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What to Expect from the Home Inspector

by Connie Yoshimura

Selling a home is a four step negotiating process. Step one is deciding the asking price in consultation with your realtor. Step two is negotiating the price and terms of any offer that you receive. Step three is negotiating the recommended list of repair items from a home inspection report. Step four is any change in the final sales price as a result of the appraisal coming in less than the agreed upon sales price.

Step three is the sticky part where the buyer, seller and realtors often disagree with what needs to be done as a result of the home inspector’s recommendations. This is a growing issue in our local industry due to Anchorage’s aging housing stock. Buyers want everything fixed or replaced that is identified in the report, often times requesting beyond the health and safety items to include cosmetic and maintenance items. Sellers, on the other hand, see no need for most if any of the items called out on the report because they have lived comfortably in the home during their ownership.

Thus, the home inspector report becomes almost the defining negotiating document in any transaction and becomes as important as a buyer’s credit score or an appraiser’s value. So who are these home inspectors and what are their qualifications? There are seventy-two licensed home inspectors in the state of Alaska. Twenty-two are in Anchorage. Home inspectors must pass significant national exams in order to become licensed in Alaska. They are also required to be bonded and insured by the state of Alaska, according to the Statute and Regulations for Home Inspectors published in January 2015. So what does the license allow them to do? It allows them to do a ’visual’ inspection of an existing or new residence of the heating and air-conditioning systems; plumbing and electrical system; built-in appliances such as stove, hood, dishwashers; roof, attic and visual insulation; walls, ceilings, doors, windows and floors; foundation and basement; visible exterior and interior structures; drainage to and from the residence; and other systems and components  as specified by the department of commerce. They must physically inspect the property and write a written report. The statute does not authorize them to address general maintenance issues, lawn care, stained or frayed carpet or any other interior/exterior cosmetic items and should not be noted in the report. That responsibility falls to the appraiser to address the general condition of a home.

It is in everyone’s best interest to sell a home with all health and safety issues clearly identified and repaired prior to closing. Home inspectors should be careful, however, not to extend their comments to items of general maintenance or address items of cosmetic discretion or preference. And first time home buyers need to remember that they might very well be purchasing a home that is older than they are and may need to lower their expectations for a like new home.

What to Expect from the Home Inspector

by Connie Yoshimura

Selling a home is a four step negotiating process. Step one is deciding the asking price in consultation with your realtor. Step two is negotiating the price and terms of any offer that you receive. Step three is negotiating the recommended list of repair items from a home inspection report. Step four is any change in the final sales price as a result of the appraisal coming in less than the agreed upon sales price.

Step three is the sticky part where the buyer, seller and realtors often disagree with what needs to be done as a result of the home inspector’s recommendations. This is a growing issue in our local industry due to Anchorage’s aging housing stock. Buyers want everything fixed or replaced that is identified in the report, often times requesting beyond the health and safety items to include cosmetic and maintenance items. Sellers, on the other hand, see no need for most if any of the items called out on the report because they have lived comfortably in the home during their ownership.

Thus, the home inspector report becomes almost the defining negotiating document in any transaction and becomes as important as a buyer’s credit score or an appraiser’s value. So who are these home inspectors and what are their qualifications? There are seventy-two licensed home inspectors in the state of Alaska. Twenty-two are in Anchorage. Home inspectors must pass significant national exams in order to become licensed in Alaska. They are also required to be bonded and insured by the state of Alaska, according to the Statute and Regulations for Home Inspectors published in January 2015. So what does the license allow them to do? It allows them to do a ’visual’ inspection of an existing or new residence of the heating and air-conditioning systems; plumbing and electrical system; built-in appliances such as stove, hood, dishwashers; roof, attic and visual insulation; walls, ceilings, doors, windows and floors; foundation and basement; visible exterior and interior structures; drainage to and from the residence; and other systems and components  as specified by the department of commerce. They must physically inspect the property and write a written report. The statute does not authorize them to address general maintenance issues, lawn care, stained or frayed carpet or any other interior/exterior cosmetic items and should not be noted in the report. That responsibility falls to the appraiser to address the general condition of a home.

It is in everyone’s best interest to sell a home with all health and safety issues clearly identified and repaired prior to closing. Home inspectors should be careful, however, not to extend their comments to items of general maintenance or address items of cosmetic discretion or preference. And first time home buyers need to remember that they might very well be purchasing a home that is older than they are and may need to lower their expectations for a like new home.

The Growing Popularity of Ranch Homes

by Connie Yoshimura

MLS recently reported that sixty-five ranch homes in Anchorage have sold since the first of the year and twenty are now pending. There are forty-five active ranch listings with an average asking price of $363,112. Their average price per square foot is $236 and their time on the market is fifty-five days, slightly less than all MLS combined inventory. I was surprised by those numbers as they represent an impressive part of the Anchorage market place. A closer look shows that forty-seven of the sales were homes built between 1940 and 1980, demonstrating that regardless of the age of the property, the demand is there for the aging baby boomer looking to ease into a simpler lifestyle. But, wait, as part of this demographic, I’m no longer referring to the ‘aging baby’ description. Let’s just call ourselves ‘boomers’, searching always for ways to enhance our life.   

However, the problem is new ranches are expensive to build—larger footprints than two story homes and thus they cost more for excavation, foundation and roofs. Boomers also don’t want to leave behind their chef’s kitchens and spa bathrooms, the two most expensive rooms in any home regardless of its configuration. Builders have historically used the second story element to lower the average square footage price but without it new ranch homes cost well over $250 per square foot in comparison to the $236 resale value of existing ranches. And boomers are hesitant to make a lateral financial move, i.e. spending the same amount for a new ranch home as for the sale price of their existing residence, regardless of the new five star energy efficiency standards and the freedom from worry over unexpected maintenance and replacement costs on an aging property. Then, there’s what to do with all that furniture and mementos. It seems like an almost unsurmountable task, both financially, physically and emotionally. Yet, those aching hips and knee joints propel us to keep up the search. 

Although they have been a long time in design and coming out of the ground, there are some new ranches at reasonable values starting to pop up. Westgate, the final remaining phase of WestPark at the corner of Kincaid Road and WestPark Drive, has recently introduced duplex condo ranch homes on large R2A lots starting at just $3…… These new homes have three beds, two baths, and a double car garage with the third bedroom having double French doors opening to the great room. Plus, these large fenced backyards, many with southern exposure, are perfect for that tag along pet. It’s a great ‘lock and leave’ opportunity for boomers who want to head south for the winter. Gray Hawk, a small community off Lake Otis and E. 80th has just announced three new ranch homes on fee simple lots starting at $369,000. It’s an Alaskan style cul-de-sac where you can park your toys in the back yard and no covenants, codes and restrictions so you can park your boat and RV all year round. Only three of these homes which have just been permitted are available. 

Finally, Huffman Timbers, the new craftsman style community at the corner of Lake Otis and Huffman Road, also has a new group of ranches on the market, ranging in price from $459,000 to $499,900. The developers adjusted their square footage requirements downward to 1,400 square foot for ranches in order to keep values under $500,000.    

Go Fish and Find Some Good Single Family Buys

by Connie Yoshimura

Selling real estate is like fishing. You dip the home in a sea of social media, print and online marketing and wait for a buyer. Some fishermen are more aggressive than others and try fancy flies, travel farther upstream or out in the ocean but it’s hard to beat the odds when it comes to time on the market and price per pound. This summer I’ve heard a lot of fishermen talk about the lack of fish—whether it’s caused by commercial trawlers, foreign intercepts or warm water. The discussion in the residential real estate market is not much different. Longer time on the market for that buyer to come along, particularly if you’re looking to catch a big king, i.e. expensive home buyer.    

Last year was a great year for fishing and real estate. Plenty of fish and buyers. There’s no doubt the 2016 market is making an adjustment from the high water mark of 2015 but the statistics don’t indicate the depth of despair as purported by some. The month of July is a good indicator in real estate and fish. Recently statistics from MLS indicate a $5,000 drop in the average sales price of a condo when purchased in July 2015 compared to 2016. The average sales price of a condo now is $215,084. Because our local listing and sales activity is cyclical, just like when is the best month to fish for your king salmon, I much prefer monthly year over year comparisons to annual average. You can also spot more current trends, whether upward or downward, by looking at monthly statistics. What is surprising, however, in these recently published stats, is that the time on the market has actually declined by five days for condo sales. 

Single family homes have dropped by $13,000 with an average July sales price of $365,217, just a few dollars shy of the July 2014 average. That’s more than a four percent drop in a twelve month period. Plus, days on the market have also modestly increased. Last week, there were 200 more single family homes for sale in Anchorage than a year ago while the number of pending sales remains the same. The difference between the stability of the condo market and the modest decline in the value of single family homes is interesting demographically. I would attribute it to the millennials putting a tepid foot in the water towards purchasing their first home. Condos are affordable and carefree. However, when a condo becomes more expensive and luxurious and reaches or exceeds the average sales price for a single family home, it becomes subject to the same pressures as in the single family home market, i.e. a reduction in the final sales price and longer time on the market.  Meanwhile, the ‘boomer’ is stuck trying to figure out not only where to live (Anchorage vs. Arizona or both) but how. Keep their aging single family home, move to a new home with no stairs, less maintenance and utility costs but costing almost the same or more on a price per square foot or join their millennial sons and daughters in condo living? But in between those two demographic bulges are some generation Y and X’s who can right now go fish and find some good single family buys in Anchorage.                

Brand New Multi-Family Investment Opportunities

by Connie Yoshimura

Bill Popp probably said it best in his three year economic forecast for the Anchorage economy. He said our current situation is a ‘pinch’ not a punch like we experienced in the late 1980’s. I agree with him. Last year was the best real estate year for sales and higher prices in the past five years so any decline from that may seem like the sky is falling. In reality, the market is making a ‘correction’ to use a catch all phrase normally used to describe the stock market.

I’m not an ‘equity’ investor in stocks. I’ve always placed my bet on the local real estate market either as an investor in small multi-family units or as a residential land developer, providing home sites for builders. But today, I’d place my bet on small multi-family units, particularly brand new ones. For years, I’ve lived in an owner-occupied duplex which has provided me with some tax relief, not a lot but some. As an owner occupant, I’ve been able to deduct advertising, landscaping, mortgage interest, office supplies, professional fees, property insurance, real estate taxes, repairs and maintenance, utilities, as well as depreciation. Not 100 percent of all those items described but enough to make a difference in my tax bill at the end of the year. Much better than the phantom income that comes with being a land developer and selling lots.

For example, an owner of a $660,000 brand new duplex could have estimated total deductions of over $30,000 from their taxable income. Other benefits include the contribution of monthly principal reduction from the rental unit. With a vacancy factor of only 3.9% (still below the national average) and the average age of an Anchorage apartment almost 30 years old, brand new apartments, particularly if they are townhouse style with a garage, will provide the highest rental income. New units are also built to better energy efficiency standards (all buildings are now required to be five star while many older apartment buildings are only four star) which reduces the utility costs for both the owner and the tenant.

uire less reserves for maintenance and repairs. After all, renters are no different than home buyers. They like laminate flooring, java cabinets and solid surface countertops. If you’re an aging baby boomer, thinking about only living part-time in Alaska, an owner occupied duplex makes sense. A friend, relative, or a good tenant can look after your home while you’re enjoying that Arizona or California sunshine. A duplex or owner –occupied four-plex, is also a good investment for first time homebuyers, particularly if you’re a triple zero down VA buyer. Many home buyers start out with a duplex and after living in it for a few years, move up to a single family home and keep their duplex as an investment.

How Much Does Pretty Matter?

by Connie Yoshimura

Buyers zip through online websites looking for the home of their dreams. They discard homes based on the exterior photo and move on to a dozen or sometimes a hundred different properties. At open houses, probably fifty percent of those who thought they were interested in the home, simply drive right by it, rejecting the outside appearance of the home. So, yes, pretty does matter whether it’s for a single family home and for a small investor looking to make his first duplex or four-plex investment.

Anchorage’s housing stock is old, really old. Not only does it suffer from economic and cosmetic obsolescence but it doesn’t always look that good, either. In the world of botox and LA inspired cosmetic surgeries, ‘pretty’ adds value but giving a home a new facelift can be expensive and return on value is usually 50% or less. What ‘pretty’ does provide, however, is a faster marketing time or a slightly higher rental rate.

However, probably nowhere in our housing stock is a ‘facelift’ more important than in our local rental market, the vast majority of which was built in the 1970’s and 1980’s. With a vacancy factor of 3.9%, a creep up from 3.5% in 2015, the vacancy rate is still below the national average but the average Anchorage rental rate for an apartment has only increased by $5, signaling a stall in rates while at the same time the existing housing stock needs that facelift.

While on the other hand, builders and investors are hesitant to build and buy brand new rental units. In order to compensate for the higher cost of construction versus existing square footage values, units have to be built smaller but also ‘pretty.’ Apartments built in the 1980’s usually had two bedrooms and one bath in about 1,000 to 1,200 square feet. Today, there is considerable demand for three bedrooms and two baths packed into 1,000 square feet. You can count on the ‘micro’ rental unit coming to Anchorage in the not too distant future, although it may be larger than the 200 square foot units recently approved by the New York City zoning commission.

Small has value. Less square footage to heat. Better and more efficient mechanical systems. Better insulation. Less reserves for maintenance and repairs the first five years. As our market readjusts itself from the last few years of appreciation, more and more buyers will turn to owner-occupied duplexes and four-plexes. They will like the 27.5 years of depreciation and the pro-rata write off for insurance, advertising, office supplies, landscaping and utilities. But, like any other buyer, they will want to buy ‘pretty’.

When Is a Contract Not a Contract?

by Connie Yoshimura

The forms committee of the statewide Multiple Listing Service has done an outstanding job in creating purchase and sale agreements which are used for the vast majority of residential real estate transactions in the state of Alaska. The contract is virtually a fill in the blanks document and covers almost all contingencies, including those relating to financing, title, home inspections and appraisals. So the problems arising from the contract are not with the contract itself but with its users.

Negotiations over the purchase price and terms is only the beginning of a lengthy process. Once agreed between buyer and seller, there are specific dates where identified items must be completed on both the buyer and seller’s part. It is over the lack of compliance of these dates where many contracts are not being followed and, thus, jeopardizing the sale of the property.

The MLS PSA (purchase and sale agreement) requires a buyer to produce a 90% letter within a certain period of time in order to demonstrate their ability to pre-qualify for the mortgage on the home they wish to purchase. This is a no brainer as most PSA’s are never accepted by a seller without proof of the buyer’s preliminary ability to qualify.  However, after that many listing and selling licensees tend to get sloppy with compliance without realizing their sale is in jeopardy. A preliminary title report must be ordered by a specific date. This report identifies any liens or encumbrances on the property. It also identifies for the buyer any unexpected IRS liens or judgments. If this is not completed as agreed, the contract is void. Home inspections must be completed by a specific date and agreement on repairs by seller. Again, the MLS PSA clearly states the right to terminate if not complied with.

Buyers may elect to switch financing options. If this occurs, it must be identified in writing. Seller closing costs may be affected by the type of financing procured by the buyer. Failure to identify can also result in a broken contract.

The closing date must be adhered to or the contract may be voided. Even a day or two delay makes the contract invalid without a written extension. Most buyers and sellers operate with the best of intentions, as do the licensees who represent them. However, as a long time real estate broker, I worry that we have become too sloppy in the execution of our contracts. Over the past five years, much has changed on how we list and sell properties. Online marketing and DocuSign have made transactions easier to create but that ‘easy way to do business’ has also created a lack of adherence and fulfillment of the contract.  

A broker’s number one problem and, thus, liability, has to do with earnest money disputes over a broken contract. Staying in contract is the best way to avoid the dispute and finalize the sale. However, in the past any earnest money was kept in the selling licensees trust account and was rarely ever disbursed to a seller over a broken contract. Now, however, some brokers have elected to turn earnest money over to a third party title company, relieving the burden of accounting and disbursement in case of dispute, similar to how commercial transactions are handled. Tracking that earnest money, however, verifying that it has been deposited, receiving a copy of the check, does create greater opportunity for error on the part of the listing licensee. So, does the earnest money deposit due upon acceptance. That is when any offer does not receive a good faith deposit when presented. A good listing licensee must therefore chase it down to make sure it has been deposited. Without that deposit, there is no contract.

Displaying blog entries 1-7 of 7

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