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Connie Yoshimura

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More Info on Homeowners Associations and Insurance

by Connie Yoshimura

Homeowners’ Associations come in all shapes and sizes from single family communities to stacked condos but they all have one thing in common and that is they are governed by a Board of Directors. The board has the ability to change the number of pets an owner is allowed to have; fine owners for lack of dues payments; supervise tree cutting and in general make life pleasant or miserable for the residents it governs. More importantly, the board, with the assistance of an association manager, establishes budgets and reserves so that the association, which is a non-profit corporation or LLC, has adequate funds to manage its financial responsibilities to its owners.

One aspect of financial management is adequate insurance. Homeowners need to understand what is covered under the various insurance policies available. The declaration will clearly state who or what entity is responsible for road maintenance and replacement, water and sewer pipes and the building structures. For example, in a site condo association, the building insurance is the responsibility of the unit owner because the unit is enveloped in an air space so that it functions, for insurance purposes, like a single family home and also reduces monthly dues. The HO-6 policy covers personal belongings or, in other words, anything that is not a fixture. Just turn the unit upside down and shake it. Anything that falls to the floor should be covered. Again, that portion of the policy is similar to a homeowner’s policy for a fee simple home. However, if you have upgraded your appliances because you couldn’t live without a Viking five burner stove or even upgraded the pad under your carpeting, you need to tell the insurance agent or otherwise they will assume a builder grade and you could end up under insured.

You should also ask your insurance agent for a special assessment rider which covers any special assessments that may be assessed against the unit. The policy limit for that is usually $2,000 with a deductible of some amount. However, it is a real savings to the unit owner, particularly if you are buying into an older condo development which may or may not have adequate reserves for painting and roof repairs, two of the most common special assessments. Any condo buyer should not only examine the association’s budget and reserve amounts but they should also read the last six months of minutes from the board meetings where they will discuss any potential pending assessments. For many buyers, condo living where someone else manages the physical structure, grounds and pays the utility bills is a welcome respite from the hassle of every day life. However, it gets complicated if the board becomes power hungry and overly rigid in its demands. The board’s primary responsibility should be sound financial management. Overly restrictive actions and lack of financial stability can ultimately have a negative effect on property values.

Test Your Market Knowledge

by Connie Yoshimura

 

In 1998 a Certificate of On-Site Systems Approval (COSA) became required for all title transfers (except between spouses) of single family on-site wastewater disposal systems and for wells. This twenty year old process continues to be rigorously enforced by the MOA to protect the health and well -being of its citizens who elect to live in a home not serviced by public water and sewer. In order for a COSA, the acronym used in the industry, to be issued the following guidelines must be met:

 

1. An absorption field adequacy test has been performed within the last two years or the absorption field has been constructed within the last two years

2. The septic tank has been pumped within the previous year

3. The well has been flow tested within the last two years

4. The arsenic water sample results are less than one year old

5. The nitrate and bacteria water sampling results for private and Class C wells are less than 90 days old

 

A COSA is valid for two years from the date of the absorption field adequacy test or date of construction as long as the nitrate and bacteria water sampling results are less than 90 days old. Some additional requirements for septic tanks include no depression over any septic or holding tank. There must be at least one 4-inch diameter cleanout on each tank, and the cleanout must have an air tight cap. Septic tanks installed after 1980 must have two cleanouts. There should also be no evidence of heavy equipment movement over the absorption field. There may not be any driveways, parking areas or vehicle storage areas extending over or across any absorption field unless the engineer provides documentation that insures the integrity of the system.

 

Anchorage’s hillside is a popular move-up area. Last year 241 Anchorage homes sold with well and septic systems which were mostly on the hillside. Add Eagle River and that number jumps to 336.  Sometimes, there are unexpected surprises and costs. For example, an older home originally built with an unfinished lower level and then completed at a later time with additional bedrooms, a seller may find that the original septic was only designed for three beds, not the four or five that now exists, even though it appears to have been adequately working for their family and lifestyle.    

 

So how much does getting an approved COSA cost? The MOA inspection fee is $600. The permit fee to install a new tank is $250 and the cost for a design by an engineer is usually $700. Once the design and permit are obtained, the MOA requires three bids for the new tank, installation, top soil and seeding. Bids can vary anywhere from $10,000 to $30,000 depending upon the design. During the winter time, construction does not have to take place and a conditional COSA can be issued by the MOA once they have approved all of the above requirements. However, to sell a home requiring a new septic system an escrow will need to be established that amounts to one and a half times the cost of the highest bid. For more information, go to the Community Development Department on the MOA website.    

Helpful Hints on How to Buy and Build on a Lot

by Connie Yoshimura

 

Spring time brings out buyers looking for lots to build their dream home on. Currently, there are 220 lots in all zoning districts for sale from $30,000 to $6,086,865. However, many buyers are looking for a larger R6 lot of which there are only 60 lots including Anchorage and Eagle River. In 2017 the average R6 lot sold for $183,000.

 

The R6 zone almost always requires an individual well and septic system. Many buyers, having lived in a home on a lot with public water and sewer and on a publicly dedicated street are unaware of the due diligence necessary before committing to a purchase. Not every lot is going to percolate sufficiently for a septic system. Check the surrounding lots to see if they have holding tanks or the more expensive Avantec system. There is also a significant difference in cost and installation between a four bedroom septic or a three bedroom. Water is still the source of all life. The depth and flow volume of the well will add to the cost of your lot. Check the neighbors well depth at the MOA or the State DNR which is a good, but not guaranteed, indication of what you will have to spend to develop your water source. The minimum standard for a four bedroom house is .42 gallons per minute or 600 gallons per day. However, underground water sources shift and wells do run dry so there is no guarantee you will have a continual water source. Then you have to verify the quality of your well water to make sure it’s ok to drink. 

The lot, if it is not accessible by a public road, may be part of a LRSA, a limited road service district. Find out how much it costs to maintain the road and who is in charge of the LRDSA. This is not always a static cost, depending on the winter snow fall and annual maintenance. The topography of the lot is going to determine its initial development cost. Extra excavation and haul off adds cost but do not add value. Haul off costs are calculated by the round trip in miles to and from the dump site so needless to say the location of the lot and dumpsite may significantly impact your cost. Poor, especially wet soils conditions will require often large excavation out and gravel haul in for a stable building pad. Most sellers will allow one or two test holes as part of due diligence as long as there is not unnecessary damage to the topography. You can also look at test holes required to build the access road if it has been recently constructed and approved by the MOA.

There may be easements or restrictions to the lot that are not visible to the human eye so please order a property profile which is a nominal cost from any title company. Although a full title report is not required to purchase a lot most real estate professionals will not participate in a sale without a title report. Some restrictions or easements that commonly pop up are gas and electric or perhaps even a public access easement. There may also be setback requirements more restrictive than required by the MOA. MOA driveway standards may not exceed 10% which may mean, on steep lots, one or two switchbacks which add to the cost of the driveway. Some lots may have buried fuel tanks, basement foundations or have been used for storage and repair of old vehicles. In that case, a Phase I environmental assessment should be done.

Finally, after you have gathered all of the information, I strongly suggest you hire a builder or an engineer to review your findings and walk the lot with you. This spring, wearing a pair of snow shoes or muck boots is also probably a good idea.

What Can You Buy For $650,000?

by Connie Yoshimura

So although we bemoan the high cost of housing in Anchorage, it sometimes helps to put it in a little bit of perspective. In Austin, Texas, near the University of Texas campus, you can buy a 1,200 square foot renovated l950’s home for $635,000.  Taxes are $9,588.  In Philadelphia, you can purchase a former carriage house built in l932 with three bedrooms and two bathrooms for $650,000. It has 1,755 square feet.  Taxes were $5,851 in 2017.  In West Stockbridge, Mass. you can purchase a 2,381 square foot home priced at $273 per square foot.  Taxes are $5,637.  In Anchorage, you can purchase a new $659,900 home with 2,887 square feet.   Taxes are estimated to be $9,748 per year which may or may not have a slight decrease in the $300 to $400 range depending on whether or not Proposition 11 passes.   Regardless of the passage, however, Anchorage does appear to have some of the highest residential property taxes in the nation.

Currently, twenty-six single family homes in Anchorage are available through the local MLS ranging in asking prices from $609,500 to $699,900.  Six of these listings are ‘to be built’. In other words, there is currently no building permit for any of these homes.  They are place holders on lots and are marketing as a home that can be customized to a buyer’s tastes.  The twenty remaining homes range from 2,300 square feet for new construction to over 5,600 square feet for a home usually  built in the 1980’s.  Lot sizes range from 6,000 square feet to over 65,000 feet.

There is probably no better area of the market that demonstrates the disconnect between an older home with more square footage  compared to a brand new home with 2 x 6 construction and built to five star energy standards.   Buyers have to decide between more living square footage and ‘room to roam’  versus the benefits of brand new with no unexpected maintenance and repair costs.  Regardless of the decision of new vs. pre-owned, homes in this price bracket remain relatively affordable on a price per square foot basis.  Financing in this price range is also attractive. VA  loans allow 100% financing of the purchase price and closing costs amount to $14,000.  Ask a seller to pay for closing costs and a veteran with good credit can purchase  a $650,000 home without any out of pocket expenses except the cost of the Uhaul.   Other loan programs with a modest down payment will waive the dreaded mortgage insurance monthly premium. 

Here’s Why You’re a Frustrated Home Buyer

by Connie Yoshimura

Chances are almost 100% that if you’re an Anchorage home buyer, you’re frustrated with your hunt for a new home—whether your choice is either pre-owned or brand new. But, if it is any consolation, you’re not alone. In July 2007, the United States had 4,040,000 homes for sale. Ten years later, that number had dropped to 1,900,000. Inventory has decreased on a year-over-year basis in each of the past 29 months, according to the National Association of Realtors.  


The national standard for inventory in a well-balanced market is six months. Anchorage’s current inventory is 2.52 months, inclusive of all price points. Of the 568 homes for sale on February 8, 2018, 44% were above $400,000 while the average price of a sold home for the last six months was only $363,000. So not only does Anchorage have a lack of inventory it also has a lack of affordable home inventory.


We all know the reasons why we’re faced with this shortage. On a national level that trickles down to the U.S.’s largest state, we’ve had the California wildfires, Hurricane Harvey in the Houston area and Irma in Florida which is absorbing workers and materials. More than 130,000 residential and commercial structures were damaged in the Houston area and the California fires damaged more than 7,000 structures.  Alaska has always been at the tail end of the supply chain and that crunch will continue well into 2018. Locally, the rewrite of Title 21 has increased regulations, costs and time for approval for builders and developers.


So what’s a frustrated home buyer to do? First, get off Zillow. I know that’s a radical statement but sign up instead for a portal on Alaskarealestate.com which is the statewide MLS. There’s more and accurate information on that site than you’ll ever get from Trulia and Zillow. I’m not going to put all photos you find online in the ‘fake news’ category, but our job in marketing is to make all homes look good. Second, drive around! Except for going east on Tudor at 4 pm, you can still get almost anywhere in 30 minutes. Even from the intersection of Potter Valley Road and New Seward to E. 36th is only 14 minutes with no stop signs. Finally, visit the neighborhood where you would like to live at different times of the day and week. After all, you’re not just buying a home but a community. Let your family and friends know you are shopping for a home. Occasionally, a home does sell by word of mouth but more than likely, stay in touch with your realtor who is probably your best source for new homes on the market. Finally, once you find a home don’t nickel and dime your offer. A few thousand dollars is hardly going to budge your mortgage payment and the inventory shortage is going to continue for the foreseeable future in Anchorage.

Time to Buy with Interest Rates Set to Keep Rising

by Connie Yoshimura

One year ago this month the VA 30 year fixed mortgage rate was 3.75. Today, that rate is 4.5%. Similar increases have occurred with all mortgage programs. A 15 year fixed conventional rate was 3.5% and today’s rate is 4.125. The popular FHA 30 year fixed rate has jumped from 3.75% to 4.5%. With less than 10% down, FHA loans now also require mortgage insurance for the entire 30 year life of the loan whereas previously it was cancelled after five years and 78% loan to value. Interestingly enough, conventional rates have not jumped up as high. One year ago, 30 year fixed conventional was 4.125% and today it is 4.5%. Without question, these interest rate jump ups hit the entry level and one step move-up market the hardest. I’ve never worried about the conventional mortgage rate as higher end buyers frequently have financial resources that allow them to buy down rates and avoid mortgage insurance by putting 20% down. On a $400,000 mortgage, avoiding mortgage insurance can save you $9,000 plus over ten years.

These rate increases will definitely make it more difficult for first time home buyers to enter the housing market. However, they better jump now rather than later in the year as more rate increases are inevitable with anticipated rates reaching 5% or higher by the end of the year. I recognize that our historically low rates couldn’t, and shouldn’t, last forever but I also believe that homeownership, which begins at the affordable level, is the backbone of any socially vibrant community. So my recommendation is buy now and lock your loan. There is more inventory in the market to select from. Anchorage has the highest number of single family homes listed in MLS than in the past five years. And the first 2018 reports from MLS show a 5.89 % drop in average sales price, the biggest drop reported since the real estate recession of 2008. But buyers should not be wary of Alaska’s mild recession. As Neal Freid from the Department of Labor has pointed out, recessions don’t last more than two to three years and ours is in its third year. It takes will power to buck the trend but with more inventory, lower prices and the continued real threat of increased interest rates, now is a good time to buy a home because of the cost of home ownership is not the purchase price but rather your mortgage interest rate over the life of the loan. 

There are some good buying opportunities out there, including entry level condominiums which have remained stable in value at $212,000 the past couple of years. Just make sure there are adequate reserves for maintenance and repair and no looming special assessments. Any home priced under $500,000 is also a good buy if it has been well-maintained and had some cosmetic renovation.  New home construction can’t begin to replace a $500,000 home for less than an additional $75,000 due to increased costs for labor and materials in 2018. Also, look for any new construction standing inventory in any price point. Builders want to get rid of any leftover 2017 inventory so they can get ready for spring digs.  

Why Are New Homes So Expensive?

by Connie Yoshimura

There’s no denying that new home buyers are frustrated by the high cost of new construction. Whether it’s the land cost or price per square foot for the vertical, buyers are having a hard time wrapping their heads around builders’ quotes for  new homes.  Unfortunately, Alaska is not immune from the inflation occurring in the lower forty-eight for all types of home building materials and supplies.  Alaska is like an island of economic activity with all goods coming by sea, road or air to build a new home or remodel an existing one. Lumber is a key component of every new home. According to a local supplier, lumber is 11 to 12% of the cost of a new home.  And lumber prices have been on a roller coaster ride this past year. But, despite the dip in the fourth quarter, all predictions are that lumber prices will remain higher from  a year ago. One reason is that last year the Pacific Northwest was literally on fire—with 72 ongoing fires. Plus, the tariff on Canadian lumber also had an immediate affect on U.S. lumber costs. U.S. mills contended that the Canadian government subsidized the Canadian mills  and thus gave them an unfair advantage. The tariff was good for the U.S. mills but not for the home building industry.

 

Much of Alaska’s  lumber supply comes from the Port of Tacoma but the trucking costs to get to the port have increased substantially. The U.S. is short on truckers and transportation companies have had to increase  wages just to keep supplies moving. Plus, proposed gas taxes will get passed on directly to the end user. Despite all these challenges and higher costs, buyers are taking a serious look at new homes because the cost of remodeling their existing home will also increase. Seventy-five percent of Alaska’s current housing inventory was built between 1970 and 1990. And much of it was built with two by four construction instead of the now widely required two by six. Increased utility costs will also make older homes more expensive on a monthly basis.

 

New versus pre-owned has always been the ying and yang of home buying. Currently, the disconnect in pricing on a 2,000 square foot home in Anchorage is probably close to $100,000. That’s a lot of investment dollars to be spent for a brand new home with an open living concept and white cabinets which are preferred by 80% of new home buyers. Sometimes, however, it’s not always about the dollars but the lifestyle. We continue to see a high demand for ranches from seniors and aging boomers. The well stacked 3,000 square foot home is also popular for multi-generational families as well as  homes with a finished  basement either for teenagers or mother-in-laws. And then there are the millennials who are beginning to think long term and so prefer a new or newer home.                

Preparing Your Home For Sale

by Connie Yoshimura

Despite a slight increase in single family homes for sale after the first of the year, it’s still a frustrating buyer’s market with aging inventory. Making your home market ready for a buyer, who may have unrealistic expectations for a home that is twenty or more years old, is definitely challenging for sellers so here are some helpful hints that may help create a sale. Most of us go in and out of our garage but buyers start at the front door so make sure the porch is shoveled and your Christmas decorations are down. A nice winter or soon to be spring wreath is a welcoming precursor to a home tour. In the spring, touch up the paint around the door frame and make sure the key in the lock box doesn’t stick when trying to open the front door.

Inside the home, change out all your light bulbs to the highest wattage available. Consider adding some contemporary light fixtures. They’re not all that expensive at Lowe’s or Home Depot. Light fixtures are the jewelry of the home and can update an older home. Make sure all your lights are on for a showing, even when the sun is shining. More light makes all spaces appear larger. Take down heavy draperies or curtains, particularly those that are made from heavy material. Stylized, gathered draperies make a house feel heavy. Instead, consider some window shades or levelers. Make your home more spacious by removing items off the floor like that worn out ottoman, stacks of magazines, that chair you could never figure out where to put. More floor space gives breathing room to a home and allows buyers to use their imagination when placing their own furniture. If you have a beautiful yard and garden in the summer, make sure to have the photos available on the dining room table. Costco has a great program that inexpensively enlarges photos so check it out.

Remove and replace broken shower tile and graying grout. Freshen up the bathrooms with some new towels.  Knobs and pulls in the kitchen go a long way to wake up aging cabinets. Add a couple of live plants. Hang some art work from Pier One or Target. Take the blender, kitchen aid, toaster off your countertops. Leave the coffee maker. You’ll need it for all those home buying tours. My home has some purple and dark red walls but it is not for sale because my husband won’t move. If it was, however, back to neutral. You might love, green, orange, or purple but if you’re putting your home up for sale, paint it out with a neutral white or at best grayish. And that includes rec rooms and children’s bedrooms. Clean your garage and paint the walls white with a primer. It makes even a small garage look larger. 

Buyers have a hard time looking beyond clutter and bright colors. That’s not what you want buyers to see or remember when they tour your home. If you would like a personal consultation, or have any questions, please contact me at cyoshimura@gci.net. I look forward to hearing from you.

 

Limit Home Inspector Reports to Health and Safety Items Only

by Connie Yoshimura

Dear Readers,

I wrote the following article in September 2016 which was published in the Alaska Journal of Commerce. It is worth reprinting here because of its increasing relevance today as our housing stock continues to age. In my experience, home inspectors are over-reaching beyond health and safety issues. Home inspections are full of ‘recommendations’ that are not related to health and safety. The more items identified on a home inspection report, the more work is created for general contractors or handymen, many of which are the same as home inspectors. But, not all the fault lies with the inspectors.  Much of it is also the fault of my own industry. As realtors, we need to dampen the expectation buyers have when purchasing a home that is 20 to 30 years old and counsel them as to what is truly health and safety items. So, here’s the article.   

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.

 

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