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How to Manage Upgrades

by Connie Yoshimura

     The number one complaint about builders is not that they don’t finish on time, not that they don’t return calls or do warranty work; it is that their allowances for light fixtures, cabinets, flooring, even faucets is not adequate and that most buyers of new homes end up spending anywhere from $2000 to $50,000 in upgrades to get the look they want. In part blame HGTV and all those remodeling shows which create instantaneous new looks in minutes and for low cost. Anchorage is a different state. We don’t have low wage labor and we manufacture absolutely nothing for a home which creates a string of wholesalers and retailers, who all along the way, want to sell the new home buyer upgrades.

     Builders receive discounts when they make a commitment to buy 20 stoves. However, when a buyer goes into the appliance store and makes another selection, they are most likely going to pay full retail price. And why wouldn’t they? After all, the suppliers/retailers are entitled to a reasonable profit just like any business person. But here’s the potential problem. The supplier would rather sell retail than what was negotiated for as a bulk sale discount. Unprofessional customer service reps may even go so far as to criticize the builders’ allowances as being inadequate which may or may not be the case.

     There’s no single entity to blame and no simple solution. Builders try to keep their prices reasonable and competitive in this high cost Alaska construction environment and one way to do it is by keeping allowances low. Unfortunately that doesn’t always satisfy the buyer’s vision of their new home. Unfortunately, some builders do give the same lighting allowance for a $300,000 home as they do a $500,000 home. Builders need to recognize the different expectations buyers have for higher valued homes and adjust their allowances accordingly.

     It is pretty disheartening for a buyer spending half a million dollars for a home to be told by the retailer’s sales clerk that the builder’s allowance isn’t adequate (in their opinion). Builders need to make sure that regardless of the allowance, their suppliers are providing the best and most encouraging service possible and not try to upgrade every allowance and item in the home. Usually, customer service reps earn a significant portion of their income from one or two builder accounts and they should be respectful of that opportunity. On the other hand, builders need to raise their allowances and make them proportionate and appropriate to the value of the home. Most buyers aren’t looking for a bargain when it comes to a new home, but rather a good value with an amenities package to suit their vision and lifestyle.

     Buyers also have some responsibility. Before making a commitment to purchase a new home, they should get as much information ahead of time regarding the builder’s allowances and what specifically is included in their potential new home. A reputable builder will provide a spec sheet, allowances and an option list for upgrades. Buyers need to carefully review the approved set of building plans and the plot plan which shows the relationship of the lot to the home. They should be encouraged to do some pre-shopping if the builder does not have samples readily available.

     If the buyer finds the allowances are inadequate, they should ask the builder to increase them and make those increases part of the original purchase price. When the upgrade increases are included in the initial purchase price, they have a better chance of being included in the appraised value. And appraisers need to re-think how they value property. Value should not be by square footage alone, regardless of the fact that the MLS form has a field where homes are priced by square foot regardless of their age or amenities. That $1500 chandelier may not be worth its purchase price but it has more value than the five-bulb tulip version found in many spec homes today.

The Changing Face of Anchorage Home Buyers

by Connie Yoshimura

     Owning your own home has long been considered a part of the American dream.  It ranks right up there with owning your first car and the memory of your first kiss, only it is a lot more expensive and in some cases emotional, particularly in Alaska.  Anchorage is one of the highest cost housing communities in the nation, aside from large metropolitan cities like New York and San Francisco.  However, that doesn’t prevent 63.7% of Alaskans from owning their own home which is comparable to the U.S. average, given a varying per cent or two by decade.  What is perhaps more interesting than the statistical averages is who in Alaska, particularly in Anchorage, are actually buying homes.   Anchorage’s population hit 300,000 last year and the average age is in the mid-30s, so our home buyers are younger and, we also know, more athletic than those in other communities.  That’s why we have a plethora of sidewalks, bike paths, recreational trails and parks. (Per capita our park land is more than any other city in the U.S.)   Over the past thirty years, Anchorage has also grown more cosmopolitan.  Filipino, Hispanic, Hmong, Somali, Korean, Sudanese, Polynesians, Russians and many others are forming a larger and diverse ethnic population.  More than 90 different languages are spoken by students in the Anchorage school district.

     I have been meeting potential home buyers in Anchorage at open houses for almost thirty years and today the ethnic make-up of those potential buyers reflects our cosmopolitan population.  Although my information is only anecdotal, our local cosmopolitan population is definitely on the search for the American dream of home ownership.  I am a ‘hapa’ which is a slang term for someone who is part Asian and part something else - which in my case is ‘Iowan’.  As a ‘mixed’ realtor, I’m happy to report that Anchorage doesn’t have red-lining:  the steering of ethnic groups to certain areas of town, unlike the story line of the play, ‘A Raisin in the Sun’ which deals with the integration of a Caucasian neighborhood by an Afro-American family, is not found here.    In Anchorage, you can live in whatever subdivision or home you can afford to own.  Realtors don’t steer buyers to certain areas of town because of their race.  If we did, we would soon have no buyers or sellers because 50% of our population is soon to be considered non-Caucasian.  Only twice in the past thirty years, have I had a seller tell me they wouldn’t sell to a minority buyer.  Those two rare occurrences speak well for our community.

     Home ownership will become more expensive for all buyers in the near term.  Subcontractors and suppliers have raised their prices 3% this spring directly due to increased costs.  Home builders have no choice but to pass those costs on to home buyers.  On a $400,000 home, that’s a $12,000 increase from just a few months ago.   Inventory this past week has increased by 40 homes, but is still about 45% lower than the average of what we would normally experience over the past decade.   Conventional interest rates bumped up an eighth of a point this past week to 4.5%, making home ownership a tad bit more expensive.  In Anchorage, the American dream is becoming more and more expensive but that hasn’t stopped home buyers from their pursuit of new homes and most likely never well.  It is, after all, home sweet home.

Understanding the Community Where You Live

by Connie Yoshimura

     If a subdivision has any common element such as an entrance sign or open space and is less than twenty years old, it most likely falls under the Common Ownership Interest Act.  Most of us think of the Act as applying only to condominiums, but it can actually apply even to subdivisions where the roads, water, sewer  are public, built to municipal standards and the lots are fee simple.  Many buyers don’t understand that when they purchase a home, either new or pre-owned, they are governed by the declaration and articles that  initially incorporated the community.

     Buyers who purchase a home governed by the  Act have fifteen days to review and accept the public offering statement (for new homes) or the resale certificate (for pre-owned homes) before any seller can require that their earnest money becomes non-refundable.   These documents can be up to a hundred pages long and the reading can be tedious, but it is important to slough through it.  This document should include any amendments to the declaration, the current annual budget and minutes of meetings.   Most buyers are primarily concerned about where and for how long they can park their recreational vehicles and  how many pets they can have.  But buyers should keep reading  so that they understand the powers of their board, what the enforcement policies are for any violations of the covenants, codes and restrictions, including the ability to fine homeowners who do not abide by them.

     Larger communities frequently hire professional management to manage associations.  This is a good idea even for smaller communities because it provides a third, and hopefully, independent voice as to interpretation of the regulations and in some cases, designates architectural control to the property management company.    After all, it is difficult to tell your next door neighbor they can’t repaint their home that Easter blue color.    Some associations can actually hurt market value of their community by over regulation.  It is up to the association’s board to determine the length it will go to for enforcement.  Some associations fine violators; others only issue warnings. Some patrol their streets looking for violations; others only respond to complaints.  The  Municipality of Anchorage has limited resources and its zoning enforcement division usually  only handle violations that are a health and safety issue. If there is a HOA, that is the appropriate place to turn to about a barking dog.

     Some self-managed associations prepare their own public offering statement.  The public offering statement is the initial document for the first time home buyer and should be prepared by an attorney and not photocopied by the seller or developer.  Make sure you have an original document, not a copy.  It is very important that all amendments are current and that there is a current budget.  Some developers try to save the $300 cost of preparation by simply recopying a prior declaration.  This may mean that recent actions/amendments are not in this copy.  Buyers and their representatives should ask if the resale certificate or public offering statement was prepared by an attorney or property management company.    It is not a legal requirement to have done so, but it does ensure against any negligence or oversight on the part of the developer.

     Homes in Anchorage are expensive (some of the highest in the nation) and if your home has been built in the last twenty years,  it is most likely part of an association which holds an annual meeting and elects a board.  As a homeowner with a vested financial interest in the community in which you live, you should take the time out of your busy schedule to attend at least the annual meeting.  If you don’t go, someone else will make these decisions.  Your voice is important.   At times a board may not reflect the general will of the community it is elected to represent.  The reputation of your community with the public and the real estate industry is an important consideration in your future resale value.

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Dwell Realty
561 E. 36th Ave., Suite 200
Anchorage AK 99503
907-646-3600