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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, let’s 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 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 (i.e. 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 “Quality” Upgrades” – By adding molding, ceilings fans, upgraded lighting fixtures, quality vanities etc you make the house appear to be of better quality on the surface. Buyers are visual and the very basic upgrades will improve the perception of the houses quality through the buyer’s eyes
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. Nice, matching appliances (stainless steel is hot now) completed the kitchen
Adding a 3rd Bedroom – If your home has less than three bedrooms, adding a bedroom will add significant value. Despite what conventional wisdom says, adding a 3rd bedroom in the basement (if there is no logical spot on the main levels) does add value provided it bright, airy, has windows and is of good quality.
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.
Landscaping/Curb Appeal – YES!!!!! Landscaping makes a difference. Ok, I truly admit that appraisers, banks etc traditionally don’t place much value on landscaping when doing bank appraisals, but I can tell you personally from showing houses and “flipping” houses that curb appeal matters BIGTIME!!!! At a minimum, the there should be some well maintained plants, flowers and shrubs. Bark mulch is also great. The yard needs to be clear of debris, clutter and junk. Outbuildings are fine if well maintained…if not tear them town. Value is determined by the buyer (yes… us appraisers only provide an OPINION of value. If buyers “think” a house is more valuable due to having more curb appeal…then guess what… IT IS!!!
Paint – The single best improvement you can add to your house. The most bang for your buck! If you have a wood exterior keep it freshly painted in 3 colors 1) the body of the house 2) The trim and 3) an accent color for shutters and doors.
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 OVERIMPROVE 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 at jacklavoie@comast.net

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An important part of my job as an appraiser, broker and investor is to analyze the markets. Each month I run statistics on several representative cities and towns in the state. By simply tracking “Supply”, it give you insight on the current state of the market and short term future values. I calculate supply by dividing the average amount of sales in the last 3 months into the current amount of listings. As an example, if there were 60 sales over the last 3 months (20 per month) and 120 current listings, the supply would be 6 months. 120/20=6.0. The higher the supply number, the more oversupplied the market. Below are the following Supply in terms of months.

Manchester 10.40 months
Bedford 11.50 months
Nashua 9.59 months
Concord 14.80 months
Portsmouth 15.5 months
Laconia 18.80 months

If you would like a custom market analysis for your town, city or neighborhood, email me at jacklavoie@comcast.net or call me at 603-644-1000.

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Here is an interesting article in the today’s Manchester Union Leader which talks about the number of bankruptcies, forecloses, and late mortgage status among various homeowner/loan groups in New Hampshire.

ARTICLE IN TODAY’S UNION LEADER

It will be interesting how this impacts the real estate market. I track sales/data each month myself in several sectors and have noticed a dramatic slowdown in sales activity throughout the winter. Some of the slowdown is attritributed to winter/season, but some of it may not. I do believe that spring will help and I am eager to analyze the numbers over the next few months.

If you have specific question about a real estate matter please don’t hesitate to call me at 603-644-1000.

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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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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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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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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 think most people realize that whenever a property is bought or refinanced, the lender typical orders an appraisal.  We have many mortgage/bank clients and we do these type of appraisals all over Hillsborough (Manchester NH, Nashua NH), Merrimack (Concord NH), Rockingham (and more) counties.  However, financing appraisals are only the tip of the iceberg.  Here are my “Top 10 Reasons to order an appraisal” for the average person.

  1. Thinking of selling –  A listing appraisal is different from a market analysis.  It is an independent appraisal that assists you in pricing the home correctly.
  2. Buying a property –  While the appraisal that will be done for the mortgage company will most likely be done honestly, you need to remember that the appraiser represents the bank.  If you are uncertain of the value, I recommend you hire you own independent appraiser.
  3. Divorce Divorce is a difficult and stressful time.  Decisions made during this turbulent time with effect you for years.   Have an appraisal completed to evaluate your assets prior to dividing them.
  4. Estate/Inheritance –  If you inherit a property you will need to document the “cost basis” of the property at the time you acquire it (market value at the time you receive it).  This is very important to avoid being taxed on the entire value of the property down the road.
  5. Financial Planning – Similar to #4, it is important to document value of the property for the IRS when it comes to transferring property into different businesses, trusts or other entities.
  6. Tax Abatement – Assessor’s get tons of request from upset homeowners seeking Tax Abatements.  Submit a professional certified appraisal with your application and you chances for success with rise.
  7. Family Transfers – Ever hear the saying “Never do business with family”.  It is because many times things don’t work out for one of the parties.  When that happens, people tend to forget the original details.  For your relationship’s sake, if you are selling to a family member have it appraised independently so everybody knows they were treated fairly even years down the road
  8. Considering repairs or renovation – If you are considering making major repairs/renovations or adding an addition to your home, and are concerned with the “after repaired” value of your home, then it is prudent to hire an appraiser to tell you what the property will be worth. 
  9. Buying real estate as an investment – An appraiser can provide you with opinions of the “after repaired value? (#8), as well as forecasting cash flows and income and expenses for the investment by analyzing rents, expenses and the many “soft costs” that go into investments such as management, vacancy, maintenance and reserves.
  10. Bank Workouts/Short sales –  If you are trying to negotiate with the bank or are seeking a “short sale”, it is wise for someone OTHER THAN THE BANK to appraise it.  The results of the appraisal may give you negotiating leverage. 

There are MANY other reasons to hire an appraiser (ok…Jack Lavoie) to assist you in your real estate endeavors.  If you need assistance contact me at 603-644-1000, email me at jack@jacklavoie.com or goto  www.jacklavoie.com

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I just went and did an appraisal for a bank owned Concord NH property and was “pleasantly” surprised when I arrived and the house was still winterized and there was no heat or running water.  The place was Frooooooooozeeeeeeeen!!! lol   The problem is that FHA requires that the appraiser verify that all utilities are working and functional.  Since they were off, I need to make my appraisal “Subject to” the utilities being turned on and verify later (and before the closing) by doing a “Final Inspection”.  Luckily for these first time buyers they are confident the bank will turn on the utilities at some point so I may go back.  Lesson learned is…..  If you are buying FHA, make sure that you will be able to get the seller to turn on all utilities.  If you would like to know anything about special financing programs in New Hampshire whether it be Portsmouth, Manchester or the Lakes Region, give me a shout at 603-644-1000 or email me   jack@jacklavoie.com

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