SALT LAKE CITY — Utah Republican Sen. Mike Lee has experienced the housing bust first-hand after short selling his dream home a few months after taking office.

Lee’s mortgage bank suffered a loss of up to $400,000 in the July 2011 sale of the house in Alpine, Utah, about 30 miles south of Salt Lake City, the Salt Lake Tribune reported Thursday.

Lee bought the home for about $1.1 million in January 2008, while he was working as a private practice lawyer.

He took office in January 2011.

“It certainly is something that is painful to go through and I know a lot of people are going through it, and I feel for those who have had to go through it,” Lee told the Tribune.

“It’s not fun. It’s not something any of us would have chosen. But you do what you have to do when income doesn’t match your outlays. You have to pare your outlays down.”

Lee, who was elected largely on a platform of making the federal government live within its means, said he couldn’t afford the home anymore after taking a hefty pay cut.

His short sale was made public as members of Congress were required to disclose their personal finances, including for the first time home mortgages.

Utah County records show the home sold for about $720,000 after J.P. Morgan Chase agreed to write off the loss in the value and Lee forfeited his “significant” down payment.

Lee said he knew he had to sell his home if elected because he went from

an annual salary of several hundred thousand dollars to the Senate payroll of $174,500. But he said he thought improvements to the home and a rebound in housing prices would help, along with a large sum that his firm owed him.

Home values on the street dropped when a neighbor’s home went through a short sale, he said. Then his law firm, Howrey L.L.P., filed for bankruptcy, leaving Lee with no option other than to persuade the bank to take a loss.

Lee isn’t the only one in Congress to face such financial problems.

The Illinois Daily Herald reported Rep. Joe Walsh, R-Illinois, faced a foreclosure on his condominium in 2009 as well as financial setbacks from past-due child support and tax liens.

Daren Blomquist, vice president of California-based RealtyTrac, which looks at housing trends, predicted short sales will surge in 2012.

Lee’s wife and three children are now living in a rental home in Alpine and will continue to do so for some time.

The “dream home” is now owned by the vice president of a telecommunications company, county records show.

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Information from: The Salt Lake Tribune, http://www.sltrib.com

AP-WF-05-18-12 2035GMT

Article source: http://www.mercurynews.com/real-estate/ci_20662514/republican-senator-gives-up-dream-home-short-sale?source=rss

At least once a year, it’s a good idea to review the insurance coverage on your biggest asset: your home.

Your homeowners insurance coverage should start with a replacement cost policy that covers the entire expense of replacing your home if there is a loss. You also can opt for what’s sometimes called a “guaranteed” replacement policy that typically includes around 25 percent of additional coverage over the estimated value to replace your home.

No matter what type of home insurance you have, there are many ways to adjust your coverage, whether you need to add to your policy to cover Grandma’s diamond brooch or buy separate protection to guard against flood damage.

Supplement figures generated by your insurer for the replacement cost of your home by getting a second opinion from a local contractor. Ask for an estimate of the real-world cost of rebuilding your home, including the expense of demolishing the structure, says public adjuster Robert Freitag, president of AmeriClaims Inc. in Indian Trail, N.C.

“The agents plug in square footage and construction materials, and (the computer) spits out a figure,” Freitag says. “Sometimes it’s on, and a lot of times it’s off.”

Natural disasters can also drive up replacements costs, says Ed Charlebois, vice president of personal insurance for Travelers.

“With building costs, you can’t anticipate everything that could happen,” Charlebois says. “If you think about the tornadoes

in Missouri and Alabama, I’m sure there were surges in pricing that were higher than you would have thought possible.”

Replacement cost policies usually don’t include the same level of coverage for contents — instead, the reimbursement amount for furniture, clothing and other possessions is typically based on a percentage of the replacement value for the entire house.

For those who determine their contents are underinsured, it’s “pennies on the dollar” to buy additional coverage, Freitag says.

If you live in a condominium, be sure to read the fine print of the association bylaws to determine which portion of the building is covered by the association policy and which part you must insure yourself.

“Typically, the association will cover everything in a unit, except improvements and betterments made,” Freitag says. “The association will never cover contents.”

Additions and interior renovations, such as a new kitchen, remodeled bathroom or finished basement, could push your home past its current insured value.

Some improvements may also come with unexpected insurance costs, according to Kevin M. Lynch, an assistant professor of insurance at the American College in Bryn Mawr, Pa., and a former insurance agency owner.

“If you put in a pool, you may need to upgrade your homeowners (insurance), but you also may need umbrella liability insurance,” Lynch says.

Even under a replacement cost policy, there typically will be limits on certain categories of possessions, including fine jewelry, watches, fur coats, silverware and firearms. Typical policies will cover $1,500 for each of these types of categories, according to Charlebois.

“If you have jewelry that costs more than $1,000, you will want to think about an additional endorsement, or you can buy a separate policy,” Charlebois says.

If your policy only covers items stolen from your home or destroyed by fire, then another strategy is to purchase a so-called floater policy for high-value items for coverage at home and away, Lynch says.

“These (floater) policies cover you for loss or mysterious disappearance 24/7, everywhere,” Lynch adds.

However, forget about stashing your cash under the mattress — home insurance will only reimburse you for small amounts of the green stuff.

“If you have thousands of dollars in cash and the house burns down, you might be able to recover $200,” Charlebois says.

Unless you live in certain coastal areas, damage from wind and hail is covered by most homeowners insurance policies. However, flood damage is not. Those who live in a high-risk flood plain and have a federally backed mortgage are required to buy a separate flood insurance policy through a program run by the federal government.

However, at least 1 in 5 floods occur in an area the government hasn’t designated a high-risk flood zone. If you live in such an area, Charlebois recommends you consider buying a preferred-risk policy from the federal government.

Certain breeds of dogs, such as Rottweilers and pit bulls, may not be a homeowner’s best friend, because they may not be insurable.

“If you fail to disclose you have one of these breeds, chances are that if your pet injures another person, and you get sued for liability, the claim could be denied,” Lynch says.

Whatever your home situation is, when in doubt, consult with your home insurance company or agent.

“There’s no such thing as too much communication with your agent,” Lynch says.

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Mortgage rates reached record lows, as investors grow concerned about the political unrest in Greece and fear the country could be forced out of the eurozone.

The 30-year fixed-rate mortgage fell 5 basis points to 3.97 percent. A basis point is one-hundredth of 1 percentage point. That’s the first time the fixed rate dipped below 4 percent since Bankrate started the weekly survey 26 years ago.

The 15-year fixed rate was 3.2 percent, the same as last week. The average rate for 30-year jumbo mortgages, or generally for those of more than $417,000, fell 2 basis points to 4.52 percent.

The 5/1 adjustable-rate mortgage rose 1 basis point to 3 percent. With a 5/1 ARM, the rate is fixed for five years and adjusted annually thereafter.

(Reach Robert DiGiacomo at editors@bankrate.com.)

(Distributed by Scripps Howard News Service, www.scrippsnews.com.)

AP-WF-05-17-12 2031GMT

Article source: http://www.mercurynews.com/real-estate/ci_20649213/real-estate-review-homeowners-insurance-coverage-regularly?source=rss