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Should You Buy a Second Toaster?

by Connie Yoshimura

Every time I take a break from real estate and head to the island of Kauai and Poipu Beach, I end up thinking about buying a second home at the end of the road of Paradise, or at least one of those almost historic ranch homes in the little town of Waimea. That, however, would require me to buy a second toaster, vacuum cleaner, dishes, sofa, pillows, TV, et cetera. Nevertheless, it’s tempting to the point of checking out financing for second homes. VA and FHA do not finance second homes, so Fannie Mae is the lender of choice unless you are paying cash. In order to qualify for a second home, it must be occupied by the borrower for some portion of the year. Financing is restricted to one-unit dwellings and must be suitable for year-round occupancy. The borrower must have exclusive control over the property. And, perhaps most importantly, it must not be a rental property or a timeshare arrangement. It also cannot be subject to any agreements that give a management firm control over the occupancy of the property. If there is rental income from the property, it cannot be used for qualifying purposes.

Despite the incredibly low interest rates at 3.65% for a thirty-year fixed mortgage, most aging baby boomers end up paying cash or mostly cash for a second home. The idea of a second home in a warm climate is attractive to Alaskans, and when I am hosting open houses, I frequently hear that conversation between spouses/partners as what to do when retirement comes their way. To stay or leave? To downsize and sell their current residence and buy a condo or a smaller home? To take their hard-earned equity and buy that second home in Arizona with the plan to make it their primary residence at some future point in time? One reason people stay or leave is to be near their adult children and grandchildren. As people age, family becomes more important. Perhaps, even more so than a state’s favorable tax structure or low mill rate for property taxes. Like all decisions regarding home purchases, after you get over the financial requirements of home ownership, it really all boils down to personal lifestyle choices that almost always are related to a change in marriage, birth, death, divorce, or job change.

Second home choices aren’t just limited to Hawaii or Arizona, however. Many locals enjoy the benefits of having a second home at Big Lake, Alyeska, Halibut Cove, the Kenai, or a remote cabin accessible only by snow machine or four wheeler. Some of those remote choices are neither financeable nor insurable. Many Alaskans have lost their cabins due to the interior or Kenai fires in recent years of which many were not insured. Also, some insurance policies are only good if you elect to rebuild.

As for me, I’m content to rent my fun in the sun. The toaster will have to wait.

How to Get What You Want in a New Home

by Connie Yoshimura

All across the nation (and Alaska being no exception), buyers are demanding extras, upgrades, and changes to stock housing plans that have been the mainstay of builders profitability for the past twenty years. In the financial uncertainty of homebuilding, repeating a plan provides a modicum of stability in maintaining a builder’s profitability. Lot costs, soil conditions, weather, and the cost of lumber and other materials, remain variables, but in general builders can predict and reach their profit margins by building the same plan over and over again, despite how boring a streetscape it may create.

Most Alaskan builders are not custom builders. Unlike publicly traded home building companies that build thousands of units a year in multi-state locations, Alaska’s largest builders build between just fifty and one hundred homes a year. In fact, in the Municipality of Anchorage, the number one builder in 2015 was the owner-builder. The handful of truly custom home builders generally builds only one to eight homes per year. However, today’s buyers are demanding, thanks to Pinterest and Houzz, a custom home even if it is their first home. They want the railing, the wall color, the canopy hood, the window size and placement, even the towel bars of their choice. And given the growing divide between the cost of new homes versus resale, it is one of the few benefits buyers have in selecting a brand new home rather than the added expense after closing of the remodel of an existing home.

So how can buyers get what they want in a new home without breaking their budget or the builder’s opportunity for profitability? First, get everything in writing, even down to the allowance for the plumbing fixtures or a tear sheet of the door knobs. The final set of plans needs to be initialed, dated and agreed upon between builder and buyer. This plan set should include size of windows and have room dimensions clearly identified. If there are to be cedar shakes or stone on the exterior elevation, the allowance and dimensions need to be identified as well. Buyers should be encouraged to visit a builder’s finished home to check out finishes, although they should be aware that many builders have differing standards for each subdivision. For example, the same house plan in two different locations may have varying allowances for carpet and cabinets. Whether or not landscaping is included also depends on the subdivision and local government requirements. Buyers should also pay special attention to the plot plan which shows the relationship of the foundation and driveway to the lot lines. Be aware that asking for an extra four feet in driveway length adds to the cost of the home.

Builders get very frustrated with changes after construction has started. A change order late in the building process travels from the vendor to the accounting office to the superintendent, to the subcontractor and back. It can also hold up construction which extends the cost of the builder’s daily interest rate. The bottom line for builders and buyers is to make all decisions for amenities and upgrades prior to the start of construction and to write it all down. Buyers need to know what they are buying and builders need to know what they are building. The clearer the plans and specifications the happier everyone will be.

Connie Yoshimura is the broker/owner of Dwell Realty. Contact her at 907-646-3670 or [email protected]

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Dwell Realty
561 E. 36th Ave., Suite 200
Anchorage AK 99503