Gloria Dodge's Blog
One Overlook Drive, Atkinson, NH 03811
One Overlook Drive, Atkinson, NH 03811
Each industry comes with a vocabulary of its own, and in real estate, some of that vocabulary is downright confusing. So, if you find yourself stumped by lingo, jargon, or acronyms, you’re not alone. One of the most confusing words in the real estate industry is “abatement.”
In legal terms, to abate means to remove, lessen, or diminish a thing. In residential real estate, however, abatement has both positive and negative connotations. Here is a short primer on what you need to know.
Property tax abatement – the positive view
Most often to home buyers, the term abatement applies to a property tax abatement. Property taxes are ongoing, annual homeowner expenses, even when you own your home outright, so the ability to access an abatement means valuable savings to homeowners. When a state, county, city, or other taxing entity offers homeowners an abatement, it means a tax reduction during the years of the abatement. Specific reductions apply to all homes in a location, while other abatements apply to specific homes that meet certain criteria for one-time improvements, upgrades, or enhancements.
Some abatements could be for installing environmentally friendly additions or upgrades such as solar panels or green-technology roofing materials. Others apply to renovations that increase both your own property's value and the value of the area. This type is true for many areas under redevelopment. Other abatements might apply to convert ware-housing or other industrial or commercial areas into residential housing or low-income housing.
Of course, all improvements must conform to the abatement's requirements, permits, and local codes, so make sure you know all the information about an abatement before relying on it as part of a purchase.
Property tax abatements may make qualifying for a mortgage easier since it reduces the income/debt to housing cost ratio. It can also be a selling-point as long as it is still in force when you choose to sell your home.
Asbestos and lead abatement – negative consequences
In a twist of the English language, the potentially negative use of abatement is the requirement to remove or mitigate exposure to asbestos and lead. If you purchase an older home, particularly one built before 1978, or conversions from commercial to residential use, all renovations must conform to modern lead-free paint, lead-free plumbing, and asbestos-free insulation, siding, roofing, and ceiling materials requirements. Prior to the 70s lead solder joint in pipes and lead ingredients in paint were common, but since children tend to put paint chips in their mouths, and since drinking water flows through those lead pipes, the Environmental Protection Agency requires it to be removed or completely sealed. Asbestos used as insulation around ducts and pipes or vermiculite attic insulation, or in wall, flooring or ceiling materials requires removal by certified professional asbestos removers.
Let your real estate professional help you determine if the home you're considering buying falls in either of these abatement categories.
Every homeowner knows how difficult it is to maintain a household. There are so many things that could go wrong in one’s life that committing to significant home payments may cause trouble.
Those who have been in debt knows that the reality of real estate is that it goes up. The value of your house would increase with the limited inventory and the high demand for homes.
Refinancing is always a viable option for every homeowner. With that, if you are asking if refinancing is a good step for you, the following should provide an answer:
First, refinancing is not a one size fits all kind of solution. It has different types which would determine if it is the right step for you.
There is a cash-out refinance which allows the homeowner to take advantage of the increase in price and replace the existing mortgage with a new one. Every person should know, however, that taking out cash-out refinancing is not good for those who cannot handle their payments in the first place. It renews your loan and extends it for a period, but it is not always a solution for those who lack self-control.
There is also a rate refinance where you would renegotiate the interest rates that you are paying. This one is a good step for those who are willing to pay off some of the debt through the equity and place it directly on loan.
Second, refinancing is not free. A common mistake that people think is that their refinancing option is open, so they get shocked when they have to pay about a thousand dollars for it. If you are in a position where you can afford a thousand dollar lost for tens of gain, it should be a good step for you.
Third, refinancing extends the term of your loan. You may feel like you get out of debt with refinancing but what you are only doing is reaching the end of your credit, and you are still in debt.
Now that you know some facts about refinancing, you can make a better decision if it is right for you and your mortgage. A financial adviser could advise you, but it is you who ultimately makes the decision.
Keep in mind that in case you need to ask more questions, you should ask a real estate professional and seek help from the experts.
Home valuation is one of the tricky areas of real estate. In general, you want a high appraisal and a low assessment. But shouldn't they be the same? Well, in a perfect world your assessment and your appraisal would be the same, but you don't want the world to be perfect in this regard. Here's why:
An appraised value comes from the report completed by a licensed professional appraiser to determine property value at a specific point, typically for a buyer to obtain a mortgage. It is a tool used by underwriters for lenders to determine if the home has enough collateral for the loan needed to purchase or refinance it.
Appraisers compare the home to similar properties in their evaluation. They look for both similarities to find a base value and difference to increase or decrease the value such as the roof's age, livable square footage, exterior materials, upgrades, and other finished. Using these numbers and other valuation formulae such as the cost to rebuild the home (similar to your homeowner insurance values), and potential income from rental or other uses, the appraiser determines a possible value.
The market value is not the same as the appraised value, however. While it starts with the appraised value, other determiners such as the desirability of the area, or circumstances such as a tornado, hurricane, or eminent domain issues may adjust the market value above or below the appraised value.
A home's assessed value typically comes from the taxing authority for the municipality. It is the method of determining the tax basis (or valuation) of the property. The tax assessment is a percentage of that value that the homeowner pays annually to provide the municipality money for water and fire services, schools, capital improvements to roads, bridge, and public parks and additional essential services.
The amount of the percentage and its designations differ for every taxing authority, so a home in one neighborhood might have a different assessed value from an identical house in another block nearby if the boundary lines for the taxing authority (school district, for example) differs.Some counties and cities reassess homes only when they sell, while others have periodic assessments. And the percentage rates of the assessments change when voters approve various tax levies for a variety of purposes.
An appraisal affects your ability to obtain a mortgage for your home while an assessment relates to the ongoing yearly tax expenses. Since a third factor determines the home's selling price, the market value, your professional realtor should guide your understanding of how these factors affect your home purchase or sale.