Replacement Cost Versus Market Value — Are You Covered? by RealtyLine

MAY 2021 VOLUME 26 • ISSUE 1

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Replacement Cost Versus Market Value — Are You Covered? written by RIKI MARKOWITZ When a home burns down or the pipes burst and floods the house with water, homeowners call their insurance company to collect money they’ll use to repair or rebuild. If the home is considered irreparably damaged, then owners can ask the insurance company to pay the replacement cost of the home. But, what if most people don’t understand their own home insurance policy? A 2019 survey by Insurance.com found exactly that.

sibility to be sure their clients — past and current — understand their home insurance policy and are fully covered in the event that the worst case scenario arrives on their doorstep.

One area that confuses about 48 percent of policy holders is the section that describes how much money customers are entitled to when their home is injured past the point of repair. And when homeowners confuse replacement costs with market value, they’re at higher risk of being under-insured at the worst possible time.

Insurance companies arrive at a homeowner’s replacement cost using the same technology used to arrive at other types of coverage amounts. It takes into account the current cost of things like building materials, age of the roof and structure, square footage, energy costs, labor, fees and even the depreciation value. The final coverage amount represents what the company estimates it will cost to rebuild or replace the home to as close to its pre-damaged

REALTYLINE spoke to a group of real estate professionals in Austin who believe it’s their respon-

The first thing to get out of the way is that replacement cost has nothing to do with the value of a house or what a buyer would pay for it. Put simply, it’s the amount it would cost a homeowner to rebuild the home back to its pre-damaged condition.

condition as possible. Also, where you live makes a big difference in determining building costs. In areas of the country where the market has been stagnant or depressed, insurance replacement values have gone up. So you can imagine that here in the Austin area, where sales and home values have never stopped growing, replacement values have also been increasing dramatically. But not a lot of homeowners are aware of this growth and even more are completely unprepared for the degree at which their coverage is possibly lacking. In 2020 and 2021 alone, thousands of homeowners in Texas have had to replace homes injured beyond repair by hail, fires, frozen pipes and flooding from rain. For many policyholders, it was only after

Replacement Cost continues on page 12

Jessica Turner Branch Manager

It is with great pleasure that we announce the promotion of Jessica Turner to Branch Manager of our 183-Oak Knoll location. Jessica leads by example. She works tirelessly to serve her clients as well as her team members, ensuring an excellent closing experience for all. We are excited about her new role and look forward to her continued success. Congratulations, Jessica! Scan the QR code or visit the link below to learn more about Jessica and our 183-Oak Knoll team.

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Austin Board of REALTORS®

MLS Resources for a Seller’s Market Saying that Austin’s housing inventory is tight is like saying Texas summers are hot — an understatement to put it mildly. With listings moving from Active to Closed at the speed of light, it’s more important than ever to have bestin-class tools and technologies at your disposal.

SUSAN HORTON

2021 PRESIDENT

The ACTRIS MLS has you covered. In addition to the most comprehensive and accurate listing and lease information in Central Texas, ACTRIS offers multiple pro-level tools to stand out and stay ahead in a seller’s market. Here are two ways buyer’s agents can leverage the MLS to beef up their farming strategy.

Use Your Sell Score to Uncover Leads If there’s one thing every buyer’s agent needs to be doing right now, it’s farming leads by using the Sell Score feature available across multiple ACTRIS products. A Sell Score provides unique insights into which properties may be likely to transact in six months to a year. Typically, a property with a higher Sell Score is five to 10 times more likely to go on market soon. A high (625-830) or very high (831-1000) Sell Score is a great way to determine prospective sellers. ACTRIS subscribers have access to three robust products that offer a Sell Score feature: Remine Pro, Homesnap Pro, and Realist. So, whether you’re partial to Remine’s user-friendly interface, Homesnap’s comprehensive data, or the reliability of Realist, you can generate more leads by simply incorporating Sell Score as a filter in your property searches. Each of these products has something great to offer, and it takes no time at all to conduct a thorough search. As an example of how to effectively use the Sell Score feature, Remine Pro recommends using this filter in conjunction with additional filters such as Ownership Type and Home Equity to turn up more leads in a given area. Remine Pro also allows you to create a mailer campaign through their partnership with Rocket Print & Mail, making it easy to customize and send mail-

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ers to prospective clients.

Stay on Top of New Home Construction ACTRIS subscribers have access to Builders Update and New Home Source Professional, both of which offer a comprehensive view of new home construction throughout our region. New Home Source Professional provides them with an agent-branded capture page, complete with thousands of new homes, which they can use to earn new leads. Alternatively, Builders Update is locally owned and operated and provides agents with an easy-to-use, map-based search. Want more MLS pro tips? Bookmark our MLS Resources page on ABoR.com (ABoR.com/ MLS-Resources) and join our next MLS Power Hour on June 3 for a deep dive into Homesnap Pro. Register today at ABoR.com/Events.

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HBA of Greater Austin

If You Want The Job Done Right, Hire a Professional Remodeler Any homeowner planning to remodel wants nothing less than a professional job. Who wouldn’t want the best quality in terms of workmanship and materials when it comes to improving their most prized and valuable asset? With May being designated National Home Remodeling Month by the National Association of Home Builders, it seems appropriate to share some tips and tricks on how to ensure a successful project and a smooth working relationship with the remodeler.

CHAD DURHAM

2021 PRESIDENT

The dilemma that confronts many homeowners is their desire for a top-notch job at the lowest possible price. COVID has made this process even more difficult thanks to the high demand for remodelers and the scarcity of available materials. Even so, homeowners need to keep a cool head and take the time to find the right professional for the job. The extra time and money spent will pay for themselves in the satisfaction you receive while the project is in progress and the years after while you enjoy the final product. Below are a few important characteristics to keep in mind during the vetting process. The HBA’s Member Directory is a great place to start your search. Experience — Ask how long the remodeler has been in business. Longevity suggests financial stability, which is necessary for the remodeler to finish the job and still be available if problems crop up after the job is completed. Also, the more jobs the company has completed, the more expertise the remodeler will bring to your project and eliminate the hidden surprises that remodeling typically entails. Reputation — Look to the remodelers’ former and current customers to gauge the company’s reputation. Obtain the names and phone numbers of customers you can call to get their impressions of the company’s work and customer service. Call them and make personal visits to see the work they had done. Even better, get references from customers whose projects were similar to the one you are planning. Also, go visit one of the company’s jobs in progress to evaluate how they manage the construction process and how tidy they keep the job site. Ask whether these homeowners would hire the company again. Business Credentials — The HBA’s Custom Builder and Remodelers Council help to keep their members informed about new products, construction techniques, business practices, and industry issues. Participation demonstrates a remodeler’s commitment to professionalism and the remodeling industry, so be sure to resource this council before making your decision. License and Insurance — Ask to see a copy of the remodeler’s li-

cense. Though Texas does not require contractors to have a license, it is highly recommended that you hire a licensed professional. You can find out if there are any unresolved complaints against a company by calling the licensing agency. It is also important to verify that the remodeler carries workers’ compensation and liability insurance. Have the remodeler show you copies of both insurance certificates to protect yourself from liability in situations involving job site injuries or property damage resulting from the work being done on your home.

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We will miss our friend Bette Cook

Bette, a native Austinite, started in the Real Estate business in 1974 as a salesperson for NPC Homes. She obtained her broker’s license in 1984 and worked in many areas of the industry as a broker for residential, commercial, investment and management of properties. In 1996, she transitioned to the title side and joined our North American Title family in 2009 until her recent passing. Bette was dedicated to her clients and her team and always had a whirlwind story to share. ®

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WCREALTORS.org

Real Estate Agents: Benefits of Community Service Real estate professionals have a unique role serving our communities with the responsibility of seeking out and delivering on arguably the most important product and purchase for most Americans — a home. Because of the inherent networking requirements which include building personal and professional connections the role is perfect to help connect bridges and volunteer in your community. And, it has a side benefit that may bolster your career and business. More specific — it delivers a side benefit of building relationships expanding your sphere of influence and ultimately your business. It is a win, win scenario.

KRISTON WOOD

2021 PRESIDENT

Williamson County Association of REALTORS® is dedicated to giving back to the community. Our Community Service Committee works diligently throughout the year to give back and assist those in need. The most recent efforts include raising donations for Habitat for Humanity followed by our annual Food Drive in July. In 2020, we organized efforts that resulted in donating more than 38,000 pounds of food to local area food banks. In October 2020, our team hosted Treats for Troops providing candy to troops. And we wrapped up 2020 with our annual Holiday Toy Drive. The level of dedication and commitment our members display to help those in our community is truly inspiring. The 2021 Community Service Chair Kaitlin McWhorter says, “Our Food Drive we put on in the month of July helps provide supplies to all nine of the food banks in Williamson County. The Food Drive is extremely important this year as many families are struggling due to the past shutdowns of COVID-19. I have challenged our Committee to beat last year’s number but also donate their time monthly to a food bank near them.” “I find it so important that REALTORS® get involved in their local com-

munity in any way possible. I am here as the Community Service Chair to help facilitate and lead others to do so. If any member of the association has a passion to give back but is not sure where to start — well that’s where I come in! The committee is here to support all projects or ideas that others may have to give back to the community.” This month Katilin’s committee is running a Yeti™ Full of Goodies Raffle Drive to raise money for Habitat for Humanity! You can purchase one ticket for $10 or three tickets for $25 through our Events Calendar until Thursday, May 27. The drawing will take place on Friday, May 28. It will be a virtual drawing and the winner will be contacted by the association. Volunteering within your community goes far beyond simply helping others. Giving back helps you grow both personally with an added professional benefit. It allows you to broaden your horizons and increases your social awareness through compassion, understanding and engagement. Professionally you will improve your communication, teamwork and planning skills along with problem-solving and task management benefits. When you contribute to a cause that you are passionate about and connect with people in your community, you will meet other like-minded individuals. This type of networking includes indirect reminders that you’re a real estate agent and helps keep your name in the forefront of the minds of those you meet. We encourage all REALTORS® who may be considering getting involved in the community not to hesitate — get involved! You will be glad you did. With a plethora of opportunities to give back, the opportunity is wide open for personal and professional growth. When the community comes together for the greater good — everyone benefits — and isn’t that what it’s all about?

Thursday, May 27th

REGISTERHERE! HERE! REGISTER

Membership Mixer Happy Hour - 5 to 7 p.m. @ 685 Backyard 19903 Farm to Market 685 #B, Pflugerville Eat, Drink & Network with your fellow members of WCAoR! Thursday, June 3rd

Williamson County REALTORS® Affiliate Expo - 3 to 7 p.m. @ WCAoR Headquarters 123 E. Old Settlers Blvd, Round Rock Contact: Natasha McKenzie @ 512-255-6211

You are Invited.

90 Days to Pay or At Closing Terms: No out of pocket money. No credit check. 90 Days or Closing whichever comes first. Credit Card held for payment options. 8

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SPICEWOOD SPRINGS OFFICE

Susan Graham Ashley Guerra Vice President/Branch Manager Escrow Officer Escrow Officer Ashley.Guerra@austintitle.com Susan.Graham@austintitle.com

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Women’s Council of REALTORS, Austin Network

Women’s Council Continues To Thrive After Challenging 2020 This year may be every bit as challenging as last year, but members of Women’s Council of REALTORS, Austin Network are thriving. In March, to commemorate the Fair Housing Act, the Austin Network in collaboration with 12 other local networks, National Association of REALTORS and Texas REALTORS offered members the At Home With Diversity designation at a deeply discounted price as part of the “2021 Real Solidarity: It’s a Movement” challenging members to stand up for racial equality. Women’s Council of REALTORS Mission Statement: “We are a network of successful REALTORS®, advancing women as business leaders in the industry and in the communities we serve.” The “2021 Real Solidarity: It’s a Movement” brought that mission to life, supporting and celebrating minority women in leadership. It seems there have been adjustments at every turn during the last year and a half. Women’s Council of REALTORS, Austin Network has not been spared and we are looking for REALTORS interested in taking their

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Meet the Interim 2021 Austin Network Board: 2021 Interim President Lorrie Westberry Kennedy, Broker/Owner, Classic Realty; 2021 Interim Treasurerv Aaron Lee, REALTOR, Classic Realty; 2021 Interim Secretary Carissa Chandler, REALTOR, Austin Summit Group; and 2021 Program’s Director: Jennifer Gordon, REALTOR, All City Real Estate. Find us on Facebook @wcr.austin, register for upcoming events and reap the benefits. Leaders are truly made here! It is an honor to serve and we are looking forward to an active calendar providing support and making leaders!

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Replacement Cost continued from front page the damage was done when they found out their insurance coverage was not nearly sufficient. “Far too many customers find out after the fact that their replacement value is not high enough to actually build out their house,” says Levon Steele, a REALTOR with City View Realty Brokerage. Unless customers are actively keeping up with their coverage, they won’t learn about it until it’s too late. In 2019, CoreLogic, a property analytics firm, estimated that 60 percent of homeowners in the United States were living in a home with inadequate replacement coverage, and under insured by an average of 20 percent. The replacement values for most of these policies were outdated. For others, their assessment was inaccurate. But in both scenarios, in the event of a disaster, these homeowners are completely out of luck. After a storm or fire devastates one’s property, you can’t negotiate retroactive coverage. So what’s the point of bringing this up? It’s a topic that Travis County firefighters/REALTORS Levon Steele and Mike Del Castillo think about frequently. “Extreme increases in a home’s market value and rebuild costs versus insufficient replacement coverage is something Mike and I see often,” says Steele. Because of their part-time firefighting gigs, these guys are actually on the scene when victims are watching their homes flood or go up in smoke. Brandon Weber, an agent with The Weber Agency, a company that provides insurance and risk solutions, says that right now the entire country is seeing unprecedented increases in labor and material costs and it’s causing home repair and replacement prices to skyrocket. “I have a perfect example of what Austin homebuyers are going through,” says Weber. “A customer called me to get a competitive bid for his home insurance. One year ago it was valued at $532,000. If he were to renew at that valuation today, he’d be under insured by $100,000.” Just to be sure his math wasn’t flawed, Weber ran four separate estimates with different carriers. He also ran the numbers through the insurance originator’s calculator and even that company’s valuation showed that the client’s replacement coverage should have been significantly higher. “And therein lies the problem,” says Weber. “If an agent simply lets the client’s policy renew without analyzing it and running new valuations, the customer believes coverage is adequate.” But many clients don’t have an agent who is proactively pulling new valuations on every renewal to look out for his or her best interests. Steele, Weber and Del Castillo believe that brokers and agents should bring these issues up with their clients, even the ones you sold a house to five years ago. Some Insurance companies give a small inflation bump-up to customers’ home values every year. This raises percentage-based deductibles and, of course, premiums. So it’s not unrealistic for an agent to check in on a client’s replacement coverage once or twice a year. “What we’re suggesting,” says Steele, “is to reach out to your clients and tell them to contact their insurance broker or insurance company and update their policy. It’s likely that most homeowners have to add more value to their coverage because the market is not slowing down.” Steele, Del Castillo and Weber see it as a touchpoint for REALTORS to add value and stay top of mind with their clients. Once agents are aware this kind of thing happens so often, it adds tragedy upon tragedy to not notify clients. After losing a home to fire or flood, finding out their replacement value is not enough to actually replace the house makes the situation even worse,” says Del Castillo.

MAY 2021 | REALTYLINE.US

“This year,” says Steele, “costs are even higher.” Just look at the price of lumber. It’s gone from about $470 per 1,000 board feet to about $1,000. That can add $25,000 — and climbing — to the cost of an average new home build in Austin. Based on the way costs have increased up and down the chain, from labor to materials, there’s every reason to believe that the gap between homeowner’s actual replacement coverage and the replacement value is even wider than CoreLogic’s two-year-old numbers indicate. Of course, it’s in the homeowners’ best interests if they’re proactive about verifying their premiums and coverage at least on an annual basis. And it goes without saying that a majority of agents and brokers simply don’t necessarily have the time to run these numbers for clients every year. But Weber says it’s not very time or labor intensive. “The information is already in the system,” he said. All you have to do is rerun their original calculations to get the most updated numbers. “Again,” says Weber, “it’s an opportunity for agents to reach out, talk to clients and let them know you’re concerned and being proactive.” It might be a motivating factor to learn which clients are at higher risk of finding themselves in this type of situation. A lot of them are people who don’t have a mortgage anymore. “That’s the real danger zone,” says Steele, “because they don’t have mortgage companies staying on top of them to keep their insurance active.” A good number of these customers are elderly folks who’ve paid off their loans years ago and no one is around to tell them if they are under insured or their insurance has lapsed. It can be catastrophic for them. Weber recently reached out to a client. The calculations showed the homeowner needed more coverage. The client demurred, saying that his 25 percent extended replacement policy would take care of the difference. But Weber ran those numbers, too. “I told him, ‘If your home is insured at full replacement cost and you have a full loss and you need more coverage, then you can tap into the extended replacement coverage.’” At that point, the customer did not have full replacement coverage. “That’s not an argument you want to have with the adjuster after the fact,” says Weber. “We know that nobody wants to pay more money to the insurance company, but nobody wants to be caught with half the replacement value that they need,” says Steele. Clients who suddenly get a call from their REALTOR or insurance agent out of the blue probably aren’t thrilled to find out the reason for that call. But not every customer needs to pay more. “One client I called recently had coverage that didn’t even apply in Texas,” says Weber. “I told him, ‘You don’t have a basement or a sump pump. So you don’t need this coverage.’ Between raising his policy by $100,000 and taking off the endorsements he didn’t need, his premium was actually lower.” Del Castillo says that when you are delivering bad news, it’s better to put all of the details in an email. That way, the client can take his or her time to review everything and ingest the information on their time and at their pace. In his experience, Del Castillo said most clients are very appreciative. “It seems to me like everyone loves hearing from their REALTOR,” says Del Castillo. “We have a dynamic market right now and I can’t go anywhere without people asking me about real estate.” So this is an opportunity to provide value outside of saying, ‘The market is nuts right now. Are you interested in buying or selling? Put on your seatbelt and grab your checkbook!” But more than that, you’re adding some good information for homeowners while also giving yourself an opportunity to get back in the flow with clients you’ve been out of touch with for a while.

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MAY 2021

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Tejas Tuesday with TREPAC: Glyn Kennedy and Lorrie Kennedy, both with Classic Realty

John Lockhart Charity Golf Tournament: Michelle Gundlach of Classic Realty and Laurel Brown of Freedom 512 Real Estate

HBA Bryson Benefit Home Ribbon Cutting

WALLS CAN’T TALK

Title is Title. But having a TRUSTWORTHY team is what makes all the difference.

Brian Meyerdirk License #5248

Call the experts before you buy.

TREC #3304 / TDA #37603

• 5 Inspectors • 1 Engineer on staff • Same day/next day • Residential • Commercial • Multi-family • New Construction • Investors • Lenders • Consulting • Phase Inspections • Pre-listing • FHA • HUD • Construction Management • Mediation/Arbitration and More!

SHEILA BALAGIA

LORI WILLIAMS

Office Manager/ Escrow Officer

Business Development

SHEILA@ SWTATX.COM

LORI@ SWTATX.COM

To learn more about how Southwestern Title Agency can simplify your closings, simply contact us. JENNIFER RHODES Escrow Officer

Escrow Assistant

Serving Austin, Central Texas and Surrounding Areas Since 1989

JRHODES@ SWTATX.COM

LLAMBRIGHT@ SWTATX.COM

State of Texas Certified Real Estate Inspector

SUPPORT LOCAL BUSINESSES MAY 2021 | REALTYLINE.US

↗ One single point of contact ↗ Full service on every transaction ↗ Timely and accurate title commitments ↗ Superior communication ↗ Knowledgeable, professional staff ↗ Contract upload capability or drop off

512-418-6165 info@austininspectionservices.com

REALTORS® deserve a trustworthy partner who understands their needs. When you work with Southwestern Title Agency, your job is easier. REALTORS® enjoy:

LENORA LAMBRIGHT

512-273-7767

SouthwesternTitleAgency.com

1111 N. IH 35, Suite 102 Round Rock, Texas 78664

Proud to be named

2020

Best of Hays County!

L Y Mom!

# ove ou

1/4-ACRE SITES with Hill Country Views! Non-Age Restricted! All Age Groups Welcome

NEW HOMES available Now! LACIMATX.COM

512-856-5664

512-337-6093

512-834-9294

1-800-247-3779

512-484-8677

512-523-4128

MAY 2021

| REALTYLINE.US

John Lockhart Charity Golf Tournament: Bret Baker and Mick Donohoe

SouthStar Pancake Breakfast: Renee Jordan of New Hope Realty, The Easter Bunny and Micah Weldon of New Hope Realty

MAY 2021 | REALTYLINE.US

Tejas Tuesday with TREPAC: Jen Forgey and Connie Cochran with Cary Nichols and Nancy Best, both of Coldwell Banker Realty

Upcoming Events

>> Thursday, May 27

>> Monday, June 7

>> Thursday, July 15

>> Thursday, June 10

High Stakes & Hot Markets Austin Board of REALTORS

Listing Boot Camp Stewart Title & WCAoR

Texas REALTORS® 360: Real Insights Region 15 Online Event

9 to 11 a.m. CDT

10 a.m. to 3 p.m. We’re partnering with our friends at the Williamson County Association of REALTORS.

Don’t miss your opportunity to hear about the latest industry trends: Attend a Texas REALTORS® 360: Real Insights Meeting near you.

The day consists of (4) hours of continuing education in the areas of farming for leads, marketing and perfecting your listing presentation.

Please contact Sandi Wilda with any questions: https://www.texasrealestate. com/.../staff.../sandi-wilda/.

To learn more and to register, please visit the WCAoR website. Or, you may contact Kathryn McCurry at (512) 230-7040.

1 p.m. In today’s market, if you’re not a strong negotiator, you’re toast. In our next High Stakes, Hot Markets event, REALTOR® and national trainer Evan Fuchs will show you how to put together deals that “stick.”

Annual Summer Mixer is BACK! Austin Mortgage Bankers Association

4 p.m. t 7 p.m. Top Golf 2700 Esperanza Crossing

By blending communication strategies and principled negotiation, you can achieve a win-win outcome that leaves clients and agents with a positive experience, so that they want to work with you again in the future.

Food, Drink,Golf, Network and Fun Times! More details coming soon.

MORE EVENTS CAN BE FOUND AT https://www.realtyline.us/events/

183

GEORGETOWN LEANDER

35 ROUND ROCK

CEDAR PARK LAGO VISTA

Guide Families Home At Brohn, we take pride in carefully selecting the communities in which we build, ensuring each has character and amenities families will enjoy for years to come. From Lago Vista to San Marcos, there are homes and layouts to meet all your clients’ needs. Start the search with Brohn.

1 71

PFLUGERVI

360

290

WEST LAKE BEE CAVE AUSTIN

290

Now Selling Lago Vista

MANCHACA

Trace

Hymeadow

183

DRIFTWOOD BUDA

Starting from the $300s - $500s+ GuideFamiliesHome.com

NIEDERWALD KYLE

21 ®

Clayton Properties Group, Inc. Formerly known and Qualified to do business in Texas as CMH Parks Inc. DBA Brohn Homes reserves the right to make changes to pricing, floor plans, specifications, features, dimensions, elevations, and incentives without prior notice. Stated dimensions and square footages are approximate and should not be used as representation of the home’s precise or actual size. Copyright © 2014 Clayton Properties Group, Inc. Formerly known and Qualified to do business in Texas as CMH Parks Inc. DBA Brohn Homes.

SAN MARCOS

LOCKH

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MAY 2021

| REALTYLINE.US