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.
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.
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.
Refinancing When is the best time to refinance?
It depends on how long you plan to hold on to your house and
if you have to pay anything to refinance. In addition, it
also depends on how far along you are in paying off your
current mortgage. If you are going to be selling your
house shortly, you probably will not recoup any costs you
incur to refinance your mortgage. If you are more than
halfway through paying your current mortgage, you probably
will gain little by refinancing. However, if you are going
to own your home for at least five years, that's probably
long enough to recoup any refinancing costs you incur and to
realize real savings on lowering your monthly payment. If it
is going to cost you nothing to refinance, you can gain even
more. Many lenders will allow you to roll the costs of
the refinancing into the new note and still reduce the
amount of the monthly payment. Also, there are no-cost
refinancing deals available. In any case, it pays to consult
your lender or financial advisor, or run the numbers
yourself, before you refinance.
What are the advantages/disadvantages of no-cost loans?
In many states, real estate regulatory agencies are cracking
down on such advertising. The very term, "no-cost" loan, is
misleading because borrowers are actually paying a higher
interest rate in exchange for not having to pay fees or
closing costs up front when the loan is secured. A
"no-points" loan is one for which the lender does not charge
points (one point is equal to 1 percent of the loan amount).
But there are other fees involved in no-point loans, as with
most loans.
How does bankruptcy affect my refinancing?
Refinancing may be prudent but could be difficult after a
bankruptcy. If you're considering bankruptcy, you may want
to go to your current lender first and explain the
situation. If you have been current on your payments, the
lender may be accommodating and refinance your loan, easing
your financial situation.
What are the rules on Capital Gains?
When children inherit a home,
the Internal Revenue Service determines their basis in the
property on the date of the owner's death. The cost basis is
not the amount the owner originally paid for the house, but
the property's fair-market value on the date of the parent's
death. Cost basis is a tax term for the dollar amount
assigned to a property at the time it is acquired, for the
purpose of determining gain or loss when it is sold. For
example, one of the three siblings sold his or her share of
a property to be divided equally, he or she must pay capital
gains tax for whatever profit made over one-third of the new
basis. Other tax consequences include estate taxes.
However, the estate must total $675,000 or more for tax year
2000 before tax issues become a concern. The IRS allows
residents to pass on property, cash and other assets worth
up to a total of $675,000 for tax year 2000 before charging
the heirs any taxes. This figure will rise each year for the
next several years. Regarding the transfer of
ownership, quit-claim deeds often are used between family
members in situations such as this when an heir is buying
out the other. All parties must be agreeable to dropping a
name from the title. For more information, consult the IRS's
Publication 448, "Federal Estate and Gift Taxes." Order by
calling 1-800-TAX-FORM.
Which home buying costs are deductible?
Any points you or the seller
pay to purchase your home loan are deductible for that year.
Property taxes and interest are deductible every year.
But while other home-buying costs (closing costs in
particular) are not immediately tax-deductible, they can be
figured into the adjusted cost basis of your home when you
go to sell (any significant home improvements also can be
calculated into your basis). These fees would include title
insurance, loan-application fee, credit report, appraisal
fee, service fee, settlement or closing fees, bank
attorney's fee, attorney's fee, document preparation fee and
recording fees. Points paid when you refinance an existing
mortgage must be deducted ratably over the life of the new
loan.
Buying Your Home 
