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Open House

Mortgage Meltdown; College Insurance; Tips on Choosing a Contractor

Aired August 18, 2007 - 09:31   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

GERRI WILLIS, HOST: I'm Gerri Willis, and this is OPEN HOUSE, the show that saves you money.
Our big story today, the housing market tanks and takes stocks with it.

Other stories we're following today, it's back to college on campuses across the country. We'll tell you the one gift your college student needs to save money.

And are you hiring a contractor? We'll tell you what you need to know.

And workplace etiquette. The new rules in the workplace that you'll absolutely want to take notes on.

But first, dismal news for an already down housing market. Home builders cut back yet again in July. Construction on new homes fell more than six percent to the lowest in a decade.

Separately, 41 states saw existing home sales fall in the last quarter, and that is the worst downturn in 16 years, according to the National Association of Realtors.

Florida suffered the biggest decline. Sales were down more than 40 percent compared to a year ago. That state is also one of the hardest hit by foreclosures.

The ongoing mortgage meltdown has pushed many people out of their homes and sparked credit fears among investors on Wall Street, sending the markets into a seesaw.

So how do all the numbers really impact your home and your savings?

Eric Schurenberg is the managing editor of "Money" magazine.

Eric, great to see you.

ERIC SCHURENBERG, MANAGING EDITOR, "MONEY" MAGAZINE: Hi, Gerri.

WILLIS: Stocks tanking, home prices down. What can you do to protect yourself?

SCHURENBERG: I think the best thing you can do to protect yourself is not overreact. Do nothing.

WILLIS: Nothing?

SCHURENBERG: Don't let emotions carry you away.

WILLIS: So you're saying, sit on your hands?

SCHURENBERG: Sit on your hands, yes. If you panic when are everyone around you is panicking, nine times out of 10, you'll make the wrong decision.

WILLIS: All right.

Well, let's talk about housing, because I get so many questions about that. People want to know what to do. The people (INAUDIBLE) are, you know, the people who want to buy, correct?

SCHURENBERG: That's right. It was a buyer's market before all this happened. And now it's 10 times more so. If you can get credit -- and you should have no problem if you have a good credit rating -- mortgage rates are down for fixed rate mortgages.

WILLIS: That's good news.

SCHURENBERG: Yes.

WILLIS: Good news in this market. It's good to hear.

SCHURENBERG: Sellers are desperate. You're in the comfort (ph) seat.

WILLIS: All right.

Let's talk about people who are thinking, hey, I've owned this house, maybe I want to upgrade. Is it a good time to take out a home equity line of credit, a second mortgage?

SCHURENBERG: I think, if you were looking to do that kind of thing, you should. Go ahead and live your life. This shouldn't throw you off. As long as you can get the money.

Now, that's harder that it used to be. But if you can get it, a renovation, if it made sense before, it makes sense now.

WILLIS: All right. Let's talk about the savings, because I know people out there are really worried about their 401(k). You know, people check the numbers all the time, right?

What should you do with your retirement savings?

SCHURENBERG: Again, the best thing is to do nothing. Retirement, it's years off. We'll be looking back on this going, well, wasn't that an interesting cycle? But if you sell at the bottom, then you're really taking a risk.

Look, no one really knows where the stock market is going to go. I don't, but I do know what's happened from history, is the people who were the unhappiest in this kind of upset in the market in the past were the people who sold at the bottom. And the people that were happiest were the ones that rode it out.

WILLIS: Absolutely right. I guess the best thing you do maybe is check your asset allocation, make sure you're really diversified, you're invested in the right things, because that's where small investors really make their mistakes.

SCHURENBERG: Yes, that's right. That's right. And that is the key thing for your long-term return.

WILLIS: All right.

I have to ask you, though -- I know a lot of people out there probably own financial stocks. Maybe they've double-dipped here.

They've got the big house. They're buying Countrywide. That stock in the news this week, really bad news there.

What should you do if you own individual stocks? Should you be looking at it carefully?

SCHURENBERG: Well, I think -- again, I'm not a great stock market predictor, and I'm of the belief that not many people are. I do think the risk in those stocks is a lot lower than it was before.

WILLIS: They're cheaper, that's for sure.

SCHURENBERG: They're a lot cheaper. And so, it's better to buy them now than it was to buy them a month ago.

WILLIS: You know, one of the interesting things that's going on here is that we may have a better marketplace for savers. Remember savers? You know, people who set aside money and let it grow over time?

What are the opportunities there?

SCHURENBERG: Well, cash is king in a way that it hasn't been for a long time. Money market rates are up over five percent. You can get over five percent in a bank savings account in some generous online banks.

So, that is a great idea, and that is one place you'll be glad to have some money, because it's not going anywhere. It's safe.

WILLIS: Great advice, Eric. We appreciate you coming in today.

SCHURENBERG: My pleasure.

WILLIS: Thank you.

You can hear much more about the news of the week's impact on your money on "YOUR MONEY" with Christine Romans and Ali Velshi, coming up a little later at 1:00 p.m., right here on CNN.

Still ahead on OPEN HOUSE, with some of you suffering through triple- digit temperatures this week, we'll show you how to keep your budget cool when the weather heats up. Then, choosing the right contractor can save you big bucks. I'll show you how.

And you don't want to miss this one, the new rules -- that's right, the new rules of workplace etiquette. You'll be surprised at how much things have changed in the office.

But first, your "Tip of the Day".

(BEGIN VIDEOTAPE)

WILLIS (voice over): You decided not to buy, and now you're locked into a lease.

SERGIO STIBERMAN, PRESIDENT & CEO, LEASETRADER.COM: Approximately 90 percent of luxury vehicles are leased. Overall, over 30 percent are leased. At any given time, you approximately have about 17 million Americans that are leasing a vehicle.

WILLIS: Getting out of a lease can be difficult and costly. But the Internet is changing that. LeaseTrader.com is one company that allows you to transfer your lease to somebody else.

It asks you information pertaining to your vehicle and your lease, like your lease payments, like, who your leasing company is, when the lease ends, you know, what type of vehicle you have.

WILLIS: Then, a prospective buyer can pick up the remaining months on your lease. Of course, they'll need to be qualified. A credit check is included in Web site fees.

All that's left, have the car inspected, work out a pickup arrangement, and you're set to sign another lease. Or maybe you should think about buying this time.

That's your "Tip of the Day".

(END VIDEOTAPE)

(COMMERCIAL BREAK)

WILLIS: People across the country are having to deal with high temperatures this week. And you know how this works. The hotter it is, the higher your energy bill is likely to be.

Let's get a check on the month ahead for your weather and your energy costs.

CNN meteorologist Bonnie Schneider is in the CNN weather center with more.

(WEATHER REPORT)

WILLIS: All right.

Now that you know what the next month can hold, here are some ways you can keep your home cool without draining your wallet. Easy-peasy.

First off, use a fan with your window air-conditioner to spread the cool air throughout your home. Then change air filters on your AC monthly and don't put lamps or TVs near your air-conditioning thermostat. The heat from those appliances will cause the air- conditioner to run longer than it has to.

It's not only heat waves you have to worry about, but extreme weather, too. Look, your homeowners policy covers lightning, hailstorms and volcanic eruptions, believe it or not, but it won't cover floods. Find out if you're in a flood zone at floodsmart.gov to get coverage. And don't wait until there's a hurricane warning to buy a policy, because there's a 30-day waiting period before coverage takes effect.

And speaking of coverage, college tuitions are out of sight, and the last thing any parent wants to hear about is another bill. You've factored in the cost of textbooks, room and board, but what about insurance?

Here to give us a crash course on insurance for your student, Robert Rusbuldt is the CEO of Independent Insurance Agents and Brokers of America.

Welcome. Great to see you.

ROBERT RUSBULDT, CEO, IIABA: Good to be with you.

WILLIS: All right. Now, I've heard stories about college students today. They're taking 50-inch plasmas to college. This isn't your old Trinitron.

You need some coverage, right?

RUSBULDT: You do. And if they take their plasma TV and they take their computer and their iPods and all of that, it's generally covered under their parents' homeowners policy.

WILLIS: So that's good news.

RUSBULDT: That is good news. But, there are some things that the kids and the parents need to understand. It's generally only up to 10 percent of the contents coverage in your homeowners policy.

WILLIS: So what would that typically be?

RUSBULDT: Well, let's say you have $150,000 worth of coverage for the contents in your house. That student in the dormitory would have $15,000 worth of coverage, which generally would cover most of what's...

WILLIS: That should be pretty good, right?

RUSBULDT: It should. It should cover most of what they have.

WILLIS: But not everybody lives in a dorm. About a fifth of college students are living off campus, right? RUSBULDT: And they have no coverage.

WILLIS: Wow.

RUSBULDT: The parents' homeowners policy does not cover a college student, even a full-time student, if you -- if you live off campus. You have to get a renter's policy.

WILLIS: OK. Is that expensive?

RUSBULDT: About $250 or less for up to $15,000 in coverage. They're pretty cheap. And yet, even though a fifth of students live off campus, two-thirds of Americans that are renting apartments do not have renter's coverage. It's crazy for how cheap it is.

WILLIS: It is crazy. It really is crazy.

Now, I know that a lot of students are going to bring cars to school. And the devil's in the details here too, right?

RUSBULDT: Absolutely. If your -- if your kid is going to college out of state, you'd better call your Trusted Choice independent agent, because you're going to have...

WILLIS: Or you can call any other kind of agent, too. OK. Let's just be fair here.

RUSBULDT: Or -- right. But you need to call your insurance agent and find out, because there are different state laws.

There are no-fault laws, there are straight liability state laws, and it can affect the premium of your auto insurance for your student, because they're considered to having it garaged out of state. You need to check that.

WILLIS: All right. OK.

And, you know, the devil's in the details here, too. You know, you might also want to think about health insurance. Be sure to check your policy, because it may not cover your student at school.

But I know you want to talk also, and we want to squeeze this in, about students who go overseas.

RUSBULDT: Right.

WILLIS: Any problems there?

RUSBULDT: Absolutely. If you go overseas and you're living in a dormitory, and you leave your possessions in your dormitory, after about 45 days or so -- and it varies by policy -- you don't have coverage for theft anymore.

WILLIS: Yikes.

RUSBULDT: So, if you leave your laptop or your clothes or whatever your possessions are and it's stolen after about 45 days, you lose it. There's no insurance coverage.

WILLIS: Wow. That's true, too, though, for homeowners insurance policies.

RUSBULDT: Yes. The reason that insurance companies want it is because they want people there to watch their possessions.

WILLIS: It makes sense. It makes great sense.

RUSBULDT: It does.

WILLIS: Robert, thank you so much for being with us today.

RUSBULDT: Good being with you.

WILLIS: All right.

Still ahead on OPEN HOUSE, find a contractor to fit your needs and your budget in a few easy steps.

And watch your mouth at work. We'll tell you all the new rules of workplace etiquette when we come right back.

But first your mortgage numbers.

(COMMERCIAL BREAK)

WILLIS: Renovating your home can be daunting and costly, but having the right contractor could not only save you a few headaches, but money as well.

So, how do you find one that meets the needs, your budget, your lifestyle?

Here to help is Ed Del Grande from hgtvpro.com.

Ed, it is great to see you here.

ED DEL GRANDE, HGTVPRO.COM: It's always my pleasure. You know that, Gerri.

WILLIS: Well, I love to see you.

OK, well, let's talk a little bit about -- OK, you get the names, and you get the numbers from friends and families.

DEL GRANDE: Right.

WILLIS: So you've got your list of contractors. How do I know if they are what they say they are?

DEL GRANDE: Well, the first step -- and it's the most basic -- don't be shy about this. Ask to see their license and certificate of insurance. A good contractor will always have those two.

WILLIS: Well, do you have yours today? DEL GRANDE: I hope I'm a good contractor. There's my license right there.

WILLIS: So this is what it looks like. You know, I think this is awesome. So you shouldn't be embarrassed about asking for those?

DEL GRANDE: Not really. And you can see, it says, "Ask for photo I.D." So you've got to make sure that the person whose name is on the license is actually the person you talk to.

WILLIS: OK.

DEL GRANDE: So, once you get the license and know they're insured, you're off to a good start.

WILLIS: All right. Well, the bids start coming in.

DEL GRANDE: Yes.

WILLIS: They're all over the place. Some of them contain one thing, some contain another.

How do you compare them and how do you know which is the best offer?

DEL GRANDE: I always say get about three to four, no more than five, because if you get more than five, don't forget the contractor community is small, and they'll know you're shopping for price.

WILLIS: They're talking about us?

DEL GRANDE: Yes.

WILLIS: OK.

DEL GRANDE: So we talk about the customers. Don't forget that.

So, what you need to do, Gerri, get three to four. And then you can look. If one's really high, you can discard that one. If one's really low, discard that one. And then let the middle ones battle it out.

WILLIS: OK.

Let's talk about those red flags...

DEL GRANDE: Yes.

WILLIS: ... that tell you maybe the guy that you're talking to is not good at what he does. Maybe he's just a flimflam artist. Because this does happen.

DEL GRANDE: Right. We call them fly-by-night contractors. They work in darkness, and they don't follow the rules.

WILLIS: How do I know, though, that I got one?

DEL GRANDE: Well, first of all, do you see how easy it was to show the license?

WILLIS: Right.

DEL GRANDE: They may make excuses like they don't have it or they'll get it to you. So watch out for that. And if they don't have any insurance, find another contractor right away.

WILLIS: And sometimes they'll ask for money up front, which you don't want to do either, right?

DEL GRANDE: Yes. Well, don't forget, you have to be fair to the contractor if they need to buy materials and things like that. So, once you do have a signed contract and it's in writing and it's been through the legal process, you can give a down payment. In most cases, the contractors would want that.

WILLIS: Now, I understand that you don't like it when people buy their own fixtures and appliances.

DEL GRANDE: Right.

WILLIS: Hey, this allows them to save money. What's wrong with that?

DEL GRANDE: It does. And it varies from contractor to contractor.

The reason why I don't appreciate it and a lot of other contractors don't, we want to give you the best service. If you buy that fixture, I really can't go back and give my labor to repair that fixture if it breaks down. I have to charge you for my labor. They'll give you the parts, but if you buy them from the contractor, they'll usually take care of the labor and the material for you.

WILLIS: And you'll have the markup to boot. What about...

DEL GRANDE: Well, don't forget -- let's suppose it's only a minimum markup, and in that minimum markup, that ensures the contractor that they'll have a little money to go back and do the fixes for you at no cost.

WILLIS: All right. Now, you say you can save money by watching your contractor.

DEL GRANDE: Right. Absolutely.

You watch them because you learn. So if you know your home, you know the system that the contractor is installing, if something breaks down, you'd know where all these components are, and you can do a lot of the fixes yourself later on.

WILLIS: Ed, thank you so much for being with us today.

As always, if you have an idea on how to save money, send us an e-mail to openhouse@cnn.com.

And if you want to check out this project savings again, check out our Web site, cnn.com/openhouse. Is workplace etiquette still important? You bet it is. But the rules have changed a whole lot. You don't want to miss it.

But first, this week's "Local Lowdown".

(BEGIN VIDEOTAPE)

WILLIS (voice over): Raleigh, North Carolina, the best place to be if you're looking to sell a home.

UNIDENTIFIED MALE: Raleigh is really a sweet spot for sellers. There's very low housing inventory, which is also getting lower. It's benefiting greatly, like much of the Southeast from the migration that's going on right now out of the North and Northeast, which is bringing thousands of new home buyers to the market.

Portability is also very good in Raleigh, which means that people -- the prospective buying pool isn't as limited as it would be in a place like New York or San Francisco. In addition, home building is expected to slow through the end of this year and next year. So that shouldn't really -- that should tighten market conditions even more.

WILLIS: And that's great news for sellers.

That's your "Local Lowdown".

(END VIDEOTAPE)

(COMMERCIAL BREAK)

WILLIS: Hey, you want a bigger paycheck or a better title? Being professional at work is one of the key ingredients for success. But one woman, she says the rules have changed when it comes to office etiquette.

Penelope Trunk is the author of "Brazen Careerist: The New Rules for Success," and she's a columnist for Yahoo! Finance.

Penelope, welcome.

PENELOPE TRUNK, AUTHOR, "BRAZEN CAREERIST": Hi. Thanks.

WILLIS: Now, you really are brazen. I've read some of this, and I'm kind of -- I have to tell you, I'm amazed.

You say, for example, don't ask for time off for vacation. We're all thinking about vacation right now. You say just take it.

TRUNK: Well, what I'm really talking about there is authenticity. Like, for example, if your brother is getting married on October 5th and you have to take October 4th off, you're not actually asking for it off, because you're going to quit your job if your boss is so ridiculous that they're not going to give it to you off.

So you're really saying you need it off, and it's more authentic to just say, "I'm taking that day off." And the other... WILLIS: And so be bold is your point, right?

TRUNK: Right. And the other thing is that competent workers cover for themselves when they take time off. So as long as you're covering for yourself, it's fine to not ask because your boss can assume that you're covering.

WILLIS: Another one of these that I like is you say, hey, wear the headphones at the desk. If you're having a hard time concentrating or maybe everybody around you is really loud, wear the headphones. But, well, doesn't your boss look at that and say, holy cow, that person's not working, they're listening to music?

TRUNK: Well, your boss might say that, but your boss should manage you for your results not your process. So your boss should fire you if you don't get your work done. And if you do get your work done, your boss should leave you alone. So if you put on your headphones, you make sure that you get a boss who does that.

WILLIS: All right. You say invite your CEO to be a friend on your social networking site. Really?

TRUNK: Right, yes. There are tons of CEOs on LinkedIn and on Facebook, and they're both great opportunities for you to get to people who you wouldn't normally have access to in the workplace. And the reason that the CEOs are there is to specifically to network with people they wouldn't have access to.

So, it's a great opportunity for you.

WILLIS: I hope my boss thinks of it that way. OK.

Let's talk about homework on the boss. This is a great idea. What do you mean by it?

TRUNK: When you're getting -- when you think you're going to get a job, you can figure out if your boss is going to be good or not by going to, say, LinkedIn and looking up who else has worked for that person and checking up to see if they're going to be fun to work for.

WILLIS: Don't do the exit interview. What do you mean by that?

TRUNK: The exit interview is when the company says, what are we doing right and what are we doing wrong? But how ridiculous that they're doing that when you're leaving. If they're doing it when you're leaving, they don't care. You need to talk to them about that when you're there.

WILLIS: Right. Right. I don't know how much wiggle room you've got there.

But here's one that I find really interesting. You say you have to be nice. You say even go so far as maybe a little brown-nosing. But what's the line there?

TRUNK: Well, really, the whole workplace is about being nice, right? We all know that the people who get promoted aren't the hardest workers. They're the people who everyone likes.

I mean, we see that time and time again. But it's actually a great situation, because it encourages everyone to be kind and empathetic and look at other people's needs in order to get what they want, and that's what they should all be doing, is looking at how we can help people. What a great workplace.

WILLIS: Well, Penelope, I thank you for joing us today. It was really interesting to hear your brazen tips.

TRUNK: Thank you.

WILLIS: As always, thanks for spending part of your Saturday with us.

OPEN HOUSE will be back next week right here on CNN. And you can catch us on Headline News every Saturday and Sunday at 3:30 p.m. Eastern Time.

Don't go anywhere. Your top stories are next in the CNN NEWSROOM.

Have a great weekend.

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