Archive for February, 2010

People ask me about choosing/selecting comps all the time. Truth be told there is no exact formula. It comes with experience and feel, but I do have 2 “magic questions”… And here they are… 1) Would the buyer of the house you are appraising “consider” the comparable if their home was not available… and 2) would the person who bought the sale/comp “consider” the house you are appraising (the subject property) if their home were not available. Comps dont have to exact, they just have to be “reasonable substitutes”. Having said that, lets play “Comp or No Comp”. I will sets of two properties and you tell me whether or not they are comps or not.. Just post you answers in the comment section. “Professor Jack” will grade you….lol

Set #1
A 22 year old cape in the country on 2.1 acres.
A 26 year old saltbox in the country on 1.8 acres

Set #2
A 92 year old “New Englander” on 0.11 acres in downtown Manchester
A 80 year old “New Englander” on 5.35 acres on the outskirts.

Set #3
A 7 year old ranch on 1.1 acres in Bedford, NH
A 7 year old colonial on 1.5 acres in Bedford, NH

Set #4
an 1,800 SF house on Lake Winnipesaukee
a 3,000 SF house on Lake Winnipesaukee

Set #5
an 1,800 SF house on Lake Winnipesaukee
an 1,800 SF house located near Winnipesaukee

Comments on your anwers.

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I am working on a complicated tax abatement assignment for Bedford NH. In order to show some support for lower values today versus when the client purchased the property (the town has the property assessed for exactly what they bought it for in 2006), I did some price analysis. Below are the stats for the years ending April 06, April 07, April 08, April 09 and Mid Feb 10 (all columns represent the 12 months prior). Below are YEAR, NUMBER of SALES and MEDIAN SALES PRICE

2006 348 $442,000
2007 300 $430,000
2008 249 $415,200
2009 263 $390,000
2010 225 $372,000

If you would like a historical analysis on your town just email me at jack@jacklavoie.com

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In all cities and towns in New Hampshire, the deadline for filing your 2009 tax abatement is Monday, March 1, 2010. Towns will give you the whole business day, but it is a firm deadline and any abatements delivered or mailed on the following day will be DENIED. If you would like more info on tax abatements see our “Tax Abatement” archive posts on the right or click on the TAX ABATEMENT section of my website. Please remember, that is you are going to aquire assistance or an appraisal, time is of the essence. Completing an professional appraisal takes a bit of time and the earlier in the week you order one the better. Good luck!!

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Conventional wisdon is Noooooooooooooooooo! But in reality, the answer is a definative YES!!!!

With lots of bank owed properties for sale and the banks refusing to do repairs on their properties, there are many “nice” homes available at good prices that need work. The “catch 22” is that most banks/mortgages companies do not like to loan on properties that need work. A great solution is an “FHA 203K” loan that most lenders can offer. Here is how it works….

FHA will loan against not only the purchase price of the property, but also the necessary repairs. Therefore, if a home you like needs $20,000 in repairs and you dont have the $20K at your disposal, you can still buy it. The FHA mortgage will provide you will the funds to fix the property.

In order to get an FHA loan the property must have atleast $5,000 of needed repairs and you must obtain reliable contractor estimates. You will also need to qualify for the loan income wise. When you close on your house, the lender will place the repair money essentially in escrow and pay you as work has been completed. It works great!!!

One great benefit of buying a home in need of repair is that most of the time, the value increased by fixing it EXCEEDS the cost of the repairs. Therefore, in most cases you will create/recapture instant equity…….and that is a great thing!!!

If you are considering purchasing an owner-occupied home that needs work and you don’t want to exhaust your cash reserves consider and FHA 203K loan. If you email me at jacklavoie@comcast.net , I can offer several good mortgage companies who can provide you will such loans.

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People always ask me “is the market going up or down”. I usually talk in very general terms as each market is a little different. However, here is a simple way to determine the “direction” of prices. In order to determine whether properties are going up or down and to what degree, sale comparables must be closely analyzed to extract the price appreciation or depreciation. You can hire an appraiser or a very experienced broker, but here is a “short cut” that will help.

I prescribe to the theory that all boats rise in high tide (and lower in low tide). If houses in Bedford NH are decreasing, guess what, condos in Bedford are too. If Lakefront Condos on Lake Winnipesaukee are increasing in value, then so are single family houses. If single family homes in Manchester are going down, then prices of 2-family apartment buildings in Manchester will go down too. Certainly, there are exceptions, but as a general rule, this does hold through. Based on this premise, I like to compare sales of nearly identical properties. So where do I find them? Well, if we were in California with tract housing we could use lots of sales data of similar houses. Since, most houses in New Hampshire have enough differences to make the job tough, I like to use condominiums. What I recommend is choosing condominium projects that have lots of sales and are considered “staple” properties. I might recommend “Ridgewood” in Bedford, “Fox Hollow” and “Northbrook” in Manchester or “Society Hill” in Merrimack. Then I recommend having a broker or appraiser (oh..I wonder who you could get to do this for you?…lol) to email you 2 sets of comps. One from a year ago, and one fairly recent. By comparing the difference (if any) in prices in a few complexes, it will give you a general idea what direction prices have moved to. The other way is to analyze the supply of the condos. From the same broker, find out how many sales there were in the last 12 months and how many are currently listed on the market. Do this for all complexes. Then you will figure out how much “supply” there is. You do this by taking the number of annual sales and dividing it by 12. Then divide that number into the amount of active listings. This will give you the supply. Here is an example:

24 sales in a given complex over the last 12 months

16 currently on the market in that same complex.

24/12 = 2 sales per month. 16 active/2 sales per month = 8 month supply.

Do this for all complexes.

If supply is 3 months or less, it suggests a appreciating market (prices going up)

If supply is 3-6 months, it suggests a stable market and,

If supply is 6+ months, it suggests a depreciating market (prices going down).

Remember, as a quick (but reliable) way to get a sense for the direction of the market use condominiums as your bench mark.

*If you would like a print out of sales and listings just email me @ jacklavoie@comcast.net

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I am the auctioneer for a foreclosure auction on February 15th for a newer log home on 6 acres in Washington, NH. The property is located at 400 Bailey Road, Washington. MORE INFO

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Well, anyone who knows me realizes I take challenges seriously, so when asked to “pick the winner” (Kim S…lol), I flew to Miami, talked to a ton of people and analyzed the heck out of it…lol
I have had a GREAT year picking games. I was one of 4 winners in a Suicidide/win pool that ran the table 17 weeks, something the Saints couldn’t do and the Colts wouldnt do..lol
I am 7-3 in my post season picks my highlight being 2 winners in the league championship games AND my prediction (on the record) of a “late Brett Favre Pick”.. Ahhh, made my day.
For the Superbowl, I see two of the best QB’s in the game playing well and it being a good game for 3 quarters. I see the field being a “home field” for “Who Dat Nation”, as evident by the overwhelming more Saints fans on Ocean Bldv.. I see it being an electric charged game, but I see the Saints making some mistakes as they did in the NFC game and the veteran Manning and Colts playing steady, efficient and professional down the stretch and winning. Colts 38-27…although my my heart will be with New Orleans. “Who Dat..Who Dat… Who Dat Gon Beat Thos Saints” Go Saints!

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Check out these two short videos I made yesterday. I am visiting Miami’s South Beach during superbowl week… Fun.

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With a whole bunch of bank owned properties on the market and the lenders very eager to sell them, I wanted to share a few thoughts and ideas with my friends. First of all, there is a great opportunity to find a nice house at a good price in today’s market. I remember in the last “crash” in the 1980’s, most of the properties were junk properties in bad locations. In this economy, there are nice homes in every location and price range. Yes, they need some work, but after repairs they will be great.

With regards to inspections, I do recommend you do full inspections. Think about it, the home was just foreclosed upon. If the previous owner was in financial trouble, there is a good chance they did not keep up to date on repairs, maintenance, annual service etc. How about that septic tank? How about the heating system? Most lender will not complete any repairs to the property and will only sell the property “as-is”. When buying the property you still have the right to do full home inspections on the property. After an unsatisfactory inspection, you will have the right to back out of the contract or proceed with the sale as-is. If your home inspections reveal something you did not expect, you can still ask for the seller to pay for these costs either in a price reduction or in seller paid closing costs. I have found that once a property is under contract, the lender is much more flexible with the buyer since they do not want to start over. The price you end up paying might be quite a bit less than the one you initially agree to.

Mold, lead paint and other health hazards are money in the bank if you are willing to have the property fixed yourself. Banks HATE the liability and will discount these properties for much less than the cost to fix (editorial here… NOT so smart on the banks behalf) these items. Therefore, I recommend if you find lead or mold you go back to the bank for a STEEP discount. Of course, you will want to have a professional in that area provide you with a quote so you can negotiate from strength and knowledge.

Pre-approvals are necessary and some REO lenders through there own company. Not sure about that logic, since they were the ones who wrote the previous “bad loan”, but if the bank requires it, you need to contact one of their local loan originators and get this done. If the lender does not require their own company to provide a pre-approval, then you are welcome to get a pre-approval from a lender of your choice. If you would like a referral for someone, feel free to email me. If you are paying “cash”, you will need to show a bank (or investment account) statement that shows the necessary funds to close. When providing the statement, I recommend crossing out the account number, so the information does not fall into the wrong hands

Another thing that is different with bank owned is their use of “Special Addendums”. Hey, we are talking about banks here…lol, so what would a transaction with a bank be without a little extra paperwork? ….lol Actually, they have a good reason for doing so. Since different areas of the country have difference real estale customs, the addendums allow the bank to make their sales contracts more uniform throughout the country. While they can be daunting (some are 20 pages), most of the items are common sense. Special attention needs to be paid to the section which outline who pays the closing costs. For example, in New Hampshire, the transfer tax (1.5% of sales price) is split evenly between buyer and seller. Many of the bank’s addendums state that the buyer pays the ENTIRE transfer tax. This means if the sale is for $200,000, this would be an additional $1,500 more in costs the buyer will be responsible for. Not a big deal, so long as you know this upfront and factor it in. The most important advice is to have a real estate attorney review the addendum with you so that you know what you are signing.

If you are willing to do some of the work (or pay someone to do it) you can end up with a lot of equity. If you are tight on cash, I recommend an FHA 203K rehab loan which will allow you to roll the repairs into the mortgage. This week, I did 3 appraisals on homes that are being bought from the bank. They were in Derry, Manchester and Tilton, New Hampshire. All 3 properties need less than 10K in repairs, but will be worth 40K more than what they will pay for the property once the repairs are done. If you have questions regarding FHA 203K loans just email me.

Good luck and remember, a bank will never be insulted with you offer. To them it is strictly business and not emotional. Given that…..Start low!!!!

Would you like to be added to my bank owned property email list?

Manchester NH Banl owned property list

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I met a client at a Manchester NH multi family property today. It was a 3 unit apartment building they bought 3 years ago for over $300,000 and today it is worth around $200,000. She wanted me to appraise the property and provide some advise on a plan of action as the building is causing them great pain. The couple bought it nearly 100 percent financed with a subprime mortgage with a $240K 1st mortgage at 8 percent and a $60K 2nd at 13 percent. They were told that they would be able to refinance the property, but since they are now upside down that is impossible. Declining rents combined with a costly mortgage equals a nearly $1000 per month NEGATIVE cash flow. They are stuck!

Unfortunately the Manchester NH apartment building market has suffered severe declining values and anybody who bought property from 2005 to 2008 (or refinanced to pull out cash) is most likely in trouble and stressed unless they put a huge down payment down. If you fall in this category, here are a few things you might want to do

Apply for a Tax Abatement – Since Manchester NH apartment buildings have declined in value so much, they are nearly ALL over assessed compared to other types of real estate. A successful tax abatement will lower your monthly costs and increase your cash flow (or reduce your negative cash flow). While you can apply yourself, I would recommend hiring a consultant or a professional appraiser for a tax abatement.

Short sale – In my client’s case, they cant sell the property traditionally since they owe $100,000 more than they could ever sell the property for. A short sale is when an owner sells a property to a buyer and the lender agrees to accept the purchase price which is far “short” of the mortgage balance as payment. Lenders do this because they realize it is better to get some of the money now rather than have to foreclose upon the property and take it back. If your finances are stressed and you can show hardship you may have a good chance of getting your short sale approved. I have taught courses on “short sales” and will gladly assist you with any questions you may have.

Fill those vacancies – Forget the high rents of yesterday. Lower your rents and keep your building filled. Your apartment building may show a negative cash flow but it will be a lot less damaging than vacancies.

If you need any assistance with your apartment building whether it is located in Manchester or anywhere in Southern New Hampshire, feel free to contact me at 603-644-1000 or jack@jacklavoie.com

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