When talking about the ‘American dream’, having a car, house, kids, pets and if lucky enough a swimming pool comes to mind. In recent years, Chinese people have been buying houses in the States but simply owning property is not enough. According to the National Association of Realtors statistics, in 2015 Chinese spent about 25 billion US dollars buying houses. Besides buying houses for themselves, they also make investment. This trend has spread from upper class to middle class.
Investment and rental properties are growing rapidly as well. What are the common mistakes that new immigrants and overseas buyers make when purchasing houses in the States?
1. Does Not Understand Land Use Regulations and Government Services
California is warm year-round, the backyard is full of plants and flowers and everything is pleasing. There is a lot of work that goes into the ideal backyard such as renovating the garden, planting trees, fence repair and constructing a balcony. Before starting the construction, remember to call the safety hotline – 811. Then the government will send a professional within 48 hours to check the pipelines and mark its condition underground to ensure there will not be any complications and accidents. In the past, people did not get their pipes checked prior to construction and resulted in an expensive bill because of accidents. Not only should you have your pipes checked out, also inspect underground wires, pipes and cables.
If the homeowner did not dial 811 and a construction accident occurs, he/she will be responsible for the repair cost and loss of gas. If the contractor did not dial 811 and an accident occurs, they will face fine of thousands of dollars from the government.
2. The House is So Big. Where is the Water Valve?
Flooding is one of the most common incidents that are covered by insurance companies. In the event a pipe bursts or there is leaking, before a repairman arrives, you should immediately turn off the main water valve to prevent damages. When moving into your new home, make sure you figure out where all the switches are for electricity and water.
3. Check the House Thoroughly
Typically, after the purchase application has been accepted the homeowner needs to hire a professional to do a full inspection of hydro, gas, windows, roof, floor, housing structure and pest inspection. Do not forget to get a termite inspection. In Los Angeles, a lot of houses are made of wood, which makes increase the chances of termite damage. So, you should not only get a latest termite inspection report before moving in, also this should be checked up every 5-6 years.
4. Confused by Home Insurance
Buying a house in America, unless it is paid all in cash, you will be required to purchase Homeowners Insurance or Fire Insurance that are often confused for the Landlord / Rental Property Insurance before the house title transfers to yours.
If you live in the property you bought, you need Homeowners Insurance which protects replacement cost of dwelling, personal liability and personal property such as furniture, electronic appliances or jewelry. And if the house is rented out, you need Landlord/ Rental or Fire Insurance, which don’t cover damages to your personal property. A very common mistake is that people buy house for rent in the first place, and then move in afterwards, but forgot to rewrite the policy from Landlord/ Rental use to Owner-occupied. One of my friends’ house was broken into and some personal belongings were stolen. When he was filing the claim, he realized that his current policy is still under Landlord/ Rental coverage, and couldn’t recoup his losses of nearly two millions.
Vacancy insurance (Vacant & Unoccupied Home Insurance) is also a type of insurance that needs your attention. In general, it is more likely that incidents may occur to vacant homes; therefore underwriters are very cautious in selecting insureds. After two or three weeks after purchasing homeowner insurance, insurance company will send an inspector to check your property, once they find out it is vacant, they might reject you. Similarily, insurance company has the right to deny your claim when incidents occur. So, if your home will be vacant more than 2 months, you must check with your agent and discuss how you should protect your property.