Author Archives: Jennifer Cote

About Jennifer Cote

Real Estate junkie, appraiser, sell, buy, analyze, research,passion, invest, environmental, crunchy, municipal, planning, efficiency...everything real estate!

“HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS”

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This is great news for investors!  FHA is temporarily removing the restriction for investors.  FHA didn’t allow a new buyer to purchase a home that has been owned less than 3 months by the seller (typically an investor-aka flipper).  The regulation was for curtailing flipping the property.

This change is a smart move for FHA/HUD because many of the homes being purchased by investors are in pretty poor condition and a typical buyer wouldn’t want to, or just couldn’t, purchase the home.  This allows investors to purchase the property, do the necessary improvements, which will usually help the new buyer get a conventional loan on the property.  Many, and I do mean many of these foreclosed properties don’t quality for conventional lending because they are, well, basically a mess!

Doing a quick search for “Flippers” brought up some very negative comments.  They are often looked at as the bad guy, and that is just inaccurate.  There is good and bad in every aspect of life, profession, business…you get the point.  Flippers are ultimately just investors.  Just like any other opportunity they are looking for a profit…is that bad?  They are assuming the risk.  A property might look like it just needs a couple cans of paint and new baths, but underneath all that could be a dragon rearing it’s ugly head.  The investor will do their due-diligence, but things are often missed, and herein lies the risk.

Moving foreclosures off the market is great.  In this market investors will typically price these properties low for a quicker sale and this helps your first-time home-buyer get a house that’s fixed up and a pretty good deal.  Southern New Hampshire has seen it’s fair share of foreclosures, but it has not been the dominant market.  Arms-length transactions have been the norm.

Just my thoughts…

www.TopNHhomes.com

Understanding FHA Appraisals

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Understanding FHA Appraisals

From FHA: “Required repairs are limited to those repairs necessary to preserve the continued marketability of the property and to protect the health and safety of the occupants.”

When you do FHA appraising you constantly have the 3 S’s in your mind:

1. Safety – Any safety issues need to be fixed.

2. Security – I like to refer to this one as “saleability”.  It basically refers to protecting the FHA insured mortgage by keeping the property in marketable condition.

3. Soundness – Are there any structural problems?  Floor joists rotted, or a leaking roof?

Having the appraiser do a FHA appraisal does not constitute a home inspection and it is always recommended you hire a qualified home inspector.

Here are 12 of the many things your FHA appraiser will look for:

  1. ALL the utilities need to be ON at the time of inspection
  2. Missing floor covering, fixtures, outlet covers, and/or exterior siding
  3. Rotted wood or evidence of infestation
  4. Chipping or peeling paint – if built prior to 1978, possible lead paint issues
  5. Windows not opening or closing – need 2 means of egress from bedrooms
  6. Roof with less than 2 years of economic life or with missing or damaged shingles
  7. Garage must have drywall on any wall adjacent to living areas
  8. Crawl space should be at least 18 inches, with no standing water, or debris in the crawl space
  9. Attic must have insulation and access if there is an attic
  10. HVAC, plumbing, and electrical must function properly
  11. Electric garage door must have a reverse stop
  12. Wells must be located 50′ from septic tank, and 100′ from absorption field.

If the property has any of these issues they need to be cured (fixed) before closing.

HUD 4150.2 Handbook for appraisals.  This is the original bible for appraisers and it is constantly updated by issuance of new Mortgagee Letters…

FHA Appraiser Resources -Bottom right of page.  The Mortgagee Letters are constantly updated and the appraiser needs to keep track of this information.

Appraising Green/Energy Efficient Housing

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Appraising Green/Energy Efficient Houses

The difficulty in appraising green building is the availability of comparable sales.  It is unusual to find comparable properties with the same green features as the subject.  Therefore, how do appraisers come up with an adjustment for the feature?

First we need to determine if the green product is market accepted.  Would a typical buyer be able to operate it?  This comes from knowing your market area.

I appraised a home in Amherst, NH back in ’02, when values were increasing, high demand/short supply, and under 3 months marketing times (so much easier to do my job back then).  The house was a passive solar envelope home…a very simple way to heat your home for almost nothing.  There was a forced-warm air heat system fueled by solar, oil, or electric.  The control panel in the basement looked like a Nasa control station.  It was mind-boggling, certainly would confuse the average home-buyer.  This would not be market accepted.  Keep it simple.

Cost savings is the main way I figure out my energy efficient adjustment, but the cost savings is not always market equivalent for energy-efficient homes.  It is a way to justify the adjustment.   Generally you can find good sources for cost savings on the web, or talk to green builders.

Every sub-market will be different.  An entry-level home would most likely not see much, if any, added value.

There is a great subdivision here in Milford, NH called Sunview Homes (great name).  The houses were all placed to take advantage of the sun.  Heating/cooling costs are minimal and they all had quilted window coverings.  Most agents in the area don’t market them as passive solar homes.  Is there value there?  If the buyer doesn’t know about the energy efficiency then they certainly will not pay more for it.  The biggest problem I have when I appraise these homes is finding documentation supporting they are passive solar.  I’ve researched the line of deeds since the properties were built and haven’t found anything.  Because of my interest/knowledge in green/energy efficient building, and my discussions with homeowners who purchased the homes when they were built…I know.

There is so much to discuss on this topic, green building is such an expansive topic.  This is only the beginning.

Google my favorites:  passive-solar, geo-thermal, envelope homes, or sustainable design.

Some interesting links:

http://www.pr-inside.com/earth-advantage-institute-addresses-disparity-r1296769.htm

http://www.greenhomebuilding.com/QandA/financial/appraising.htm

Tax abatement time.

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To help you decide if a tax abatement is warranted you should first double check the physical data on the tax assessment card.  In many cases the tax card may show items incorrectly.  If you need help reading the tax card give me a shout; it can be confusing.

The second thing to look at is market data for the property which shows that the property is over-assessed.  This is based on the equalized assessed value of the property as of April 1st. Since most municipalities do not reassess property each year, an equalization ratio for every municipality is established by the state.  This ratio is not usually published until the following year.

In order to calculate what the municipality states the property is worth in a given tax year, divide the total assessed value by the equalization ratio.  For example, if the tax assessment card indicates an assessed value of $250,000 and the current equalization ratio is 92% then the equalized assessed value of the property calculates to $230,000 ($250,000 ÷ 0.92). The $230,000 amount is what should be used as a basis for determining whether or not the property is over-assessed.

Is the property disproportionately assessed when compared to other properties within the municipality?  Municipalities use mass appraisal techniques. Generally speaking, cost and sale data are collected and analyzed. Rates are then established for various property types and adjustments are made for specific property characteristics. Mass appraisal techniques are utilized to assesses thousands of parcels in a municipality. In most cases, the end result of the assessment using mass appraisal techniques should be similar to the result of an appraisal.  This would be a problem if your house is the smallest in a neighborhood of McMansions.  Your assessment would most likely be overstated due to the market data pulled from the neighboring homes.  An appraisal would pull homes from other neighborhoods that are more comparable to the subject, taking into consideration the subject’s overall superior neighborhood.

The appraisal process differs significantly from the assessment process. Rather than collect data and apply it to a large sample of properties in a municipality, the appraisal focuses on one specific property. Cost, sale, and income (if applicable) data are utilized in developing the three approaches to value: cost, sales, and income capitalization. In an appraisal, market data is also analyzed outside the town. These three approaches are developed and then reconciled into a final value conclusion for the subject property.

Check out my website for more information on tax abatements:

www.JACoteAppraisals.com

Thanks for reading!