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Archive for January, 2010

When I am out doing appraisals or consulting a homeowner at a listing appointment, I often get asked what kinds of home improvements add value. They will ask me if I think it makes financial sense to add a particular feature to their house. Here are my thoughts on some of the common questions I receive.

First of all, the best way to increase the value your home is to make any needed repairs or fix a problem in your house. For every dollar you spent repairing or fixing a problem, you will receive 3 to 5 dollars in return. Now that’s a return on investment!!!! As an example, lets say your roof is older, and needs replacing. Do you realize that most potential buyers will discount their offer on your home by MORE than the cost of repairs to account for the risk, time and inconvenience associated with having to complete the roof themselves? If a roof will cost $5,000 to replace, a buyer will discount their offer price by $10,000 or more. Therefore, isn’t it common sense that by you “investing” $5,000 in your house, you will get a return of $10,000 on that investment? This is the case for most items that need replacement such as heating system, septic system etc. If your house needs painting and it will cost you $6,000, be happy to know that after painting the house, you will get ALL the money back and more. So the #1 rule is…. Fix what is defective, broken, funky or creates a problem.

After everything is fixed, what kind of features add the most value? A deck, a finished attic, a garage? I will list a some of the items that I feel add the most. Before, I do that, I do want to make this point. If you are going to live in your home for years and are thinking of adding something major (ie. Porch, addition etc) and enjoy it for 10 years, isn’t it safe to say you got “value of out it”. Having said that, here are Jack Lavoie’s “resale value enhancers” (Editorial here. I don’t care about the myths and practices of most appraisers and bank guidelines. I base my opinion on 20 years of experience valuing homes in the Greater Manchester and Southern New Hampshire areas).

Minor Kitchen Makeover – If the cabinets are solid and modern, keep them. If they are solid, but dingy, then paint them. Replace countertops, add a nice big sink and attractive faucets and install new appliances. Tile in the kitchen gives an average kitchen an expensive look

Adding a 3rd Bedroom
– If your home has less than three bedrooms, adding a bedroom will add significant value.

Adding a finished basement– Finishing the basement is the most inexpensive way to add living space (hey, the walls, floor and ceiling is already there…lol). Compare that to having to build an addition. Sometimes adding a family room in the basement can really change the functionality of the home.

Adding a 2nd bath – If your house is a 2-story home and has only one bath, then adding a bath will greatly enhance the value. If you have an upscale home, adding a master bath with increase value.

Of course, the actual impact of these or other improvements will vary on each house. If you would like an unbiased opinion or analysis of your proposed improvements, don’t hesitate to contact me.

Last point… Never OVER IMPROVE the property. That means, don’t add features that are excessive the neighborhood.

If you have questions of this topic feel free to contact me @ jacklavoie@comcast.net

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Short sales often bring excellent opportunities for buyers to purchase a property at below market value. Below is a video of a great example of such a deal:

If you would like more info on this unit call (603) 644-1000 or send email to: jack@jacklavoie.com

For more information on Short Sales click SHORT SALES

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As an appraiser, broker and short sale specialist in Manchester NH, I have observed the largest descrepencies between assessed values and current market alues in the Manchester NH multifamily market. Manchester apartment buildings have decreased in value at a much faster rate than other types of properties in the city or region. Many 3-Family apartment buildings are assessed from $275-$400K when they are currently selling for $150-$250K. My data shows that the multi family assessments in Manchester are 30-40 percent over true market value compared to the average city “overassessment” of 18%. With the high vacancy rate, dropping rents, higher insurance costs, owners cannot afford to be paying MORE than their fair share of taxes. The deadline for filing an abatement is March 31, 2010. To file an abatement you can download an ABATEMENT FORM from the city webstite. If you need a professional opinon of value to include with the application contact me and I will gladly assist with your TAX ABATEMENT

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Here is the scenario… You decide you want to buy a certain “For Sale By Owner” home and the seller informs you that the house “appraised” for $280K only two months ago. He is asking $280K, but will let you have for it for $270K. You might be thinking…. Hmmmm, such a deal!.. 10K instant equity!! After all, it is a certified appraisal completed by licensed appraiser. In a perfect world, an honest, credible appraisal by a competent appraiser SHOULD be reliable, unfortunately, it may be not.

The first thing I would recommend is to obtain a copy of that appraisal. If the seller refuses, the appraisal probably does not exist. If the appraisal is produced, the next step is to find out WHO order the appraisal and WHAT was the purpose for the appraisal.

What if the appraisal was “fluffed” up so to show more equity so the owner could refinance?

What if the appraisal was ordered by the seller’s “soon to be divorced spouse” who wanted to prove the house hubby was getting was worth more?

Maybe the appraiser was inexperienced and not familiar with the area?

What if the appraisal was completed by a real estate broker who wanted to make the seller “feel good” about the value of the home in hopes they would “like the agent” and list their home with them?

The point is that, if you do NOT order the appraisal yourself, you don’t know what the motivation or qualifications of the appraiser are. I only trust two types of appraisals… 1) the ones I complete mself and 2) the ones I personally hire someone to complete.

I truly believe that if you want an unbiased appraisal when purchasing a home, you should hire your own independent appraiser. Yesterday, I did an appraisal on a home in the North End of Manchester. I was doing an appraisal for a lender who was going to finance the purchase of a 3-family investment property. The buyer met me at the property and asked me “Do you represent me or him (the seller). I informed with that I represented the bank and not him. Now, the fact that I am honest, competent and will provide an honest appraisal to the bank will indirectly benefit him, but what if I was not? When this nervous guy told me he was nervous because he was putting most of his savings into the building purchase, I decided that I NEEDED to make this point my friends………………… If you are truly concerned (and you should be) about the value or marketability of a home you are buying… Hire you OWN appraiser. If you would like to discuss the appraisal process, don’t hesitate to email me at jacklavoie@comcast.net

P.S. I may have painted a poor scenario of the appraisal profession. The truth is, like most professions there are always a few bad apples. The vast majority of the appraisers I know are honest and try to do a credible job.

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Here is a snapshot of the local Manchester NH single family real estate market.  Inventory is stable, however the number of units sold, median sales price and median list price are slightlly down.  Part of this decline is seasonal, since holidays and winter slow down impacts the amount of sales.  I will be posting other segments of Manchester NH (condos, multi-family) as well as Nashua NH Real estate, Concord NH real Estate and Lakes Region Laconia NH real estate.

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A client of mind inquired about buying a Manchester NH fixer upper recently so I provided her with some coaching.  Many other people  have called me recently and inquired about buying foreclosure properties to “Rehab” (fix up) and sell for profit.  Thoughts of real estate profits dancing through their head.   The truth of the matter is that you CAN make money that way, but there are some important factors one would need to analyze. 

There is an old saying that you make your money when you buy.  This means yo MUST buy it right.  Pay too much for the property up front and you are doomed.  I dont care whether the property you are buying is on the street you live on or Sydney Australia for that matter. Buying it right is essential.  So, Jack…How do you buy it right?

The MOST important step is estimating what the property will be worth and eventually sell for AFTER repair.  Estimate it right and follow my formula and you will make money.  Estimate it wrong and your profit will be in danger.

Step 1 –  Hire an appraiser, broker or another seasoned investor to help you (until you become proficient at it yourself) search out sales and COMPETING listings to see where your house will fit in.  In a slow market, active or competing listings are important as they are your houses competition.  Remember the list prices are just asking prices and each of the homes will most likely sell for less than full price.  This number is the AFTER REPAIRED VALUE or “ARV”

Step 2- After you determine market value figure on selling it a little less than market value as to move the property faster.  The last thing you need is costly carrying costs.  The discounted price (let’s say 5-10 % below market) is the ESTIMATED SELLING PRICE.

Step 3 -Hire an contractor to provide you with real estimates for repairs BEFORE you buy the property.  Fix the obvious, but dont forget the finishing touches, such as landscaping, light fixtures, towel racks, driveway sealcoating and interior staging.  In rehabbing, the profit is in the last 5% of the details!  The contractor estimates need to include a 20% Misc cost for over runs.  These estimates plus a 20% buffer are your REPAIR COSTS.

Step 4 – In addition to repairs, you will have acquisition costs (Title search, transfer tax, inspections etc), carrying costs (mortgage payments, utilities, heat, lawn/snow plowing) and selling expenses (real estate commission, transfer tax, etc).  These items will add up to a lot of money. 

Step 5 – Determine your Minimum profit. I would say that given the risk, time and expertise needed to rehab a house, that the profit should be NO LESS than 15% of the after repaired value.  This might be on the low side.  Your actual profit requirement will vary based on the type of property and your investment requirements.  Your profit needs to be factored in BEFORE you make an offer.

Step 6 – What to offer.  Here are two formulas for you.  The “long” one is as follows

Estimated Selling Price minus (Acquisition costs+Carrying costs+Selling costs+Repair Costs+Required profit) = Your MAXIMUM OFFER

The shorter rule of thumb is:

Estimated Selling Price X 65% less repairs = MAXIMUM OFFER.  Within the 65% are all your other costs and profit.  For riskier investments use 60%.

Remember, Estimate the Final Selling price carefully and factor in all costs.

Oh one last thing…. Don’t get greedy, a profit is a profit..    jack@jacklavoie.com

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I am introducing video to my blog so I thought I would test it out.  My favorite Clip from last nights game… The “late Favre pick” I promised earlier in the week…lol

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