Jack's New Hampshire Real Estate Blog

In the early mid 2000's most of the homes were bought with near 100% financing.  In addition, many home owners pulled cash out via refinancing and equity loans.  In 2005, the New Hampshire market began to slow down and property values declined.  Now, values have decreased so much that nearly half the homes are UPSIDE DOWN, meaning that what they owe on the mortgage is more than what they would net from selling their home.  As a result, some homeowners are stuck!!!   Well, maybe not........... 

One option is a "Short Sale".  Before it was popular, I taught "Short sale" techniques to investors and my fellow real estate agent collegues through seminars.  Short sales used to be just another "tool".  Now, it is a must have skill.  So what is a short sale?  A short sale is when a lender allows a seller to sell the property by reducing the amount of money they will accept as a payoff.  An example would be:

Market Value of house...   $200,000

Loan Balance..................$250,000

Cost to sell......................$15,000

After paying commission and transfer tax and other expenses, the seller would need to write a check for about $65,000 just to be able to walk away from the house.   In a short sale situation, a "short" payoff of $185,000 is negotiated so the home can be sold for $200,000 and expenses are paid.  The bank accepts the $185,000 as full payment and the seller moves on.

So why would the lender do this?....  The answer is it is strictly business!!  The bank knows that if the property goes to foreclosure, they will have to incur even more expenses and carrying costs and will have to take the property back.  If they foreclose and are lucky enough to get another buyer, they will net LESS than the $185,000 after expenses as they will have additional costs.  It is their best interest to accept the payoff rather than taking the property back.

So who qualifies for short sales?  People who have gone through a financial hardship.  Exampes include; divorce, health issues, bankruptcy, family issues, relocation or any unexpected major life issue that arises.

Short sales are effective, but need to handled by a professional who specializes in them.  There are many tricks of the trade that make a huge difference on whether or not it is successful.

My best advice for short sales (besides calling me...lol) is to get an offer in to the bank early.  The bank takes 60-90 before making a decision, so get a buyer's initial offer to the bank as they will not work on the file until there is an offer.  In short sales, any offer is a good offer!! 

If you wold like additional information or assitance on short sales, go ahead and email me.

Remember...You are not "stuck" in your house!

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 3^rd 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 2^nd 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 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 @ jacklavoie@comcast.net

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.

Speaking of people trying to do the right thing...........................

It was a “Great Day at Keller Wiliams”

Hats off to my real estate collegues over at the Bedford Keller Williams Realty office. On Thursday they sponsored a terrific fundraising gala over at Fratellos in Manchester. A few hundred real estate professionals, KW clients and everyday folk joined together to raise several thousand dollars for charity. Alan Rice, Bill Weidacher, Mark Mulcahy and the woman who really runs the show, Debi Levine(love ya Deb) did a great job putting together a great evening. There are some great people in this business, and that office has a lot of them. 

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 lenders like Wells Fargo and Countrywide want you to get pre-approved through thirow own company. Not sure about that logic, since they were the ones who wrote the previous "bad loan", but if the ban  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?

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

Did you know that the last few house finishing touches are the most profitable?  When I taught investing classes and worked with my clients I would view the properties they were fixing up and were amazed that they would do a terrific job on the major items, but  leave the last few details either unfinished or rather blaaaaah.  When selling in home, you need to make your house stand out in this competitive market.

I have a good friend in the business.  Her name is Karen Cormier. She is an accomplished broker and has done an unbelieable job in her brokerage business using her professional staging techniques.  Karen would tell you that staging a house makes an unbelievable difference, not only in the price of the home, but also in the reduced marketing times.  I remember working with Karen and her telling me of a listing in Bedford that she sold.  In that transaction, the house was dreary and each of the other broker who provided CMA's said the house would sell in the Mid $400's.  Karen ended up getting the listing and spent 2 days with the seller "Staging" and doing a "mini-make over".  She ended up listing the property for $529,000 and sold it for $529,000 in 7 Days!!!!.  Staging got the seller's about $70,000 more on the sale.  Isn't it worth the time, effort or money?

The point is that if you want top dollar, you can't have a bargain basement home presentation.  Whether you have a million dollar home in Bedford, a starter home in Manchester or a condo at Hampton Beach you must STAGE!!!!!.

I consider Karen the area's staging expert.  She is someone I utilize when I stage my listings.  If you would like to contact Karen you can reach her at kcormier@kw.com

On a lighter note, I am watching the Red Sox in s slugfest with the Rays as I write this.  Here is to good staging and fast sales on your homes and a Big Papi 3-run homer later tonight!!  :)

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.

Many 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 70% less repairs = MAXIMUM OFFER.  Within the 70% are all your other costs and profit.  For riskier investments use 60 or 65%.

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

Oh one last thing.... Don't get greedy, a profit is a profit..

Lastly, I would be remiss if I didn't offer my prediction for the Boston Red Sox American League Championship face out against Tampa Bay.

Red Sox in 6.  Series MVP, Duston Pedroia...Take it to the bank!!!