Ep 003 - What is a Home Inventory and Why You Need One?

Welcome to Be a Smarter Homeowner Podcast, where you'll discover strategies to save money, save time, and be better organized in managing your largest financial asset and biggest expense, your home. Your hosts, John Bodrozic and Beth Dodson, who are co-founders of HomeZada, have been supporting homeowners for over 20 years. They are here to share with you their tips and suggestions, as well as interviews with industry experts, with the goal of helping you become a smarter homeowner. Now, here's your hosts, John and Beth.

Welcome to Be a Smarter Homeowner Podcast. My name is John Bedrosian, and with me is my co-host, Beth Dodson. And today we're going to talk about what is a home inventory and why you need one. If you think about it, just about every insurance company in the United States recommends their customers have a home inventory, and yet most homeowners in America do not. Today's episode, we're going to explore about trying to actually define what it means to take a home inventory. We're going to talk about the different approaches, how to store and where to store the home inventory. Ultimately, what is all the value propositions of having a home inventory? So we're quite excited about today's episode. And with that, I'd like to turn it over to Beth and say, Hey, what do you think is your definition of a home inventory?

So my definition of a home inventory comes in a variety of items within your home. So the first thing I look at is the contents of the home, because usually the contents are something we cherish. And we want to put in a moving truck and we want to take it from home to home. They have personal value to us. And they may also have financial value to us. I mean, they are Items that cost us money, and so we want to make sure that we are tracking the details or the contents within our home. Those contents can be anything from furniture to electronics to housewares, jewelry, clothing, collections, etc. The other thing I see as an inventory is also the or what I believe. Is in its best interest to be in an inventory is the equipment, the appliances, the structure of your home. So the equipment and the appliances, it's good to know what you own in terms of appliances and equipment. Maybe you have serial numbers, maybe you have model numbers, maybe you understand that these items are things that may need repair somewhere in the future. And by knowing the model numbers, the make, serial, etc., the year in which you purchased it, You can also address the manufacturer if anything ever goes wrong. You also need to track whether it's in warranty. And then the other thing that I talked about briefly about the structure of the home is understanding the colors of your walls. You know, if you need to do touch-up, understanding the colors of your wall is important. Understanding whether you have wainscoting or not, understanding whether you have certain draperies and how you had them made. Maybe you want to repair them or replace them. But I see inventory as those different components. They are the personal contents that you have in the home, but also the equipment, appliances, and the structure of the home that get tied together that make sure that the home is actually a structure.

Absolutely. And to add to that, I think about your home insurance policy, right? And one of the things on your home insurance policy, the 2 major pieces of coverage are one is your personal property contents, which is essentially saying if your house were to completely burn down, how much is your insurance company going to reimburse you for all your personal property? And then the other coverage in your insurance policy is what's called the dwelling coverage.

Mm-hmm.

I.e., if your house burns down, what kind of policy do you have as it relates to rebuilding your house from a structural perspective? But one other question I'd like to ask you, Beth, is I know you talk to lots of Homesota customers as well as a number of partners who actually do home inventories for people. People oftentimes struggle with like, well, what should I inventory first? And do you have any guidance on that? Because there's so many different types of homeowners, like you said in our previous episode, so many different types of things inside people's home. Any advice over, you know, what people should inventory in their homes?

Yeah, I think for the customers that I've talked to, as well as other homeowners, It's what's most important to them. For some homeowners, it's these beautiful collections that they have, whether it's of personal value or whether it's of a material value, meaning it's worth, truly worth something like painting. We have customers that collect wine, and that wine has a physical value because it's vintage wine. So you look at those types of items. The other thing that that you may find with people, what they find important may be the items that they have from a work-related activity. So a lot of people are working from home now, and because they're working from home, they have a series of computers.

Mm-hmm.

Not only are they their personal computers that they're actually tracking, but they may be company property, and the company may want to understand what that inventory is. But the other thing to keep in mind is, Maybe there's a lot of contractors out there who have tools or other components that they need to inventory that they're going to use regularly on a job that affects how they actually perform their job. If they don't have these tools, they can't actually perform their job. And if they need to file a claim, they need to have that very documented with them. But when it comes to documenting a home inventory, it's what's really important to you. I mean, for me personally, like one of the things that's really important to me is I just, Love my kitchen stove. I love it. So I love to cook, and so I document the items in my kitchen because my kitchen stove and appliances are very important to me because I have a great time cooking.

So I would like to share a story with you, which is I know that you've had a number of different insurance companies throughout your journey of homeownership, and. A lot of the insurance companies will tell you that you should have a home inventory, right, for disaster purposes. But what kind of tools do most insurance companies give you to actually take your home inventory?

So personally, I can only speak from personal experience. For everyone out there, you may have experienced something different. So the consistent tool that I've gotten over 20 years of my homeownership journey Was nothing. So take a home inventory, but no direction on what they need, how you need to do it, or what to expect. No fault of the insurance companies, by the way. Just they just didn't provide that information. Two, I remember receiving from a very cherished and dear insurance agent that we had. She provided me this pamphlet. It was a It's what we refer to as a trifold pamphlet. So it's—

Trifold?

Exactly.

Like a paper folded over 3 ways?

Paper folded over 3 ways. And it said, take your inventory. What's the item? I think if you knew the date it was purchased and if you had a cost, just take it. And I thought it was the silliest thing ever. And by the way, this was not that long ago. The silliest thing ever because I looked at this trifold and I said, I don't even know if the items in my kitchen would fit on this entire page. I think I have more items than that would fit. And I thought that was silly. And furthermore, being in the tech industry as long as we have been in it, I was like, isn't there like a tech product that can actually do this, that can come back and integrate to your systems? I thought that was really funny. And they didn't have one at the time. And then as time went on, I saw some small apps that were out there and what have you, but I was never actually personally recommended these apps. I was always recommended some sort of PDF paper-based activity or just nothing. And I thought that was fascinating because I really think there's value in taking a home inventory and providing it to your insurance company to make sure you are covered.

Absolutely. And to leverage that, I'm going to maybe explore that category of what you said, which is what— there are different technical approaches over how to create a home inventory because it's kind of a series of layers over how deep do you want to go?

Yes.

Right. Some people may want to think about, you know, using a spreadsheet type thing and just sort of starting to enter in and catalog all the things inside your house, the ones that you think are important. Other people think of taking an inventory not as a spreadsheet orientation, but I want to go take photos, right? I want to take my mobile phone around my house and take photos of all the high-end you know, valuable items on personal property, fixed assets. Other people think about maybe I should just use videos instead of photos, right? Other people think about the inventory as it relates to documents, right? Because there's a lot of important paperwork, right, that I want a digital record of it. And so essentially, there are different approaches. I like to tell our audience about how to go about taking a home inventory, right? And let's face it, it's one of those things that You know, when you wake up on a Saturday morning, taking a home inventory is probably the last thing that most homeowners are thinking about. It's college football season for me. I'm into college football. So that's the last thing I'm thinking about. But most people don't have a home inventory because they think it's just going to take them too long. Right. But I think with today's technology, with mobile phones and videos, you know, and a lot of different apps out there, you can take a home inventory a lot quicker. And what I like to tell people is there's a premise of speed versus accuracy.

Yeah.

Right? And my belief is that the fastest way to take a home inventory is to basically walk into every room in your house and probably take a 3 to 5 minute video.

Even that, I think, is long.

Right, but I mean, at least you have a documented record of what's inside that room, right, in that 3 to 5 minute video. But that video doesn't aggregate the total value of those things inside that room.

That's correct.

Right? And then it's the— there are other people who want to be more accurate. Like you said, the people with the—

They want to go deeper.

They want to go deeper. The people with the wine collection, you know, there's— I could take a picture of my wine cabinet with 100 bottles of wine, or some people may want to take each individual photo over each bottle of wine because their collection is extremely valuable and you want to be more accurate about these things. And I think it really goes back to whatever makes sense for the individual homeowner, right? Some people want to do the video thing. Some people want to do the photo thing. Some people candidly want to do both.

Some people want to actually write down all the different details of their items. So if you think about electronics and appliances, like I said earlier, they want to document the make, model, serial number, the year they bought it, If they bought it outright and it wasn't part of the existing home, then they want to basically take also the cost of it and the year in which they bought it. Because I think that's important because you know when your warranty's up, when you may need to get repairs. But they really want to go even deeper. And then in addition to that, and I think you may actually get here a little bit, they may even want to add any type of documentation to these particular items. Let's face it, we go into receipts, we go into owner's manuals, how-tos, warranty cards, but we also get into things like certificates of authenticity. Most people don't realize that oftentimes if you've got artwork or you've got certain items that have verification type parameters. Those certificates of authenticity are critical in order to sell something later on.

Yeah, absolutely. I mean, it gets into the, you know, you take a photo of something, you at least have it documented that you own it. But if it's a high-value item, uploading the appraisal, uploading receipts, uploading owner's manuals just adds to the depth of that home inventory, where we're going to talk a little bit about what all the different value propositions that's going to help you as a consumer once you have a home inventory. But one thing I wanted to ask you about was a story that I know that you know about some friends who their house burned down.

Oh, yeah.

And what was the pain that they went through because they didn't have a home inventory and can maybe share the story over what was the root cause over why the house burned down and what was the pain associated with trying to recover from that?

Yeah, I'm thinking about 2 people in particular. And so, um, for those people who don't know, John and I actually live in California. I'm not talking about wildfire fires. I'm talking about really weird house fires.

House fires.

Weird. So one of our friends lost their house because of a faulty dishwasher wire. I guess they replaced the dishwasher and everything's behind something, but they had gone out. If they had been there with their fire extinguishers, they probably could have put it out, but they were out of the house, so the entire thing just went up in flames. I also know somebody who lost their house because, um, and this is in the middle of a party they were having in the holiday season. It's a horrible thing.

It's a bad story.

And they apparently had, um, mice, because many of us get little rodents.

Critters. Critters.

Um.

In the attic?

Oh gosh, in the attic. And apparently it was— they were chewing on wires up there.

Electrical wiring.

Yes.

Yes.

And so literally They got every— because water started coming down first. I don't know what the water has anything to do with this.

Probably had a fire sprinkler system. Probably, I guess. Yeah.

And so the water came down first, they moved everybody out of the house, and then thank God they did because it literally torched and went up in flames like immediately. And one of the things that they told me was they lost everything. I think one, you know, couple may have ended up having some sort of marital problems. I mean, it causes a lot of stress. They— the couple that had the party, they literally had the clothes they were wearing. That was it. They had nothing else. So they had to go buy all new clothes. They had to go record everything. They had to go back and figure out what they owned. The other couple that had the—

The pain and suffering of trying to prove what you own to the insurance company.

And that's where I'm getting to. So the other couple who was, um, had the faulty dishwasher wire, it took them an entire year to go back to their emails, look at the things that they've purchased, find receipts, talk to the vendors. It, it was crazy. Now, I don't know what they did in the interim, where they lived. I think they may have moved back in with their parents, you know, at 40-something years old. Which is crazy town, but the pain that they had to go through was a pain in the neck in terms of the amount of time they had to go back and re-record everything that they had, the time they had to go and eventually purchase everything back or make changes, the time they had to rebuild the entire house and figure all that out was a year. A year just in the pain and suffering, and then they had to build. Yep, that's another year at least. It's a— it's what a ridiculous thing. But if they had had their inventory, both of these individuals, if they had had their inventory, they could have turned around the processing much faster.

Absolutely. And one other thing I'd like to point out is the concept— we get asked this question a lot— is once I've created my home inventory, let's say I've got all my photos or videos or documents, where do I store it? Right. And, you know, yeah, let's face it, if you're using your mobile phone and you're storing it and it's only stored locally on the phone, then if you lose your phone, you've now just lost your home inventory.

Yeah. John just lost his phone. Yeah, that was good.

Not a great story, but oftentimes you want to be able to back up that inventory into a safe and secure cloud environment. Right.

Yeah, not to mention, remember our conversation? So we also talked to people at the Red Cross, and the Red Cross also told us that when there's a really big disaster, doesn't matter what's going on, whether you're losing your home to a fire, whether you're losing your home to a hurricane, tornado, etc., the phone is the last thing you think of. You oftentimes— they're left behind because you're, you're thinking about the more important things in your life. So it's important that you said to have something backed up somewhere else.

Absolutely. One other thing. Once you take the home inventory, can you share the story over why you should share it with your insurance agent or your insurance company? So, you know, let's say you people go through the process of finally realizing they're taking that home inventory. Now you've got it, you've got something tangible. Why should people share it with their insurance agent?

Yes. So sharing your inventory with your insurance agent is really important because you can determine if you're properly covered. My own personal experience, a friend's father had been in insurance for many, many years, and he came into our home and was giving us some feedback when we were building HomeZada. But he had said a lot of the things in your home is not necessarily covered. And I was unaware of why. I said, I think I have a thorough policy. I know the value of the home. I know the property replacement. I come from a construction background, so I built my home. So I also understand that. So I don't understand what's not covered. And he pointed out a few items here and there, whether it was a piece of artwork that was an original artwork, whether it was silver that's been passed down from generation to generation, real silver. And then he also pointed out, you have this rug on this floor that's not covered. And I went, huh?

What?

Exactly. You did the same thing. You were like, what?

Well, absolutely.

It's a rug.

You quickly realize that the property contents coverage on your insurance policy comes with a whole bunch of terms and conditions, which is code for lots of small print language in that contract. And they end up excluding a lot of these high-value items.

Correct.

Or they're capping you at those particular things. And so there's a lot of that whole learning curve over things that you may think are covered are not actually covered because nobody bothers to read the fine print. And it's important to basically document that because, correct me if I'm wrong, once you do it, it wasn't like it was a massive increase in the cost of your policy. It was relatively cheap to cover those things.

It was.

You just, just had to go through the process of documenting them and sharing that with your agent.

My agent also appreciated it. When I brought everything to the table, she actually appreciated the fact that we had all this documented and she could easily get into the system because she had not been at our house, so she had not seen everything. And I think we expect our insurance providers to automagically know what's in our houses, yet we've never invited them in, so they don't even know what to cover because they haven't been in our houses. So it's really important to really understand all the items that you have and share that with your insurance agent, because the worst that could happen is they charge a little bit more to make sure everything's covered. Sometimes you may go in and realize that you're slightly overinsured. So that also is a benefit to everybody.

Yeah. And frankly, I think what we're trying to do is create a better relationship with the consumer and the insurance company, because essentially both sides, in case there was a catastrophic loss, Right? It's the, the homeowner wants to be properly reimbursed for everything that was in their home, right? And that's what the insurance companies do. But let's face it, we live in a society where some people are going to try to claim that they have more and more, you know, contents than they did to try and essentially get more from the insurance company.

Yeah.

And then there's vice versa. There are some insurance companies that were going to try to minimize the payout And take advantage of the fact that some consumers don't have that home inventory.

That's correct.

So I think the whole concept of creating a home inventory for the consumer and sharing it is essentially creating a more of a trusted relationship between the two. And let's just pay for what the value is, right? If my house burns down, this is what the value is that I want to get reimbursed. And candidly, I've talked to other insurance companies. A lot of them are like, yeah, we just want to pay out what's fair and reasonable. Because we don't want to have claims and processing time to take into account and, and have to sort of go back and forth with the consumer on these things. So it's really trying to create a better relationship between consumer and insurance company.

Yeah, it truly is. And I think too, that if we can bring the tools together, that can make it more efficient for the parties to engage, that's also very beneficial.

Great. So maybe now we go into a bit of a speed round as it relates to once a consumer takes a home inventory, what are all the value propositions associated with it? Right. And so I'll kick us off by basically saying, yeah, if you look at your insurance policy, there's that property contents coverage, right? So if your house is worth $300,000 to rebuild, usually the property contents value is about half of that. It's like we think you're Stuff inside your house is worth $150 grand. But what if you've got a lot of stuff in your house and it's worth more than $150 grand, right?

Yep, I was just about to say.

So that's clearly one value proposition is just having something to compare where you've actually taken the time to estimate the value of your personal property and compare it to the amount that you actually covered in your insurance policy. Beth, can you share us perhaps another value proposition over having a home inventory?

Yeah, and for, any of those just-in-case situations in terms of not only just whether you're affected by a fire, a flood in your house, whatever the case—

Tornado, hurricane, hailstorm.

You can even have a leaky toilet that breaks and damages everything downstairs, or shower pan or something. So I mean, just having all of that so you know what you own is also another reason to have a valuable home inventory, because you now know what is in your home so you can quickly file a claim. So filing a claim is really quick with an inventory, and that's really important.

Right. So it's the other part that I wanted to point out on the insurance policy. It goes back to what's called the dwelling coverage, right? And my example is your insurance policy may say it costs $300,000 to rebuild your home if it burned to the ground. A lot of times people are underinsured because they've done a home remodel project.

Mm-hmm.

Right? You got your policy when you bought the house, and then 2 years later you spent $50,000 remodeling your kitchen, right? And if your house burned down the day after you finished your kitchen remodel, it's going to cost more than $300,000 to rebuild it. It's going to cost like $350,000. So assessing the value of the dwelling coverage, given it— especially for people who buy homes that do a lot of home improvement projects, That's a constant. Another reason to share that inventory with your insurance company to kind of, again, triangulate what's the right dwelling coverage.

Yeah, but you want to share the most up-to-date inventory. People forget about that. They share their inventory that they did when they first moved in and they forgot that they ordered all this new stuff. They changed out the house. So your most current up-to-date inventory is really important.

I'll share another value proposition of having inventory. It goes back to those fixed assets and equipment and building materials, right? So if you inventory your HVAC units and your hot water heater and your roof and all these other things, those fixed assets tend to be things that need preventative maintenance.

Yep.

Right. And so if you're on vacation and something happens and some unit breaks down, you want to be able to be able to call somebody and say, hey, I've got this Carrier unit, can you go out and fix it? Right. And having that inventory of all those things leads to a much more seamless transition to the home maintenance aspects of managing a home. Beth, do you have any other value propositions that you can think of as it relates to the value of having a home inventory?

Yeah, I can think of a lot of inventory values. You don't buy the same thing over and over again. I've done that before. It's a pain in the neck.

So, so you're at the store about to buy something and you're like, gee, you don't even know whether you have it or not. Maybe I should pull my inventory and just search whether I actually have that leaf blower already.

Yeah. Or you can't find it somewhere in your house. Because you forget where you placed it. And yes, I have a personal story on this. I like to go outside and do my own trimming of trees and hedges because there's a lot close to my house and it's constant and we live in fire territory. And so I like to make sure that I'm on top of this. Well, I had not one, not two, But 3 of the exact same hedge trimmers for my shrubs in my garage. But because it was in a cabinet that Jon can see because he's taller than I am, and I couldn't— I could— I didn't even know they were up there until he pointed it out to me after I bought the third one.

I can see them, assuming I know that they're actually stored in there.

Exactly.

The whole point of I never know what's actually stored in the house. And another big category is Christmas ornaments, since I know we're coming across the seas. You have a rather large collection of Christmas ornaments.

I do. I love holidays, but I love Christmas. I decorate my whole house, but I have a lot. And so I do document those as well.

All right. I'm going to share another value proposition over having a home inventory is in case you ever decided to move from your current home, it's— and you're going to hire a set of movers. You have to have an inventory over what you want your movers to move because you're going to move it from house A to house B. And you've already gone through that process of understanding the inventory of all the furniture and electronics that you have. It makes it much easier to understand how to manage your mover. And then one last bit, I'll turn over to you, Beth, 'cause I know you talk to a lot of estate planning attorneys.

Yes.

How does a home inventory impact somebody's estate plan?

It absolutely does. So when it comes to putting together your trust and wills, There's another document, and forgive me if I get it wrong. It's called your personal contents memorandum, I think. But your trust and estate attorney asks for this information because they want to know who you're designating the items in your home to. Is it going to a charitable organization? Is it going to specific family members and which ones? And that prevents people from having arguments at the time of. Someone's passing on to the next life, the afterlife. So what ends up happening is this is really important, but estate attorneys and estate planners, along with inventory professionals, professionals and some other individuals who perform inventories, are coming together and actually offering this service to their customers so that they can get their inventory documented And it's assigned to the appropriate individuals. Really, really important to prevent any infighting, family infighting at the time.

Absolutely. So let's start wrapping up this great episode. Action items for our audience. My action item for them is to, you know, start thinking about how to go about creating a home inventory and what's important to you in your home. And I always tell people that, you know, it's going to decide on what your strategy is— spreadsheets, photos, or videos— deciding on the cloud storage. But I also try to tell people that don't do it in one— don't try to do it all at once, right? Pick like one room or one or two rooms a weekend and, you know, maybe spend half an hour, an hour kind of documenting one thing. And then it doesn't seem like a big monumental task if you space it out. And by basically taking one or two rooms a weekend and sort of figuring that sort of aspect out.

Yeah. And I've got an added action item. Have fun with your family. You can all do a room and have a contest. How much fun would that be?

If you've got kids old enough, you could assign the task to them. Make them do the whole maintenance.

Exactly.

Absolutely. So, um, with that, Elizabeth, why don't you close us out and tell us a little bit about where we're headed next on our podcast?

Yes. So thank you all for joining us. We invite you to come back and visit us again at Be a Smarter Homeowner Podcast. And our next episode is going to focus on home maintenance. What it means to perform home maintenance, the specific tasks that you're going to need, especially during this fall season that we're embarking on, but also how you can track this information and some more details as it relates to home maintenance. In addition to that, please subscribe to our podcast. Please rate us on all the major podcast stations, and we look forward to seeing you at our next episode.

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