New Hampshire waterfront property owners appreciate a clean beach

Location, location, location is the rule of thumb for much of the national market. However, like politics, real estate is local and here in the Lakes Region of New Hampshire we will place a great emphasis on Clarity, clarity, clarity.

Waterfront property demands its own level of priorities, and a clean, sandy lake bottom with a pleasant swimming area is often at the top of the list. But, New Hampshire is not known as the Granite State for nothing and so the ideal beach is often a rarity. This does not preclude that most beachfronts cannot be improved by what I label “aqua landscaping.’’

The dynamics of each water body should be carefully considered by any buyer: average depth, nutrient recycling capabilities, dissolved oxygen levels, rates of decomposition and water temperature are the primary evaluative tools. Phosphorus is at the root of most beachfront problems; it promotes plant growth and is introduced to a water body by lawn fertilizers, soil erosion, sewage, animal waste and decomposing vegetative matter.

Over the past dozen years impressive technical strides in water treatment have led to effective means of improving or eliminating problem beachfront concerns. Ultrasonic procedures, electric powered mechanical weed rollers, chemical additives and tools that agitate the lakebed are being used effectively without any negative effects to the aquatic life.

The impact of The New Hampshire Shore Land Protection Act by establishing rules for waterfront property owners has become a valuable piece of legislation for maintaining the quality of the way of life for waterfront owners in The Lakes Region. I encourage you to contact our offices and speak with our knowledgeable realtors prior to making your buying decisions.
Jim Ferriman Jferriman@spencerhughes.com 603-520-5385

The first was the chance encounter with a man in his 80s who happened to drop in at our Alton Bay office with a question. Specifically, could I tell him if Camp Mishe Mokwa was still operating? He still has wonderful recollections of the 4 summers he spent there on Treasure Island in Lake Winnipesaukee, way back in the early part of last century. With a little research I informed him that it was no more, as of 1937. We chatted for some time, though, about Alton Bay and the Lake of his memories, and he grew more animated and specific of those halcyon days.

Subsequently I counted more than 47 camps had at one time existed along the shores of Lake Winnipesaukee and Squam. Most have long since gone; Camp Tecumseh in Moultonborough, however, is still often rated among the top camps in the country. It struck me that there must be hundreds of thousands of people, perhaps many, many more, who harbor a strong fondness for the special qualities of our area. These shared memories have a force of their own, almost tangible lingerings of happy experiences; I’ve felt them, and so have others.

Moultonborough Real Estate Gem with a Long History & a Bright Future?

My second observation concerns a new real estate listing of Spencer Hughes: That of the unique gentleman’s estate of Kona Farms, MLS #4068978, in Moultonborough. At a mere $7,995,900.00, this remnant of the American Age of Elegance exudes a touch of class and a propriety of another time. Why the name?  Well, it stems from the legend of the tragic love affair between the Indian princess Ellacoya and her suitor, the mighty Kona. Personally I’d love to see a creative school obtain this property to continue a reverence for the continuity of an earlier time. A Chautauqua, perhaps. We’ll see.

Jim Ferriman:  Jferriman@spencerhughes.com,  (603) 520-5385

Image via Wikipedia

There has been some welcome, and overdue, legislation from the NH State Senate regarding the New Hampshire Comprehensive Shoreland Protection Act, which clarifies and simplifies the 2008 revisions of the original 1991 act.  NH State Senate Bill #154 will allow the waterfront owners and builders in the Lakes Region to efficiently schedule and manage costs concerning waterfront property alterations by greatly reducing the confusion and unknowns of the state’s position regarding an owner’s project proposal.

The bill will also keep in tact all of the provisions that protect the water quality and waterfront beauty, hence the property value, upon which the purpose of the Act rests. I believe that this bill will eliminate what had been in my mind some of the unenforceable aspects of the earlier revisions and provides that most permits would be issued or denied within 5 days of the application date. This includes applications for new construction, landscaping, excavations, water runoff management, repairs and alterations to existing structures and general improvements to waterfront property beneficial to the goals of the Act.

The NH publication “A Shoreland Homeowner’s Guide to Stormwater Management – Protecting Your Home & Environment” can be accessed on the web and consists of ten worthwhile articles that should be part of any waterfront owner’s library. Mr. Jay Aube (jason.aube@des.nh.gov), the director of the Shoreland Program, can be easily contacted and offers clear and valuable advice regarding all aspects of the Act.

With each new spring season, waterfront owners walk their property with an eye toward making long-term improvements and value appreciation efforts. Should this bill pass the NH House and gain the NH Governor’s signature, the law is expected to take effect on June 30, 2011.  Overall it will provide an understanding of the needs and expectations on everyone’s part in protecting the high standards of the Lakes Region. After all, out-of-state second home owners can buy their dream house anywhere.  This proposal will help determine that the NH Lakes Region and Lake Winnipesaukee will be able to showcase our lifestyle well into the future.

Jim Ferriman

603-520-5385 or 603-520-2020

The basics of the case are as follows: A Connecticut couple bought a second home for vacation use on Long Island for approximately $260,000.00 some years ago. During their ownership they complied with all tax laws regarding mortgage interest and property tax deductions based upon their minimal personal use.  New York state income tax had been assessed only on the husband’s income earned while working in New York.

With this new ruling, the couple has been found to have been in non-compliance with the New York State Tax Code, and the state has made an additional demand regarding income earned by both husband and wife outside of NY. This additional tax bill amounts to $1.06 million. New York tax experts say this ruling is a complete departure from how summer second homes have been treated by NY.  It has the potential to raise the tax bill for thousands of second home owners in the city and other vacation home areas in the state.

Last week’s analytic report numbering visits to the Spencer Hughes website showed gains in the number of inquiries from Connecticut, Massachusetts and New Jersey residents. Small surprise to me, for I expect an increase of inquiries to New Hampshire, which has no state income tax, should this interpretation be applied to out-of-state second home owners in the Catskills, Finger Lakes, Adirondacks and Thousand Islands areas. And the possibility of other cash-strapped states adopting the NY ruling is also very real. This would certainly provide support for second home property values in our state.
Jim Ferriman    Jferriman@spencerhughes.com     603-267-9866 & 603-520-5385

Image by Golden Eye via Flickr

Some believe the translation of “Winnipesaukee” to be “Beautiful Water in a High Place;” an apt description, and one that has been in use for more than just a short while. After all, the earliest known community along Lake Winnipesaukee’s shores was the large village of Aquedoctan, established by the Abnaki Tribe along the Weirs channel some 500 years ago, perhaps a great deal earlier. The historical evidence leads to the great mystery surrounding the “Big Lake”—that being how this large lake can maintain its water quality in such a confined watershed. Winnipesaukee is extraordinarily pure for a body of fresh water, in spite of heavy and sustained use. The continuous efforts of the past and current inhabitants to preserve its rare qualities account for this end result.

Winnipesaukee 101: Lakes Region Facts

The basic facts: Winnipesaukee has 183 miles of shoreline and a surface area of nearly 72 square miles, is 21+ miles long and up to 9 ½ miles wide, has a multitude of islands (300 or so, depending on who is doing the counting), and possesses some 600 navigation aids. It was born of the Wisconsin Glacier Period, when glaciers 2 miles thick gouged out fractured and less competent rock, leaving citadels of the more substantial host granite. At their end 13,000 years ago, the glaciers retreated, leaving their mark in the form of moraines, eskers, and kettle depressions, and in effect sculpted all of the Lakes Region of New Hampshire.

Why Do We Love to Live on Lake Winnipesaukee?

Of course, I have an opinion as to the major influence on the quality of the lake: I think that when people choose to live in a place rather than living somewhere out of necessity and receive continual visual inspiration, things on purpose turn out better.  That, and the fact that very little mining was ever done in the surrounding mountains.

The 19th century poet John Greenleaf Whittier thought this way about the view from the Melvin Village shoreline when he wrote, “Where the great lake’s sunny smiles – Dimple round its hundred isles.” When I try to imagine the lake a generation or so from now, I feel that the magical quality of the lake will more than endure; I believe it will grow in grace and serenity.
Jim Ferriman     jferriman@spencerhughes.com        603-520-5385

Remember the loan clause regarding each spouse being equally and severally liable for the entire debt?  If both spouses had originally signed for the mortgage and one one spouse is going to keep the property, it is of paramount importance that the other meets his or her obligation before signing over ownership interest.  It may be necessary to refinance the mortgage so that the other spouse can be paid off. Besides determining who should buy the other person out you must negotiate the division of property and assets. But even before this takes place, you need to know your share of the equity. Therefore you must evaluate the worth of the house, subtract the outstanding mortgage balance and then calculate your share of what remains.

Selling shared property in a divorce

If both parties are selling the property, then you’ll need a complete understanding of what, if any, improvements will be needed for the sale and what they’ll cost. Both parties, or their executed power of attorney, must sign the sales document, disclosure documents, sales contract and settlement statement, as well as any deficiency in a negative equity situation.  Remember, too, the timing of the divorce and property sale needs to be considered so that each spouse gets all available tax benefits.

Do divorcing couples need a Realtor?

After all, both individuals will have their own attorneys. Well, an experienced Realtor can facilitate cooperation between divorcing couples and their respective attorneys. Besides reducing overall stress levels, the Realtor provides a neutral, independent professional assessment free of any prejudice. And, in my experience, when every issue goes to the attorneys for a solution, expenses and delays rise dramatically. Let the Realtor pre-qualify potential buyers, assist in setting the price, advise as to preparing the house for sale, prepare the marketing proposal, show the property, execute the purchase agreement and close the deal.

Jim Ferriman    jferriman@spencerhughes.com        603-520-5385

Securing a Mortgage Loan? Plan Your Strategy.

Mortgage rates this week are quoted as low as 4.25% fixed on a 30-year primary residence mortgage. These low rates may even drop further before they begin to rise again; the real surprise may be the difficulty of even well qualified buyers in securing these low rates.

I want to review the important steps to be followed in applying for and obtaining the best rates offered. The loan process begins with an individual’s credit report and the FICO credit score.

The FICO score is the 3 digit number that is used in the majority of mortgage lending decisions. I recommend buyers order their score on the web for a nominal charge at least 6 months in advance so that there is time to challenge any errors prior to making an application for a loan. Never confuse being “pre-qualified” with being “pre-approved” for a mortgage loan. The first term is almost meaningless while the second is a complete process and actually involves applying for a loan.

Mortgage Loans: How Much Is Too Much?

An all too familiar error is for an applicant to seek the highest loan amount available. Remember, the applicant has to pay the loaned amount back and home ownership costs also include property taxes, insurance and necessary maintenance. Assessing your future monthly expenses is critical.

There are many sources of mortgage loans and it would be a mistake not to shop around but remember the lowest rates do not always mean the best mortgage loan. Gain a clear understanding of the closing costs from a potential lender.

Having high balances on numerous credit cards is also a red flag for lenders. It is also imperative that no large purchases appear on your credit report between application and closing. I had a client who decided to buy an expensive boat for his expected waterfront home prior to closing and it resulted in a failed loan closing.

The overriding rule is not to borrow more money than you can repay.

Jim Ferriman    jferriman@spencerhughes.com        603-520-5385

One very basic rule is to document the length of time per year that you and your family members spend at your vacation home, and whether it is held for personal use and enjoyment or for investment purposes. This, along with any rental income you may derive from it, will determine how the property is treated for tax purposes.  The three basic categories for review are: Use a lot/Rent a lot; Use a little/Rent a lot; and Use a lot/Rent a little.

What qualifies for a 1031 exchange?

It is accepted that a 2nd property that is used fewer than 14 days per year by the owner and rented out the rest of the year, is considered to be an investment property and qualifies for a 1031 exchange. Furthermore, raw land with no improvements and held solely for appreciation purposes qualifies for a 1031 exchange. Again, this at times may seem like a somewhat moving target, and discussion with your tax advisor would be my advice.

If your 2nd home is used exclusively for family vacations, the interest on a mortgage would be deductible just as interest on your first home is treated. And as important, local property taxes may be deducted on your second home. If your 2nd home is for seasonal use only, and you rent it out for 14 days or less in a calendar year, you can receive rent without claiming it on your income tax return. You can also still claim the same deductions in that the IRS considers it to be a vacation home.

Some formerly seasonal homes, bought many years earlier, and then later used as the principal residences of  newly retired owners following improvements, may qualify for the up to $500,000 tax free profit upon its sale after 2 years of primary use. However, federal legislation has been adjusting this break recently to apply tax to a pro-ration of the total years of 2nd home ownership to that of primary residence.

Confused? It is daunting at times, but 2nd home ownership reality is made more possible for many by navigating through the existing rules and regulations – and for, by and large, very enjoyable results.
Jim Ferriman

Belknap Mountain Tower in 1989 (Photo courtesy Iris Baird)

Around this time last year, after a period of little rain and low humidity, the Town of Alton experienced a major fire which, fanned by 40 MPH winds, destroyed a number of homes in the Alton Bay area. The town council has been active in reviewing and acting upon prevention suggestions. But one of the first lines of defense remains the Belknap Mountain Fire Tower, in operation since 1913.

Each day may begin like any other for a smoke watcher in the Lakes Region of New Hampshire. The fire watcher makes a visual scan for any blue smoke, reads the weather recording devices, checks the Osborne Fire Finder instrument, settles into the insulated chair, for lightning storms, and makes his morning radio check.  Right now the forest is dry, always flammable, but until the lightning storms later in the summer the danger of fire is moderate. Later, with the afternoon winds, the tower will sway; maybe there will be a visit of St. Elmo’s fire.  Vigilance is the watchword; there are no magazines or newspapers; no telephone, doorbell or mailbox.

The trails to the fire tower are worth the walk. My favorite route is along the ridge from Mt. Major. There are also trails from the Gunstock Recreational Area. The views – what can I say, they’re mesmerizing. Lakes Winnipesaukee, Crystal, Manning, Wentworth, Merrymeeting. The towns of Alton, Gilford, Wolfeboro, Meredith, Center Harbor. To the Northeast, the Maine mountains bordering the ocean, to the North, Mt. Washington and the White Mountains, to the Southwest, Mt. Monadnock.  Dreamlike views, all of it seemingly empty.

It still surprises me somewhat to find people local to the area who have never gained such a perspective offered from the highest point in Belknap County. There are more of them than you would guess. Not so, my friend J.R. Stockwell, the 10th generation native who I believe has hiked more trails, ascended more mountain tops in winter, and taken more advantage of the wonders New Hampshire has to offer than anyone that I know of or have heard of.

I stayed on Belknap Mountain one afternoon until sunset, the sky filled with banks of ragged fiery clouds and then hiked back down in a fine mist as the forest settled in for the night. Time well spent.
Jim Ferriman    Jferriman@spencerhughes.com    603-520-5385

Considering real estate? Don't wait!

Why? Why indeed! The answer is and always will be the long term appreciation rate of a property. Appreciation is the increase in property value over time due to inflation and the effects of supply and demand imbalances. If the appreciation rate is high enough, about 1.75 points above the inflation rate, the value of the property increases faster than the outlay costs of taxes, insurance, maintenance and interest. This results in the experience of “living for free.”

Long term appreciation rates will mirror the general rate of inflation. If they don’t, the great leveling factor of supply and demand comes into play. A statistical review tracking repeat sales of the same homes, known as the Case-Shiller index, concluded that the price of existing homes increased by 3.4% annually from 1987 to 2009. The general rate of inflation during this period was 2.9%.

Has the bottom been tested? The awful corollary of appreciation is depreciation. This happened in the late 2000s. Has it run its course? Well some of the best returns from Wall Street for the past 12 months have been realized by real estate mutual funds. PIMCO Real Estate, PRRSX, showed a 107.41% per share increase for the 12 months ended 4/30/10. To me this is an excellent indicator of how investors and finance insiders assess the national real estate market.

Now here is my central point: There remains little undeveloped waterfront property in the Lakes Region; ergo the appreciation rate should not only keep pace with the national inflation rate but also allow a faster increase in value due to the demand exceeding supply. Low property taxes and interest rates, a growing population and the desirability of an area are other major factors, and which I have written about in earlier blog posts, that will also positively affect the value of Lakes Region Properties.

Tomes have been written, are probably being written and likely will be written about the real estate fluctuations of the past 4 years. And though I prefer to retain a sense of the undiscovered nature of our area I imagine we can expect some focused attention on the Lakes Region of New Hampshire.
Jim Ferriman    Jferriman@spencerhughes.com    603-520-5385