Connie Yoshimura

Understanding the value of a lot

Not all lots are created equally, even within the same subdivision. Lot size, width and location are all factors to take into consideration when purchasing an undeveloped lot or a pre-owned home. Of primary importance to many homebuyers is southern or western exposure, and where that sunlight falls in relationship to the home’s living spaces. Avid gardeners will not consider buying a home without southern exposure in the backyard. Even if you’re not a gardener, at the end of the day, the gathering place for families is the kitchen that is almost always at the back of the home and so sunshine becomes a primary factor for many families. However, a popular plan is a reverse two story with a vaulted ceiling in a great room with an open kitchen. In that home plan, buyers like the southern exposure in the front of the home. Cul-de-sac lots have a perception of greater value and higher desirability. However, the narrow width at the bulb of the lot sometimes requires plans that are longer and narrower. Most trees in a new subdivision, regardless of how heavily forested before construction, are ultimately lost, particularly if the newly created lot is only 50 feet wide. A publicly dedicated road is 60 feet wide, including the right-of-way, which must be cleared. In Eagle River, shallow utilities are placed at the front of the lot, which makes saving any trees virtually impossible. In Anchorage, electrical easements are at the back of the lot, which makes landscaping and the streetscape more aesthetically appealing. Mature trees play a major role in a desirable streetscape and most new homeowners and land developers are beginning to recognize their value by planting larger trees and fewer shrubs, although foundation plantings of shrubs are becoming very popular and add to the aesthetics of any new home. Corner lots are considered more desirable by some, but not by others. Some buyers would prefer to have the drive-by car as an intermittent neighbor, to a noisy one with a barking dog. Corner lots frequently don’t have much backyard, and have front and side yard setbacks, minimizing usable yard space and putting constraints on home design. However, if a corner lot is your preference, look for one that is slightly larger than the other lots in the subdivision. Most savvy developers are creating larger corner lots that make them more desirable and provide an aesthetically more attractive spatial feel to the community at entrances or intersections. Ranch homes are a good plan for corner lots. Lot sizes vary in a subdivision, perhaps by as much as 2,000 to 3,000 square feet, and will be priced accordingly, but the location of that square footage is very important in establishing value. Lot width dictates the value of a lot more than its depth. Current construction costs for lot frontage with public water, sewer and a publicly dedicated road is about $1,600 per lineal foot. Also important is the relationship of the lot to its immediate neighbors. Does the back lot line match up with the adjoining lot? Or does it straddle two lots making for two backyard neighbors? Occasionally, a lot may actually have four or five neighbors, rather than the traditional three with one on each side yard and in the back. The more adjacent neighbors, the less value to the lot. Dedicated green or open space and mountain or inlet views are, of course, the most highly sought after and most expensive amenities. How much would you pay for an unobstructed mountain view? $20,000, perhaps. What about an inlet view? $100,000? River or lakefront? $200,000? Even a peek-a-boo view creates a shorter marketing time when it comes time to sell the home. Connie Yoshimura is the broker/owner of Dwell Realty. Contact her at 907-646-3670 or [email protected]

Alaska communities have range of balance in home market

The Alaska Multiple Service (MLS) is a statewide organization that publishes a weekly market activity report of all new listings, pending (buyer and seller agreed) and sold transactions. Although it may not reflect all activity in a market, it clearly represents the vast majority of residential transactions and provides insight into local housing activity and whether or not the market in certain communities has balance defined as an equal number of new, pending and sold properties. For example, last week, Wasilla had 363 current active listings with 34 new listings, 33 pending transactions and 33 closed. Although the number of for sale units is high in relationship to its population (even if you include the entire Mat-Su Borough), it is considered a balanced market. Another balanced market is Anchorage which had 521 homes for sale with 53 new listings, 64 pending and 58 sold. The Anchorage market in relationship to its population of just over 300,000, although balanced in terms of activity, is constrained due to its overall lack of for sale inventory. However, despite the lack of inventory, you would consider the market balanced, the same as Wasilla, with approximately 10 percent (slightly more or less) of for sale homes being sold on a weekly basis. Eagle River had 126 homes for sale last week. According to the MLS market activity, it also had 17 new listings, 18 pending and 27 sold. With more than a 10 percent turnover, it is the most active real estate market in the state. Like Wasilla, Eagle River has become the bedroom community for the employment center of Anchorage. Not only is there more available land in those two communities, but the building permit process, or lack thereof, saves not only time, but thousands of dollars, making homes on larger lots more affordable than its more urban neighbor, Anchorage. For many people, it’s worth the commute. Palmer, however, doesn’t fair as well and lags behind with less than 10 percent weekly absorption of available inventory. With 133 homes for sale and 16 new listings, it had only 10 pending sales and 6 closed transactions. Last week, Fairbanks had 65 homes for sale with 3 new homes for sale, 4 pending and 2 sold. Using the 10 percent absorption formula, its market is not balanced with less than 5 percent turnover on a weekly basis. North Pole, its Santa Claus neighbor, fairs better with 22 homes for sale, 4 pending and 4 closed. Homer, a popular go-to recreational area for Alaskans and tourists, has 133 homes for sale, but very slow absorption with 3 pending and 2 sold last week. Across the bay, Halibut Cove has five homes for sale and no activity. Some smaller and more rural communities have no market. Cordova, Delta Junction, Glennallen, Haines, Indian, Healy, Moose Pass, Sitka, Valdez, and Wrangell report no active new listings, pendings or solds thru MLS. Valdez has only one home listed for sale so you’re more likely to find one there by talking to a friend or co-worker. Connie Yoshimura is the broker/owner of Dwell Realty. Contact her at 907-646-3670 or [email protected]

10 questions to test your Southcentral real estate knowledge

Take this quiz and see how you score. You just might be surprised at some of the answers. 1. How does commercial and residential building activity in the Municipality of Anchorage, or MOA, through May 2015 compare to 2014? Consider government and commercial alteration as well as new permits. a. Increase by 5 percent   b. Decrease by 11.34 percent c. Decrease by 22.68 percent  d. No change 2. Under a best-case scenario, approximately how long does it take for a property to be rezoned in the MOA? a. 3 years  b. 2 years   c. 1 year d. Six months    3. How many elevator permits, including commercial and residential, have been issued year-to-date? a. 4 b. 24 c. 44 d. None 4. How many single family building permits have been issued year-to-date? a. 307 b. 207 c. 107 d. 87 5. Last week there were how many single family homes in all price ranges for sale in Anchorage? a. 780 b. 680 c. 580 d. 480 6. Wasilla had how many homes for sale during the same period? a. 192 b. 292 c. 392 d. 492 7. In May the average price of a sold single family home in Anchorage was $390,484. How does that value compare historically to the market? a. About the same as 2014   b. A little below the market c. The highest average price         on record d. Trick question 8. How many $1 million-plus homes are for sale in Anchorage? a. 12       b. 22 c. 32 d. 42 9. How many $1 million plus homes sell per month? a. 0.5 b. 1 c. 1.5 d. 2 10. What is the average price of a condo for sale in Anchorage? a. $150,000  b. $175,000   c. $200,000   d. $250,000 The correct answer to each is “c.” Connie Yoshimura is the broker/owner of Dwell Realty. Contact her at 907-646-3670 or [email protected]

A guide to understanding real estate business practices

People who are eligible to list and sell real estate as a business and profession are licensed in the State of Alaska. They must pass a general knowledge test on real estate as well as a portion on real estate laws specific to Alaska. However, none of the knowledge they are required to have deals with the intricacies of buying and selling real estate as a business practice. Two circumstances come to mind that create confusion with the consumer, as well as those who practice. The first is how to manage a back-up offer on a property that already has a pending sale. A pending sale is a contract with an agreed upon purchase price. In most cases, particularly for pre-owned homes, it is contingent on a home inspection and agreed upon repairs, an appraisal meeting for exceeding the purchase price, a buyer’s mortgage approval and, in some instances, with a buyer’s minimum down payment, private mortgage insurance approval. If one of these conditions is not met, the normal business practice is that the buyer who may have posted as little as $1,000 “earnest” deposit, will be entitled to his deposit back. The seller, meanwhile, has had his property off the market for as long as 60 days and has paid and accrued principal, interest, taxes and insurance, as well as having paid for the appraisal and agreed upon repairs. With all these contingencies, taking a back-up offer would seem like a wise financial choice, but it is rarely a successful strategy. Buyers and sellers almost always act in good faith and after a sale is agreed upon, there are many entities that want to keep it together including the mortgage originator, the listing and selling licensee and their respective brokers as well as the buyer and seller. So when it comes time for an extension of the contract or additional repairs, most sellers are willing to make some additional concessions to keep the current deal together unless it is out of their control. Back-up offers create disappointment as well as anxiety for both potential buyers. Although licensed real estate professionals are obligated to present all offers, even back-up ones, rarely has the back-up offer been successful in my experience. Upon occasion, anxious buyers who have difficulty making a decision as to which property to purchase, will make simultaneous offers on two different properties. Although there is no legal obligation to disclose to all parties that the buyer is making multiple offers, it is, in my opinion, an unusual business practice when it comes to buying real estate in Alaska and should be disclosed, if not in writing, at least verbally. In fact, this disclosure might even be to the buyer’s advantage because the sellers would know they are competing for the buyer’s purchase. Although this practice may be appropriate in more urban areas in the Lower 48, it is unusual in Alaska. A better business practice is to make one offer at a time and, in the case of a back-up offer, wait for the property to come back on the market. That way, all parties are dealing in good faith with full disclosure of the circumstances. Connie Yoshimura is the broker/owner of Dwell Realty. Contact her at 907-646-3670 or [email protected]

Prices rise acoss country, but not in stable Southcentral Alaska

A recent article in the Wall Street Journal recapped rising home prices in the United States. Recovering from the housing recession of 2008, home prices in Denver are up 29 percent; Houston 43 percent; Seattle 32 percent, and even Phoenix and Las Vegas, which had a plethora of vacant and foreclosed properties not that long ago, have seen home prices rise 48 percent and 52 percent, respectively. Contributing to these increases is a recovering national economy and limited inventory in some select areas. Also, a growing fear that our near historic low interest rates of 3.85 percent for a 30-year fixed rate mortgage, will increase in October 2015, is propelling home buyers to act now. After all, it is not the purchase price of a home, but rather the long term cost of the mortgage that is the defining financial commitment. Buyers should be less concerned about negotiating with a seller over $5,000 than the potential increase in interest rates which is sure to come in the near term. Limited inventory is a major factor in rising home prices and short days on the market. The number of days on the market is a good indicator of how tight a local housing market is. In Denver, homes are snapped up in 8 days. In Seattle, the median number of days on the market is 22 days. Portland Oregon is 31 days. Some sellers are holding out for even higher prices in certain metropolitan areas. Other homeowners who purchased at the top of the market are still not ready to sell, hoping for a break even after closing costs. Another factor contributing to limited inventory is the lack of new construction homes. Nationally, building permits rose 6.4 percent, and in the west, starts rose 15 percent. However, this increase doesn’t seem to fulfill buyers’ demands for more housing. So, how does Alaska’s housing market compare to the Lower 48? Statistically, “stable” might be the best adjective to describe it, but underlying currents and trends point to rising prices and frustrated buyers. On the “stability” side of the equation, prices in Southcentral Alaska, at least according to MLS statistics, have actually declined; albeit, less than 1 percent, but nevertheless it points to stability in the marketplace as far as pricing is concerned. Much of that “stability” can be attributed to our aging housing stock, the majority of which was built prior to 1986. These homes which are now almost 30 years old have reached not only cosmetic obsolescence, but functional as well. Those little-used rooms called the formal dining and living rooms are definitely out for the millennial buyer, as well as the aging baby boomers looking to simplify their life. However, buyers are frustrated by lack of inventory which continues to hover in the lower $400’s in Anchorage. In 2007, the number of available homes was over 1,000 for this time of year. And then, we have our continual dilemma of lack of housing starts, which no administration seems willing to cut through the red tape to solve. Single family building permits, the preferred choice for over 85 percent of all home buyers, has actually declined year-to-date over last year and has hit a record low of only 79 permits through the month of April 2015. Connie Yoshimura is the broker/owner of Dwell Realty. Contact her at 907-646-3670 or [email protected]

Millennials prefer tech, gadgets, and single family homes

Lots of articles have been written about what the “millennials” are looking for in a new home, as they emerge from their parents’ spare bedroom. Spurred on by low interest rates, a better job market, and lower down payments, this 25-to-35 year old age group is slowly, but surely, embracing the idea of home ownership. Their ultimate buying power will rival that of the aging baby boomers, but the big question, in the mind of builders, is what do they want for their first home? Although these “millennials” have embraced technology and the latest gadgets, their quest and desire for home ownership is not much different than their parents. According to a recent survey by the National Association of Homebuilders (NAHB), 75 percent want a single family home. Only 10 percent would opt to live in the city center. Almost 25 percent would prefer a rural setting, near parks and walking trails. NAHB also reported that for the first time, the size of the single family home decreased as millennials look for smaller, more affordable residences. So what are they asking for? As you can expect, they like electronic features such as programmable thermostats and energy-efficient appliances, and are willing to pay 2 to 3 percent more for an energy-efficient home as long as it saves in their utility bills. They also want laundry rooms (not closets), bigger garages, pantries, linen closets and will accept an unfinished area, particularly if it is a daylight or walk-out basement. They are willing to commute farther out from their employment centers in order to obtain their housing objective. They also don’t want cheap when it comes to finishes, i.e. granite or quartz for countertops and a neutral pallet of white, cream and taupe with a splash of color here and there that can be easily changed out. They like the latest pantone color of the year (marsala) and a bright front door. They’ll gladly go over their lighting allowance for some drama in their light fixtures, as it visually helps define their personal taste. These requirements are all relatively expensive, particularly in Anchorage, where garages must be heated and all building products imported, making the only option a smaller lot and a smaller, energy efficient home. For energy efficiency, Alaska is on the right track. As of July 2014, all new homes must be built to five-star standards in order to qualify for AHFC financing. Connie Yoshimura is the broker/owner of Dwell Realty. Contact her at 907-646-3670 or [email protected]

Opportunities exist in small-income properties

One of the little-discussed opportunities in residential real estate is the small-income property. Whether you choose a duplex, triplex, or four-plex, it’s an excellent way to begin a real estate portfolio for the small investor, or first time homebuyer. If you qualify for a Veterans Affairs owner-occupied loan, you can purchase a duplex with a mortgage of up to $625,500 with a zero down payment. VA does require you to have six months in principal, interest, taxes and insurance in reserves. If you’re worried about the monthly payment, VA allows up to 75 percent of market rents for rental side income that is added to the owner’s income for qualifying for the mortgage. The 25 percent of the non-allocated rents is to be reserved for maintenance, repairs and vacancy. Not a veteran? The Federal Housing Administration has owner-occupied financing for only a 3.5 percent down payment. Loan limits are $497,000 for a duplex; $601,500 for a triplex and $747,500 for a four-plex. For an owner-occupied duplex, there are also no reserve requirements. FHA also allows 85 percent of the market rent for rental income side. Fannie Mae and Alaska Housing Finance Corp., or AHFC, loan limits are even higher. For a duplex, both will finance up to $800,775. AHFC will require a 10 percent down payment and Fannie Mae a 15 percent down payment. Both will require the buyer to demonstrate they have six months of reserves in cash. That’s still an excellent investment opportunity with 30-year fixed rates still below 4 percent. It seems like a first time homeowner or small investor couldn’t go wrong with one of these purchases. The only problem is finding a property to purchase. These loan limits are statewide and so there may be other opportunities around the state, but in Anchorage, with a tight rental market, and sluggish building permits, even a good duplex is hard to find, particularly if you are looking for one that is less than 10 years old. The vast majority of our rental housing was built during the boom years of the l980’s. Although for us long-time Alaskans that doesn’t seem that long ago, the reality is these properties are now over 30 years old and have not only become cosmetically, but functionally obsolete. Much of Anchorage’s multi-family acreage zoned R2, R3 or R4 has been taken up with condominium development the past 15 years. Builders can earn an extra $10,000 to $15,000 per side by selling each side separately as a condo. That’s an opportunity that’s hard to give up when you build for a living. So the development of the owner-occupied rental properties is really left up to the owner-builder who has the time to search for that infill lot that larger builders tend to overlook because it’s inefficient to build only one building at a time. Occasionally, you see a duplex or four-plex popping up in Fairview or Spenard, both popular rental areas, where tear-downs are still reasonably priced. It’s a good opportunity for the small investor and helps create more affordable housing in Alaska’s largest city. Connie Yoshimura is the broker/owner of Dwell Realty. Contact her at 907-646-3670 or [email protected]

Advice for purchasing a house before it actually exists

This weekend is the Anchorage Spring Preview of Homes with 29 entries from six different builders in price ranges from $808,000 to $300,000. Unlike the fall Parade of Homes, these entries do not need to be completed and so visitors will see anything from furnished models to bare studs. This weekend is a good opportunity to inspect how homes are constructed beneath the sheetrock. Several homes should have exposed insulation, plumbing and electrical. Some home plans will seem familiar to you; others will be brand new but most shoppers will be more interested in the latest cabinet color, the width of the baseboard, gray vs. taupe walls and the size of the master bathroom. The idea behind the Spring Preview is to generate buyers for brand new homes. However, with Anchorage building permits still at record lows of 300 units or less for the past three years, there is very little available or “spec” inventory (homes built without a buyer) to select from which forces buyers to purchase a home before it actually exists. Attending the Spring Preview is the first step in trying to determine what plan, subdivision and builder to work with. All six builders are licensed, bonded, insured with a general contractor’s license and residential endorsement. However, each builder will have their own procedure when it comes to working with buyers for what we call in the business a “presale,” a home under contract to a buyer before it is built. Some builders are also land developers and prefer to build in communities where they have an ownership interest in the land and are familiar with the soils. Others buy lots as they are needed. A significant cost for every home is in the excavation cost, which can increase the cost of a home $10,000 to $15,000 without adding any value on the appraisal. Some builders develop their own floor plans. Others sub out the drafting and design work, which will increase the cost of the home. Selecting a builder’s plan that he has built before allows the builder to provide a more specific price for a home to be built. However, the devil is really in the details, i.e. the finishes and the allowances. Some builders have an all-inclusive list of finishes that are included in each home. However, those standards may vary from one subdivision to another, one floor plan to the next. For example, don’t assume that if you see quartz (the latest in countertop material) in a builder’s home, it is a standard feature. Most likely that was an upgrade that the buyer paid for.  Before a buyer makes a commitment to a builder, they should be provided with a copy of the floor plan, the plot plan which shows the relationship of the foundation to the lot lines and a standard features list specific to that home, inclusive of a description of plumbing fixtures and a trim package. They should also be given in writing allowances for cabinets, appliances, countertops, lighting, flooring, tile, et cetera. Buyers who exceed their allowances should be prepared to pay for any upgrades in cash directly to the supplier. The more time the buyer and the builder spend working together to outline the cost and the specific finishes of the home, the more successful the transaction will be. And, it goes almost without saying that all agreements must be in writing, including any change orders. Connie Yoshimura is the broker/owner of Dwell Realty. Contact her at 907-646-3670 or [email protected]

Resolving remodeling dilemma, for keepers and sellers

The problem with remodeling is that it never seems to stop. Once you replace the carpet and change out the Formica countertops to quartz, suddenly those white or black appliances look older than they really are. Remodeling is big business in Alaska. Just witness the growth and expansion in Home Depot and Lowe’s stores as well as their stock prices. That’s because in Alaska the vast majority of our homes were built during the pipeline boom days of the early l980s. That makes them 30-plus years old, just about the age functional obsolescence sets in and long past the point of a cosmetic redo. There are two types of remodeling. The first is the “I’m going to live here forever and so I might as well fix this place up to how I really like it.” That usually entails ripping out walls and creating great room spaces with an open living concept. It includes changing out a U-shaped kitchen peninsula to an island, expanding a master bath by accessing one of the adjacent small bedrooms, adding a walk-in shower and creating a spacious master closet. Bathrooms and kitchens are the most expensive rooms in the home to remodel and depending on the extent of the remodel and the finishes can cost anywhere from $10,000 to $60,000. But, aging baby boomers who decide to age in place and make their existing home their “terminal” residence want to enjoy what they’ve spent years working toward. Just count on spending more than you’ve planned for by about 25 percent, not counting those brassy light fixtures you forgot about replacing. The second type of remodeling comes with preparing your home for sale. Carpet tends to get dark around the edges of a stairwell and so that usually is the first item on a seller’s list for replacement. Make it simple. Select a neutral color. Beige may seem boring to you, but it is the neutral choice for most buyers. Vinyl sometimes rips at the seams and turns dark. There are a plethora of new vinyls that are hard to distinguish from tile. Just keep the pattern simple. Limit your floor coverings to as few changes as possible. The more breaks in flooring, the smaller the room will appear. Spruce up kitchen cabinets with a good cleaning and add some pulls and knobs. Change out that fluorescent light fixture with a contemporary ceiling mount or pendants. The kitchen is the heart of the home and is where most buyers go to first when viewing a home. Painting children’s bedrooms in a neutral color also makes those 9 x 10 bedrooms appear much larger.  Once you start preparing your home for sale, it is no longer yours. It belongs to some future buyer. Keep your personal preferences for color and patterns to a minimum. Visit some newly-built homes in your area. Most builders have mastered the art of making a home neutral enough for most buyers, but yet interesting enough for the more discerning buyer. And one final trick is to replace those old-fashioned plate glass mirrors in bathrooms with a designer mirror. They’re readily available at your favorite remodeling store or online. Connie Yoshimura is the broker/owner of Dwell Realty. Contact her at 907-646-3670 or [email protected]  

Despite lack of inventory, strong home sales so far in 2015

Spurred on by lack of inventory, warm weather and the threat of rising interest rates later in the year, local buyers are doing their spring home shopping early. Actual closed residential transactions for January 2015 were 166 compared to 149 in 2014. Last week in Anchorage, after Multiple Listing Service reported 45 pending residential sales and 27 sold, there were only 340 single family homes left for sale. This is an historic low inventory of available properties. Unlike Calgary, Alberta, which has had a 34 percent drop in home values due to the plummeting price of oil, the Anchorage housing market is actually holding steady and experiencing an increase in sales. The average list price for an Anchorage home in the past six months was $370,335. Available inventory between $350,000 and $399,999 is only 43 homes, which equates to a 1.31-month supply. Within this price range, there are 13 Anchorage homes with four bedrooms and a double car garage for sale, which is the most sought after configuration. The market is not much better in Eagle River with only 77 homes for sale and six homes with four beds and a double car garage. More home choices are available in Wasilla with 278 homes for sale. Many buyers, frustrated with lack of choices, are forced into the commute from Wasilla to Anchorage, the employment center for Southcentral Alaska. Unfortunately, Anchorage homebuyers can’t look to new construction to find a solution to its housing shortage. Despite promises to improve the permitting and development process by elected officials, the number of Municipality of Anchorage building permits continues to flounder at 300 units or less. In 2014, only 293 single-family home permits were issued, the lowest since 2011. In January 2015, there were 15 single-family permits issued and six duplex permits. Anchorage needs at least 450 single family permits in 2015 to fulfill the housing needs of the community. The debate between buyer preferences and planners’ vision for the city’s housing needs continues. Buyers have a strong preference for detached single family homes even if the lot size is minimal as an alternative to the long commute from the Valley. City planners, however, prefer more multi-family and vertical construction to fulfill Anchorage’s housing needs, despite the fact that apartment style units don’t have garages long enough for the 70,496 pick-up trucks and storage for the 16,000+ registered snow machines in the MOA.               Yet, according to a recently published Gallup Poll, Alaska is still considered the happiest state in the US, despite its critical lack of housing. Connie Yoshimura is the broker/owner of Dwell Realty, and a residential land developer.  Contact her at 907-646-3670 or [email protected]

Alaska has work to do to improve its appraisal dilemma

A residential real estate appraiser provides professional opinions of value in order for the mortgage investor to feel secure in its lending on a property. Appraisers in Alaska are licensed by the state through the Department of Commerce, which, in turn, is overseen by the Federal Appraisal Subcommittee. Pursuant to the Dodd-Frank Reform and Consumer Protection Act, as of Jan. 1, 2015, all new appraisers must have a college degree and go through a rigorous training and continuing education program which includes up to 2,400 hours of supervised work in no fewer than 24 months. They are required to pass a thorough background check, including fingerprinting. There are several levels of appraisers, the most highly recognized is the MAI designation. State-licensed designations include General Real Estate Appraiser, Institutional Real Estate Appraiser, Registered Trainee and Residential Real Estate Appraiser. With all this education, experience and supervision, one would think that there would be consistency when it comes to establishing residential value. However, that’s not always the way it works out. Recently, a newly built home on the market had an asking price of $549,000. An offer came in at $549,000; the seller accepted and the appraisal came in at $555,000. For a buyer’s personal reason, he chose to not complete the transaction. A second buyer came in and offered $539,000. The second appraiser appraised the property for $539,000. Within 30 days, the value of the property had been reduced by 3 percent in a market that in 2014 experienced 3.23 percent appreciation. What was the correct valuation? The asking price, the first appraiser’s value or the second? Here is another example of a discrepancy in value. A brand new home with a painted and textured garage was given a value of $35 per square foot for the garage. Thirty days later, the same appraiser appraised a similar property’s garage on the same street by the same builder at $65 per square foot. Sloppy work to say the least, which forced a buyer to pay more than the “appraised” value of the home in order to complete the purchase. Unfortunately, the appeal process is so long and convoluted that there is little opportunity to correct these inconsistencies when faced with the potential of an expired contract to purchase. So it is no surprise that the August 2014 review by the Federal Appraisal Subcommittee gave out its only “not satisfactory” to Alaska with a one-year follow-up instead of the standard two-year. So wherein lies the problem? Most likely it comes down to proper supervision and management. Supervisory appraisers hire registered trainees to do much of their work, including home inspections and analyses. Depending upon the level of experience of the trainee, discrepancies even within one company can easily occur. Prior to the new regulations, supervisors were not limited to the number of trainees they may oversee. Now, they may only supervise three. In the garage instance, the difference in value between $35 and $65 per square foot on a 1,000-square foot garage was $30,000. Other appraisers appraised like properties between $40 and $60 per square foot for a garage. To the builder, $30,000 is the difference between a profit and a loss. To the homeowner, it is cash out of pocket at closing and the uncomfortable position of paying more than the “appraised” value for a new home. Connie Yoshimura is the broker/owner of Dwell Realty, and a residential land developer. Contact her at 907-646-3670 or [email protected]

Winter real estate could get boost from recent changes

January is typically a slow month in residential real estate. Buyers are in Hawaii if they haven’t overspent during the holidays and homeowners are hunkered down, thinking about putting their home on the market come summer. So it was a pleasant surprise to hear about three financial announcements that should help stimulate late winter activity. On Jan. 1, the Federal Housing Authority, or FHA, increased its maximum loan amount in Alaska from $355,350 to $388,700, which puts a maximum purchase up to $402,797 with the minimum 3.5 percent down. This loan amount is now well above the average MLS sales price for Anchorage of $362,500. At the same time, the FHA reduced the cost of its annual mortgage insurance rate from 1.35 percent to 0.85 percent of the loan amount. The program still requires that mortgage insurance remain on the loan for 30 years or the lifetime of the loan, regardless of any principal reduction on the mortgage. Prior to the last real estate recession, the monthly mortgage insurance payment could be eliminated once the loan amount was reduced to 80 percent of the home’s value. However, this reduction in the monthly rate is a step in the right direction and saves a borrower $161.96 per month on the maximum loan amount which allows a buyer to make approximately $640 less per month and still qualify for the maximum loan amount. The new premium applies to all one-unit residential dwellings, including condominiums and is sure to spur on activity as it puts more work force buyers eligible for a home. This maximum loan amount varies by geographical location. In Fairbanks, the maximum loan amount is $274,850. However, Juneau has a higher maximum loan amount of $397,900. Interestingly enough, the Sitka loan amount is $451,950, the highest in the state. The second financial move came when the 30-year fixed conventional rate mortgage fell to 3.625 percent, the lowest it has been in 18 months. No one in the market anticipated this move and the 15-year mortgage, always the best program, is now only 3 percent. Not exactly free money but still an incredibly low rate meant to spur home ownership for some of those millennials still living in their parents’ basements and paying off student debt. The amount of interest paid over the lifetime of a mortgage is two to three times the original cost of the home which makes quibbling over a few thousand dollars seem irrelevant on the long term. Unfortunately, many buyers get hung up on negotiating the purchase price when in reality, interest rates play a much more important financial role. A quarter percent drop in an interest rate is only 69 cents per month per $5,000 of loan amount, a lot less than four lattes. And, the Feds will not hold rates down forever. We’ve had mortgages at 4 percent or below since 2008, an unprecedented period of low rates. Locally, Residential Mortgage, the state’s largest mortgage company, has now introduced the 3 percent down for conventional financing. Under this program the seller may also pay up to 3 percent of the borrower’s closing costs and pre-paid expenses. One buyer must be a first-time homeowner and reserves may be required from some borrowers but those reserves can come from a gift. Although you still need a good credit score to qualify for any mortgage, it appears in general that the pendulum of overly restrictive constraints on mortgage applicants is somewhat loosening. Over 90 percent of all mortgage activity is from FHA, Fannie Mae and Freddie Mac. Their reduction in the annual mortgage insurance premiums, the lowering of down payment requirements and the all-important low interest rates will continue to help generate the national housing recovery and locally allow more homeowners to move up, leaving inventory available for the first time homebuyer. Connie Yoshimura is the broker/owner of Dwell Realty, and a residential land developer. Contact her at 907-646-3670 or [email protected]

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