HOW CAN I IMPROVE THE VALUE OF MY PROPERTY?

Outside of a homeowner’s control, the biggest factor is market conditions. Other important issues are:

• condition of the property

• specific home improvements

• neighborhood stability and safety

The greatest rise in home prices occurs when the economy is strong and the number of home sales is increasing. Specific home improvements can increase the value above the cost of the improvements.

• remodeled bathroom returns, 81 percent to the owner

• bathroom addition, 89 percent

• master bedroom suite, 82 percent

Remember, quality pays. Well-planned and well-executed remodeling jobs are a good investment while bad work seldom enhances value or livability.

The safety and security of a neighborhood can affect property values, too. If you live in a high-crime area, an organized community watch program not only will lower the crime rate but give home values a boost, too.
 

HOW CAN I INCREASE THE VALUE OF MY PROPERTY?

Specific home improvements can increase your property value above the cost of the improvements themselves, such as remodeling a kitchen, adding a bathroom, finishing a basement or upgrading landscaping. Just be sure that quality pays with remodeling. A bad remodeling job will do little to boost your property value.

If you live in a high-crime area, an organized community watch program not only will lower the crime rate but can enhance property values, too. It also helps to live in an area where other homeowners are upgrading their homes, which can help pull up your property value, too.

The bottom line is to measure the cost of any improvements you want to make against the overall values in your neighborhood. If you over improve for the neighborhood, you may not necessarily recover your costs or boost your property value significantly.
 

WILL BUYING A BIGGER HOME INCREASE MY PROFIT?

Consider these questions before making a choice between adding on to an existing home or moving up in the market to a bigger house:

• How much money is available, either from cash reserves or through a home improvement loan, to remodel the current house?

• How much additional space is required? Would the foundation support a second floor or does the lot have room to expand on the ground level?

• What do local zoning and building ordinances permit?

• How much equity already exists in the property?

• Are there affordable properties for sale that would satisfy housing needs?

Ultimately, the decision should be based on individual needs, the extent of work involved and what will add the most value.

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HOW DO I FIND OUT HOW MUCH MY HOME IS WORTH?

A comparative market analysis and an appraisal are the standard methods for determining a home’s value.

Your real estate agent will be able to provide a comparative market analysis, an informal estimate of value based on comparable sales in the neighborhood. Be sure you get listing prices of current homes on the market as well as those that have sold. You also can research this yourself by checking on recent sales in public records. Be sure that you are researching properties that are similar in size, construction and location. This information is not only available at your local recorder’s or assessor’s office but also through private companies and on the Internet.

An appraisal, which generally costs $200 to $300 to perform, is a certified appraiser’s opinion of the value of a home at any given time. Appraisers review numerous factors including recent comparable sales, location, square footage and construction quality.

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WHAT ARE THE DIFFERENCES BETWEEN MARKET VALUE AND APPRAISED VALUE?

The appraised value of a house is a certified appraiser’s opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $200 to $300.

Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.

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WHAT KINDS OF RULES AND REGULATIONS DO ASSOCIATIONS REGULATE?

Typical covenants, codes and restrictions (CC&Rs), which govern condo associations, give the board authority to make and enforce reasonable rules for the use of common property. But that would not apply to interior spaces owned by smokers themselves.

A homeowners association’s board of directors can restrict smoking if it applies to indoor common spaces such as hallways or recreation rooms. Outdoor spaces are a different story, say legal experts. Any restriction would probably hinge on local laws (i.e. if a city banned smoking outdoors, a homeowners association probably could restrict smoking in its outdoor spaces).

The 1990 Americans with Disabilities Act does not require strictly residential apartments and single-family homes to be made accessible. But all new construction of public accommodations or commercial projects (such as a government building or a shopping mall) must be accessible. New multi-family construction also falls into this category.

In all states, the Federal Fair Housing Act provides protection against discrimination for people with physical or mental disabilities. Discrimination includes the refusal to make reasonable modifications to buildings that aren’t accessible to the disabled.

 

WHAT FEES CAN I EXPECT TO PAY A HOME ASSOCIATION?

Condominium owners pay a fee, usually monthly, to the homeowner’s association to cover the costs of managing and maintaining all common areas. In addition, you may pay extra assessments for major maintenance projects. In general these must be voted on by the association board or in some cases by all of the owners. The particular cost of monthly fees and the rules regarding special assessments vary from association to association. When considering a condominium, it’s a good idea to thoroughly research the fees and bylaws of the condo association.

 

ARE HOMEOWNER ASSOCIATION FEES TAX DEDUCTIBLE?

Homeowners association fees are considered personal living expenses and are not tax-deductible. If, however, an association has a special assessment to make one or more capital improvements, condo owners may be able to add the expense to their cost basis. Cost basis is a term for the money an owner spends for permanent improvements throughout their time in the home and is used to reduce eventual capital gains taxes when the property is sold. For example, if the association puts a new roof on a building, the expense could be considered part of a condo owner’s cost basis only if they lived directly underneath it. Overall improvements to common areas, such as the installation of a swimming pool, need to be considered on a case-by-case basis but most can be included in the cost basis of any owner who can show their home directly benefits from the work.

To find out more about how the IRS views condo association fees, look to IRS Publication 17, “Your Federal Income Tax,” which includes a section on condos. Order a free copy by calling (800) TAX-FORM.

 

IMPROVING REAL ESTATE

ARE THERE GOVERNMENT PROGRAMS FOR REHABILITATION?

The U.S. Department of Housing and Urban Development’s Section 203 (K) rehabilitation loan program is designed to facilitate major structural rehabilitation of houses with one to four units that are more than one year old. Condominiums are not eligible.

The 203(K) loan is usually done as a combination loan to purchase a fixer-upper property “as is” and rehabilitate it, or to refinance a temporary loan to buy the property and do the rehabilitation. It can also be done as a rehabilitation-only loan.

Plans and specifications for the proposed work must be submitted for architectural review and cost estimation. Mortgage proceeds are advanced periodically during the rehabilitation period to finance the construction costs.

For a list of participating lenders, call HUD at (202) 708-2720.

If you are a veteran, loans from the U.S. Department of Veterans Affairs also can be used to buy a home, build a home, improve a home or to refinance an existing loan. VA loans frequently offer lower interest rates than ordinarily available with other kinds of loans. To qualify for a loan, the first step is to apply for a Certificate of Eligibility.

Another program is the Federal Housing Administration’s Title 1 FHA loan program.

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WHAT REPAIRS SHOULD I MAKE BEFORE PUTTING A HOME ON THE MARKET?

If you want to get top dollar for your property, you probably need to make all minor repairs and selected major repairs before going on the market. Nearly all purchase contracts include an inspection clause, a buyer contingency that allows a buyer to back out if numerous defects are found or negotiate their repair.

The trick is not to overspend on pre-sale repairs, especially if there are few houses on the market but many buyers willing to buy at almost any price. On the other hand, making such repairs may be the only way to sell your house in a down market.

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