rust on the outside of the pipes would be inhibited. The problem that developed was that galvanized steel pipes rust from the inside out. The rust builds up on the inside and consequently reduces water pressure. Additionally, these pipes have had a history of leaking and bursting. As a result, some insurance companies will not underwrite a home with galvanized plumbing.

Many homes built in the 1980’s and early 1990’s had plumbing with polybutylene pipes. Polybutylene was supposed to be the pipe of the future, as it was inexpensive and easy to install. Polybutylene pipes have had a checkered past as they have a history of leaking and bursting. The problem stemmed a class action suite against Shell, the manufacturer of the polybutylene resin used in these pipes. Although polybutylene pipes are no longer being installed, many homes continue to use these pipes as the internal water delivery system. If you have polybutylene pipes, you can get more information about the class action suite, replacing the pipes and other information at www.pbpipe.com.

Presently, the most common source of water delivery in the home is through copper and PVC pipes. Although considered reliable and safe, copper and PVC pipes have had their problems as well. Copper pipes can develop pinhole leaks; locally, WSSC has been researching this problem for a solution (www.wssc.dst.md.us/copperpipe/pinholescroll.cfm). Additionally, lead solder used to connect the pipes can leach lead into the water; new lead free solder is now being used to eliminate this problem. Alternatively, PVC pipe is cheap, easy to install, and durable; however, there is some controversy that surrounds PVC as it is associated with a carcinogen, dioxin, which is released when PVC is produced and if it is incinerated.

No matter what type of pipe is in your home, general maintenance can minimize potential problems. You should know the location of the main water shut-off valves; periodically inspect pipes for leakage; make sure all plumbing fixtures are firmly secured; outdoor faucets should be shut off from the interior and drained; and be sure pipes in areas such as crawl spaces are protected from freezing. For more specific safety and maintenance information regarding your pipes, you can contact the Plumbing-Heating-Cooling Contractors Association (www.phccweb.org).

This column is not intended to provide nor should it be relied upon for legal and financial advice. Copyright © 2007 Dan Krell.