You’re not the first person to look at their insurance policy and realize that your property’s insured value is too high. In fact, two out of three homes in the US are underinsured, yet there are still plenty of people who believe they’ve over insured their home. We’re not saying this may not be the case, but the only real way of finding that out is by reviewing the value listed on your policy (usually called Dwelling limit or Coverage A) on a yearly basis. This way, you’ll be able to know whether your home is properly insured.
On the other hand, there are also cases when you may find that your insurance is too low. In this case, you can easily adjust your policy or use endorsement to add extra coverage.
One of the main issues with insurance though is when your property’s value increases so much that you quickly find yourself in a situation where your home is over insured. Luckily, there are quite a few things you can do if you don’t agree with the estimated reconstruction cost of your home or its insured value.
Check to see whether you’re over insuring your property
When people make large claims, one of the main issues they’re going to deal with is finding out their home is underinsured. Even so, when people check the cost of their home insurance, they often want to reduce costs as much as possible. New buyers are often surprised to find out just how much they need to pay to insure their home, while people who’ve had a home for a long time may feel quite annoyed to see that their property’s insurance value has increased, while its resale value may not have followed the same trend.
Prior to lowering your property’s insurance, there may be a few other factors that can help you in this regard. For instance, you may be able to take advantage of various discounts that can be added to the insurance policy. Other options may also be available, such as getting a new security system or increasing your deductible or lowering your personal property coverage.
If you don’t agree with the value the insurer wants you to insure your property for, rest assured, since there are always options you can consider. Top 3 ways your property insurance dwelling value can go up
Prior to letting you know exactly why your property’s value may be too high and what can be done about it, it’s important to understand why this happened in the first place.
There are 3 factors that may influence this increase, including:
You’ve had an evaluator visit you for an insurance property inspection. After checking the cost of reconstruction, he recommended your insurer increases your property’s value.
There may be a clause in your home insurance policy that’s meant to protect you from the costs of inflation. This clause may also increase the value of your property insurance on a yearly basis, yet only by a small percentage. However, in the long run, this inflation can become pretty substantial and eventually force you to review your property value for accuracy.
You’re the proud owner of a new property that’s going to be insured for the very first time. In order to check its value, the insurance broker or agent used basic tools and info you’ve provided them to determine the home’s insurance value.
Things you can do if you don’t agree with your property’s insurance value
A lot of people believe that the insurance value set by an agent or broker is final, but that’s not true. There are many cases when this type of evaluation can be erroneous. Luckily, there are a few ways you can check whether your property is over insured. The main reason people get insurance is to protect their assets, so if you think that something is indeed off, then you have every right to investigate and get an answer. Therefore, don’t be afraid to call your insurance agent and request a review or ask questions.
Usually, if you have a solid and legitimate case, the insurance agent or broker will submit your request for review to the insurance underwriter.
Have inflation adjustments caused your property’s value to increase?
Inflation clauses are put in place by insurers to protect their clients when they insure their property. The reason for this is simple: if a homeowner insures his home for a certain dollar amount and after several years he files a claim, he won’t have to worry about coming up short on the dollar amount required to rebuild his home from increased cost of construction. The inflation clause is intended to keep up with increased cost of construction over a period of time.
The bad news about this method’s accuracy is that it depends on the homeowner’s foresight, specifically him insuring his property for the right replacement cost at the time of writing the policy. If the numbers are off in the beginning they will continue to be off in the future- and sometimes by a significant amount.
When it comes to standard inflation that happens over a long period of time, insurers recommend that homeowners use current reconstruction ratesto re-evaluate the value of their property. You should speak to your insurance representative about your home’s value and review the dwelling coverage every few years for accuracy. Getting a readjustment can in many cases be as simple as making a call and talking to an agent.
Effectively negotiate by using these simple tips when your property’s value is increased
If you’ve discussed with your insurance representative about the increase and the results are not what you were hoping for, then rest assured. There are 3 very simple approaches you can consider negotiating with your insurers.
3 simple methods to get a second opinion on your property’s insurance value
One of the first things you can do is ask your insurer to recheck their calculations. You should specifically check the square footage they’ve used and then compare those numbers with the standard in your area (based on info from local builders). If you find that your numbers are off, show those numbers to your agent and ask them to have an underwriter make an adjustment to your policy. In many cases they’ll offer you a different solution or a compromise.
Get in touch with one or more insurers and request that they estimate the cost of having your property reconstruction and have them send you a quote. If their cost is different, be sure to ask why, especially if the info you’ve provided them for this purpose is identical to the info you provided your insurer. Make sure they also used the same rating tools as your insurer.
Another thing you could do is get in touch with a private appraiser who is accepted by most insurers. It’s important to do a bit of research in this regard and only hire someone that is accepted by your insurance company. Wasting money on this and finding out your insurer doesn’t accept the independent investigator’s review is not the goal. The methods and tools used by the independent appraiser must also be approved by the insurance company. You should know that in the majority of cases, independent appraisers are a bit more accurate and their appraisal amounts may be higher. It’s true that the appraisal value may be lower in some cases, but this happens quite rarely. Before hiring an appraiser, you need to inform them of the previous appraisals you’ve got, including the cost per sq. ft. used by your insurer. If the appraiser is well reputed and experienced, he’ll tell you right away if your values are within the normal range and may even help you save some time and money in the process.
Check your home insurance policy type and coverage requirements. In most cases, insurers provide many types of insurance coverage for properties.
What you need to know about home value and guaranteed replacement cost
Guaranteed replacement cost will effectively insure your property to replacement value, including a certain percentage over the value of your insured property in the event the reconstruction cost may go over the policy limit after making a claim. Depending on the company used, some of them may put a cap on the value to 125% of the insured property’s value. However, there are also companies that may provide a guaranteed replacement regardless of the cost. To know which insurance type to get, it’s advised that you speak to your insurance representative about it. If you opt for guaranteed replacement coverage, then you need to insure 100% of your property’s evaluated reconstruction cost at the time the policy was written. This coverage is the best by far since it fully protects your home regardless of what happens to it. Still, there are a few other options out there that provide great coverage at a much lower cost.
What you should know about replacement cost
Replacement cost is a bit different compared to guaranteed replacement cost. The difference lies in the fact that you’re only going to be protected up to the property’s insured value and no more. If you believe your home insurance dwelling evaluation is incorrect and you deem that a lesser insurance amount is better suited for your property should you file a claim in the near future, then you need to get in touch with your insurer. This way, you can talk to them about lowering your insurance cot by getting a replacement cost insurance policy instead.
To benefit from replacement cost, you need to insure your property to a certain percentage of its value. Depending on the insurance company used, you’ll find that most of them offer different plans that vary in requirement to insure to eight or up to eighty five percent of your property’s reconstruction value. Jurisdiction also impacts your insurance policy and cost, so you need to speak to your insurance company about this as well. By doing so you may very well avoid the argument regarding whether the value is valid. If you’re comfortable taking your chances, then this can provide you with a safe middle ground.
How reducing or increasing dwelling value affects your insurance coverage
A wide range of the coverage found in a homeowners’ insurance policy are provided as a percentage of the insured property value. For instance, your personal contents and belongings may have been insured at about 70% of the property’s value and your extra living expenses may be set at 10% or 20%. Each time your insured property’s value changes, it’s important that you verify how this will influence the rest of the coverage you’ve got. There are cases when the value of the items in your home could be a lot higher than the items of the average individual. Under these circumstances, it’s important that you exercise care when changing your property’s value and that’s because this will impact the rest of the related insurance amounts for:
Extra and detached structures— (Other Structures/Coverage B)
Personal contents— (Personal Property/Coverage C)
Extra living expenses— (Additional Living Expenses/Loss of Use/Coverage D)
Cutting down on your property’s insurance value won’t affect your home policy’s liability coverage, special endorsements, riders, or any special limits the policy may contain. What other options do I have to save on insurance costs?
If you’ve properly evaluated the reasons why your property insurance costs are so high and you are still adamant on saving money, there are ways you can do that.
First, you may want to get in touch with your insurer to increase your deductible. In turn, this will help you save a lot on insurance costs (usually about 40%).
Bundling your insurance is also recommended. Get in touch with the insurance company you currently use and ask them to provide you a quote for your car and home insurance.
Getting in touch with other insurance companies is also recommended because costs vary greatly. Many people may also worry about getting hit with an early cancellation penalty should they decide to cancel their policy prior to the renewal date. However, what many folks don’t realize is that in that most insurance policies are written on a Pro-Rata basis (daily rate) and any unearned premium will be refunded by the insurance company—even if you cancel your policy mid-term.
Any peril which is covered under an insurance policy that occurs in your home, has to be paid out by your insurer; but the first step is the claim filing process. The first step to take is to notify your agent in writing, at the first possible moment. A policy is a contract which is binding between you and your insurer; this means there are rules in place you have to follow, but also rules they have to follow if an accident does take place. It is also important to read and fully understand the policy, to ensure you know what is and isn’t covered.
So, here’s what happens when filing your claim:
1.Report theft, burglary, or other forms of thievery which occurs in your home to the police. Make sure a full police report is filed and you have a written copy; also make sure you take down all law enforcement names and police you speak to, in order to have everything properly filed and documented.
2. A time limit is in place for filing your claim, each insurer’s time limit varies. Ask the right questions and find out how long you have to file that claim. Find out: If you are covered, whether or not you have a deductible, how to get estimates for damage, and how long the claims process typically takes. All information is pertinent when filing your claim, and is the only way to ensure things will move along as they should.
3.Reasonably take all steps and precautions you can take to prevent further damage from ensuing. If you spend any money in doing so, save all receipts and submit these along with your claim, to the insurance agent who is going to file it on your behalf.
4.You also have to substantiate your losses during this time. This means keeping damaged items in the home until an adjuster visits and determines their value. It is also a good idea to take photos and videos of the damage, so you can document what has occurred in the home. A home inventory list of belongings (before and after the claim) should be taken and submitted when you are speaking with adjusters and of course your insurance agent. This is to make sure everything will be replaced, and you won’t have to pay money where you shouldn’t be paying for items which are covered by your policy.
5.In some cases, where extreme damage occurs, you might have to leave your home. If you have to stay with family or in a hotel, keep track of all costs you incur. From cost of the room, to food and dining out if you can’t eat from the comfort of your home. If you have “loss of use of your home,” most insurers do reimburse you for those costs (at least to a certain extent) but only if you have maintained all logs and keep receipts, which are dated, for the monies you spent while you are out of your home.
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Keep in mind if a mandatory evacuation from the home is required, most policies and insurers do not provide reimbursement for those costs. So again, familiarize yourself with the policy terms, and make sure you know what is covered, and which costs you are not going to be reimbursed for after an accident and a policy claim have been filed with your insurance provider.
6. After notice of the claim, your insurer is required to send you all claim forms within a certain window or period of time. Every state has different regulations in place, so the time frame can vary from one filed claim to the next. In order to avoid delays in processing, it is important to file the claim and fill out all paperwork as soon as you get it. Also make sure things are legible, you include all addendum, and that you make it as easy as possible for the claim adjuster to find the information they need, so they do not continually call you or try to delay the process when you need the claim to be filed in a short turn around period of time.
7. At this point your insurer will probably call an adjuster who will come to the home to do an inspection; and they will determine if it is in line with what you have reported and filed in your original claim. As they compile information, make sure you comply with requests and that you are as cooperative as possible, as this will speed the process along, and is the only way to ensure all of the costs are reimbursed when damage has to be repaired. Although the adjuster can’t approve your claim, the insurer will use the information they provide in determining what will be paid for. So you want to make sure the adjuster’s notes are as detailed as possible, meaning you have to answer questions, provide all information they require, and you have to be honest during the process, in order to ensure your claim goes through as quickly as possible, and is approved by the insurer as quickly as possible as well.
State laws are in place to make sure you receive your payment quickly after you and your insurance provider come to terms and to an agreement. If you are settling on the claim, the insurer is going to present an offer, and you have the right to counter or discuss in further details, the actual costs. Once all terms have been agreed upon, every state has regulations and laws in place, which require your insurance company to cut you a check within a certain period of time.
More often than not these claims are filed quickly with most insurance companies. The state department can answer certain questions about the claim process. If you have any questions about filing the claim or when you will receive your check, this is best to discuss with an insurance agent to make sure the process goes as smoothly as possible, and you receive payment as quickly as possible when a settlement has been agreed upon.
For those who are on active duty or have served in the military there are certain insurance policies which will afford you a discount for your service. These are five common policies which veterans receive a discount for in terms of coverage and protection.
1. Health insurance
When it comes to veterans’ coverage policies and terms can greatly vary. If you are on active duty, separated from the military, or if you have disability coverage, policy terms can change. If you seek out health insurance as a veteran, these are some policies to consider.
TRICARE - US Defense Health Agency provides this coverage. Army, National Guard, the Air Force, Marines, and reserves, are all covered under their policies. According to their site, Affordable Care Act isn’t considered when determining minimum coverage.
The VA system - this is the Dept of Veteran Affairs which offers coverage to certain veterans. Technically, the VA isn’t an insurer, but rather a health care provider. However even coverage mandated by the Affordable Care Act isn’t required by veterans who have this coverage.
Access to care is the toughest challenge for veterans enrolled with this care provider. With so many veterans, old and young, the most often complained of issue is how long it takes to actually see a doctor and schedule an appointment. Those who are in a higher income bracket, can’t apply for help through VA services either. Only about 9 out of 22 million are enrolled, and only a total of about 6.5 million veterans are using this coverage they are afforded.
Other Coverage – Many veterans buy personal coverage. As of 2012 about 1.3 million had no coverage, while others are covered by medicare or medicaid funding by the state.
2. Auto insurance
Some insurers offer discounts to military personnel; among these insurers are:
– United Services Automobile Association (USAA): This is a financial service institute, founded by military members. It offers 15% discount to military families, covering items like break ins, damage by animals, or other damage for policy holders who keep their car in the garage. USAA spokeswoman Rebecca Hirsch states this is because those which are in garages are safer than those outside on a military base, so additional protection is offered.
– The Geico Military Program: This is for personnel who are overseas, where Geico offers a 15% discount to policy holders who have vehicles when they are stationed outside the US. The company partners with foreign insurance companies to provide military personnel these discounts. Army, National Guard, and the reserves, are a few members who take advantage of such discounts.
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3. Home insurance
The USAA also offers “competitive rates,” for current and former military families. If a policy holder is deployed, some companies sell additional coverage according to the National Association of Insurance Commissioners. This is to protect the home when it is vacant from possible threats when families are away.
4. Disability insurance coverage
The VA offers monthly benefits to those who were injured or disabled while serving in the military. This coverage only extends to those who were injured or contracted a disease while they were serving for their respective military branch. The PVA encourages those veterans who are injured or have been disabled (which didn’t occur while they were serving) to seek financial assistance from Social Security benefits. Certain members and former military members do receive additional funding to help pay with medical bills, cost of medication, as well as other expenses they have to deal with, since they are disabled in any way.
5. Life Insurance
For vets, there are a number of policy options and coverage options which can be chosen by former military personnel.
A Service-Disabled Veterans policy is offered to vets who are disabled, but are in otherwise good health after they have served in their respective branch of the military. This provides them up to $10,000 in coverage. Additional supplement coverage, alongside the full protection is offered to former military members who are totally disabled. On the VA website you can learn more about the level, the amount of coverage, and what it extends to if you have been disabled after serving the country.
Veterans’ Mortgage Life Insurance is also offered to certain military members who were disabled as a result of their service as an armed forces military member. This is only extended on an existing mortgage, on a home which was built by the veteran, or one which was remodeled with a Specially Adapted Housing (SAH) grant from the VA branch. At the time of death, up to $200,000 will be paid out, on the amount of the mortgage which is still remaining on the homes which are covered by this specific form of life insurance for military families.
The VA website is not only a great resource for veterans and current military members to visit, but is the place to go in order to learn more about insurance options, and the many discounts which are offered to those who are or have served in the military. The website can answer some of the common questions you have as it pertains to the coverage, and the amount you are entitled to. There you can also speak to an agent who will help you find the right policy, or learn about the different types of and amount of coverage which you might be able to receive, based on how long you served, and other factors pertaining to your services in a military branch.
A service agent can also help a veteran learn more about the benefits they are entitled to, and help them with the application process if they are not sure where to begin, or how to go about applying for some of the benefits they can receive as a former member of the military.
It is simply a matter of using them, learning about the savings, and working with an agent who can assist you in applying for the benefits you are entitled to as a former member of the armed forces.
For policyholders, an unexpected premium or rate increase on your policy can be quite detrimental as it pertains to your monthly payment. Learn how you can avoid these premium hikes, and keep your rates as low as possible as a buyer. There are five unexpected costs a buyer should be aware of, as detailed below.
1. Fun Accessories
You know those “fun” things in your home, they are also the nuisances an insurance company considers extremely risky, equating to a costly risk. A dog, believe it or not, is one of the costliest nuisances. A swimming pool is another well known reason your rates jump on a policy premium. Not only are they dangerous for the kids, but also visitors who use your pool (with or without permission).
With these risks, you can see why rates spike up so high; in addition to these two listed above, other common nuisances include:
Tree houses, zip lines, trampolines, diving boards or slides. They are dangerous, risky, and if they are on your property, can result in a major price increase in your premium rates.
2. Structural/design elements which are risky
Of course not all perils which hike up those rates are under your control; this is one category you must consider as a buyer if you are shopping for a new home, and want to keep rates down. Some of these items might already be in the home when you move in.A stove or wood burning fireplace account for up to 36% of rural residential household fires annually. This is one of those risks insurance companies look at.
A widening staircase or balcony are also risky in terms of policy premium hikes. They are accountable for 20 to 30% of falls in homes annually, which can lead to major injuries. This is noted by the Center for Disease Control and Prevention. Your appliances, shoddy plumbing work, wiring and other structural issues, are also dangerous which can lead to higher premium rates for owners. If your appliances are 25 years or older, it might be time to consider an upgrade.
3. A business run out of your home
Scanners, printers, computers, electronics, desks and chairs, phones; these are only a few of the items you are going to need if you run a business out of your home. If a burglary or a fire were to occur, these are additional items which require protection; and, they aren’t cheap to cover. Additionally, if clients visit the home, personal liability policies should be in place to avoid lawsuits or liability in the event of injuries.
For the best coverage, many home businesses should have an additional policy or endorsement; a designated business policy might be the better route to go as opposed to homeowner coverage, if your business posses many risks.
4. Those luxury items
Sure, the watches, clothing, and cheaper items you own are covered by a basic homeowner insurance policy and will be reimbursed for in the event of loss. But how about that Picasso painting, that pricey engagement ring, or your collection of Gucci leather jackets? These and other luxury items are extremely costly, meaning an insurance company is going to hike up your premium if you would like to have the added protection of insuring these items in your home.
Your home could be a serious target for theft or burglaries, simply having these items in it; so of course your rates are going to go up because of that. In some instance, separate insurance riders are required for items of a certain value. Big ticket items will benefit from a rider policy coverage, as the full value of these items is accounted for and protected with your homeowners insurance rates.
5. Where you live (the neighborhood)
Location, location, location. Yes we want the best when it comes to buying a home. But, just as compelling as it is as times, where we live can also mean a peril in terms of the rates you are going to pay when it comes to your insurance premiums as a homeowner. If burglary claims have risen where you live in recent years, a rate increase might follow. This also goes for claims of fire, or other policy coverage protection. As an owner, simply because you live in those areas, you are going to pay the price for it, even if you never have to use your policy. This means even if you’ve never had an incident or filed a claim, the price of your premium can jump a great deal, just because of the area you live in.
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Those mishaps in the area, might pose a greater risk for you as an owner in that area. So this is one of the reasons which insurance companies give if you live in an area which is risky or has seen many claims in recent months and years. As an owner, you and your belongings are potentially at risk meaning you are going to pay a higher price to protect these items and your home.
This basically means if the number of house fires goes up where you live or on your block, or if several burglaries start popping up in the area you live in, your home is considered to be in a “risk area.” This means you are living in an area which is prone to threats, meaning you are living in an area which is not considered to be safe by the insurance provider you have your premium coverage with.
It is important to know what you are paying for, and what might cause those rates to increase as it pertains to your premiums on a homeowners policy. With Coastal Insurance, not only can you rely on the top agents to help you find the right level of coverage, but also to fully understand what is protected under your policy. Further, the agents you speak to are going to address your issues, concerns, and are always available to answer any questions you have, as they pertain to your policy, the rates, or additional coverage that you want to add to the existing policy that you already have in place with the insurer.
So you’ve decided to buy a new home. However, unlocking the door to your first home isn’t as simple as finding the right location. Once you’ve found that location, you need to compare prices, financing options and get through those challenges beyond simply finding the home with the finest curb appeal. When buying a home, some steps you’ll go through are:
Getting a mortgage approval
Finding the right agent to work with
Finding a home which fits your budget
Most buyers think if they can afford the mortgage they are ready to buy, but this isn’t the case. New York Insurance Agent David W. Clausen, president of Coastal Insurance states: “Many purchasers know where their mortgage payment will fall but forget to take into account closing costs, title insurance, increase in property taxes and a host of other incidentals.”
Search for rates and find out whether or not you can truly afford that home. Go to bankrate.com to get started.
These are five areas buyers don’t account for, which can cost more than they bargained for.
Homeowner’s insurance, taxes, HOA fees, electric and water bills, and even maintenance dues. Most first time buyers overlook these costs when shopping. Clausen adds, “It is also important to know property taxes and insurance costs typically trend up on a yearly basis.”He further goes on to state if you are possibly going to switch jobs in a couple of years, it might not be the best time to buy. It is best to pick a home only if you can ideally plan on living there at least 5 to 7 years.
Buying doesn’t start when you are looking for a home. It starts with mortgage applications, unless you are one of the lucky few who can afford a cash purchase. Clausen notes how some buyers are afraid of preapproval. As a broker/owner at Coastal Insurance on Long Island, NY he discusses how buyers are afraid of not being approved; so they simply pick a figure out of the sky in hopes of finding a home within that range.
First things first
Clausen says this isn’t how the process should go. Although it is fun to first look at homes, this is the backwards way of doing things. You should first get preapproved then shop; not only does this show you how much you can afford, but also prevents being dejected if you fall in love with a home you can’t afford.
As a new buyer, you need a reputable agent, legal team, loan officer, and broker. Anderson states if you are going in as a first time buyer, it isn’t wise to do it on your own. He further states how first time buyers shouldn’t deal with the listing agent directly, but also notes that every situation has its exception.
He compares this scenario to a divorce. If you are going through a divorce, you wouldn’t go to your ex-spouses attorney, would you? You need a buyer’s agent when buying a home. A listing agent is only going to show you their properties, while a buyer’s agent considers your personal needs.
Find out if you are ready for the mortgage payment, by getting your financial situation checked out
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First you should gather references. You should have friends or relatives lined up to provide a reference. If you don’t have any, ask your broker as well as your agent to provide some, so you go in with a positive outlook when applying for your mortgage.
Clausen adds it is very hard as a first time buyer, since they don’t know who they are dealing with. Clausen further notes how it is important to find an agent who will “truly provide independent, quality advice that benefits the homeowner and not the agent that is looking to make a quick buck.” Clausen also states that this might mean hiring a lawyer when going through the purchase process, simply to ensure the entire process is impartial when buying your first home.
Clausen also notes how many first time buyers spend all or a major portion of their savings for a down payment; this is a detrimental mistake he points out. Many will pull all of their money together to put down that 20% to avoid mortgage insurance. However this is the wrong direction to go and can leave you short on cash for a rainy day.
Depleting your savings is very risky
With a conventional mortgage if you put down 20% you don’t have to pay for insurance on the mortgage. Although this can result in substantial monthly savings, Clausen says it isn’t worth “pushing the preverbial envelope” and not having funds set aside for a potential problem down the road. He says: “I’d pay for the mortgage insurance any day over not having enough money for a family emergency or loss of employment,” and goes on to note that everyone, especially the first time buyer, needs to have those funds set aside.
Prequalification has taken place, you have the perfect home lined up, you’ve signed a contract and close in 30 days. But, don’t get too excited just yet.
Why you should keep the wallet shut for the time being
Prior to closing a financial report including credit check is run, to ensure the financial situation hasn’t changed. If you have new loans on your credit report, this can jeopardize the ability to move forward with the purchase process.
Clausen notes how some buyers sign the contract then go buy a new boat or pricey furniture for the new home. He discusses a situation where a buyer drove to his office and showed him the new boat; Clausen went on to advise him to drive it right back to the dealership that day!
The dealership was kind enough to agree to afford that buyer a few more days, until the final credit check and financial history had been run on the home that buyer was ready to purchase. If this was not the case, it could have killed the deal. So before you get ready to start spending and financing big purchases, make sure you take a step back, and wait until those final checks are run, to avoid the risk of losing everything, only a few days before moving into your dream home.