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Deciphering A Condo HOA Budget (October 27, 2015)

by Connie Yoshimura

    Not all condos are created the same and therefore not all HOA budgets will be alike. A townhouse style condo generally sits on a single tract of land. But it can also sit on a platted duplex or four plex lot. The road in front of the unit can be a private driveway or a publicly dedicated road. If it is a publicly dedicated road, it will be maintained by the municipality. Snow plowing and road maintenance will be paid for by the city. However, if it is a private road or driveway, it will need to be maintained by the homeowners association. Dues and reserves will have to be established for its maintenance and ultimate replacement. Although water and sewer to the unit will be built to MOA standards, if it is a public system, no dues will be needed for its repair and ultimate replacement. However, if it is considered a private system, even though it is built to the same standard, dues will need to be included in the monthly budget for its repair and replacement. Whether or not the monthly cost for water, sewer, and refuse is paid for in the dues, or by the individual condo owner, depends on how the association budget is set up. Having the individual property owners pay for those items reduces the dues and allows more buyers to qualify for the property. Qualifying for a single family mortgage does not take into consideration the cost of maintenance, water, sewer, and refuse. However, HOA dues for condos are calculated into a buyer’s debt ratios. In some instances, for condo buildings with a central heating system, that cost would also be factored into a buyer’s qualification. The goal with dues is to keep them as low as possible but still provide the common services and, hopefully, carefree management. Site condos provide the lowest dues because the condo owner is responsible for all exterior maintenance, including driveway, roof, and siding repair. Full service condos are just the opposite, and establish reserves, maintenance and management for all exteriors, including HOA owned fencing, monument sign and common element landscaping. With a full service condo, in most cases, you are buying the air space between interior walls, otherwise known as paint to paint.

All HOAs require management and very few are self-managed. The fee per unit for a professional property management company is usually around $20 per unit. Property managers collect the dues and pay all the bills. They seek competitive bids from vendors for work that the association needs performed. They also enforce the covenants, codes, and restrictions. The property manager is hired by the HOA board of directors and maintains the records of the board meetings. Other fees in the monthly dues include association and property insurance, legal fees, taxes and licenses, tax prep and audit. Reserves for roads, exteriors, and water/sewer if applicable are based upon the remaining useful life. Water and sewer lines are estimated to have a fifty year life; roofs twenty-five years; and asphalt twenty years. The remaining useful life must be verified by a licensed engineer who was associated with the development.

There is a cost for homeownership, whether a condo or a fee simple single family home, beyond the monthly mortgage payment of principal, interest, taxes, and insurance. Whether you write the check direct or to the association is the only difference.

Not all subdivisions are created equally, even though they make look alike and be just down the street from one another. Most, but not all, are regulated by a set of covenants, codes, and restrictions which are enforced by a homeowners’ association. Whether buying into an existing subdivision or a new home community, buyers should spend the time to read the CCRs which are part of either a resale certificate or a public offering statement. One significant restriction is the number of pets allowed per household. Pets are now considered family members and are a multi-billion dollar business. Most CCRs limit the number of pets to two. Some include restrictions as to size and weight. All require pets to conform to MOA regulations. Given the popularity of pets, three may become the new norm. Exceptions for the number of pets must be made to the HOA governing board. If you are a pet lover, do not ignore this regulation. It is not unusual for a sale to be lost by this restriction, or a homeowner having to lose a pet.

Landscaping is also a covenant requirement. New CCRs may specify the type of tree, its trunk caliber, height, and when it must be planted. Specific trees, such as mountain ash and shrubs like cotoneaster, may be identified in order to obtain a certain aesthetic look to the streetscape. Developers can also require that dead trees and shrubs be replaced in a timely manner by the homeowner and that lawns be kept up or otherwise fines can be imposed on owners by the HOA. Although some restrictions sound onerous, the value of a community is frequently judged by its streetscape. Mature and well-maintained landscaping can and does create added resale value.

The first home built on a lot is approved by an architectural control committee that is controlled by the developer of the subdivision who has also created a set of design standards that every new home must conform to. Those design standards can include the width of the window trim, whether or not stone and/or shakes are required on the front elevation and exterior colors, as an example. Height restrictions must confirm to MOA regulations. Side yard setbacks also must conform to MOA regulations but may be superseded by additional restrictions. For example, one popular new home community requires eight-foot side yard setbacks rather than the MOA five feet. It is always difficult for a committee to turn down a buyer’s favorite color. However, they must take into consideration the overall streetscape. We’ve all driven through subdivisions and wondered how that canary yellow or bright blue exterior got approved. Most new home communities are looking for a fairly monochromatic look, highlighted by differences in roof pitch and three types of siding on the front elevation.

Whether or not you can have an RV on your lot, and for how long, is also an important regulation. In addition, some subdivisions require you to park your vehicles in the garage and limit on-street parking. This includes motorcycles! Also, look for restrictions regarding the storage of boats, snow machines, four wheelers, or other recreational apparatus.

There is however, a trend developing, particularly on the hillside, for less, or no, architectural restrictions. Usually these are in areas zoned R6, large lots, and have only a handful of home sites. There is a segment of our Alaskan home buyers who want that storage shed, detached garage, chickens, or simply don’t want to be told how they should live. Whether you’re buying into a community with strict CCRs, or none, know what you are purchasing.


Is Now A Good Time To Buy A Home? (October 9, 2015)

by Connie Yoshimura

    October usually brings some surprises in the financial markets but this past week’s quarter percent drop in 30 year fixed rate mortgages to 3.75% came as an unexpected announcement. Not that it’s not welcome news for Alaskans in addition to a record breaking $2,072 permanent fund dividend check to every eligible man, woman and child. A quarter percent drop in interest rates means a savings of $49 per month on the MLS average sales price of $368,000 assuming a 5% down payment. It means buyers qualify with approximately $200 per month less income, according to Aileen Dimmick of Residential Mortgage.

    Now could not be a better time for homebuyers in the Anchorage/Eagle River market place. Low interest rates, moderately low inventory and modest appreciation have been the characteristics of our housing market all year long. Late fall or early winter (really early this year) has never seasonally been the best selling months but that’s what makes it so attractive for homebuyers. Sellers who have their homes on the market this time of year are motivated sellers. Builders are anxious to sell their summer inventory so they can get foundations in the ground before freeze-up. This week’s inventory was 613 homes for sale in all price ranges in Anchorage. But look a little closer and there are only 34 homes for sale that have four bedrooms and a double car garage. And here is the most shocking statistic of all. Of the 34 homes, only 3 were built since 2000. So, brand new or newer homes are hard to find.

   During the past thirty days, there have been 74 single family active price reductions with an average reduction of $20,625.78. There are also 14 active condos with price reductions in Anchorage and Eagle River within the past 30 days. That average price reduction was $7,464. These reductions speak to the motivation of sellers who are looking to move out before the dark winter freeze sets in. But regardless of the year or temperature, Anchorage’s housing stock continues to age just like our aging baby boomer population. And that means changes for our type of housing. The first floor bedroom/den/flex room is now a necessity whether it is at the back of the house or next to the entry. The first floor powder room has become a full sized bathroom for the future mother-in-law or disabled spouse with handicap grab bars. Downsizers are tired of large lots and lawn care but still want a small backyard for a potted vegetable garden or flowers. And, of course, there’s the need for Boomer’s fenced area. Those are all market necessities while at the same time, homesites are becoming smaller due to the continued high cost of roads, water and sewer installation.

    And let’s not forget the ranch or rambler. There are a surprising 86 for sale—more than 10 percent of last week’s active inventory. They range in price from $96,900 to $1,395,000. There’s even one built in 1941 and a handful of brand new ones. For new construction, ranches are about 25 to 40% more expensive than the traditional two-story home, due to larger foundations and roofs. Downsizers may give up some square footage but they still want all the luxury items of the past ten years, including cherry cabinets, solid surface countertops, spa bathrooms and hard surface flooring.

   So use your permanent fund divided as part of your down payment and take advantage of the drop in interest rates and go shopping for a new home rather than that new car which will depreciate the minute you drive it off the lot. Anchorage has had four consecutive years of modest appreciation and given the low inventory and age of our housing stock, even the departing Shell employees’ homes by Cartus Relocation, won’t change that.

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Dwell Realty
3230 C Street Suite 100
Anchorage AK 99503
907-646-3600