Another consideration when looking for that cozy Alaskan cabin is its foundation. Most are built on pilings (wood or steel driven into the ground)or post-on-pad (shorter posts, usually wood, set on gravel or concrete pads). These foundations are often used for cabins because they're less costly than pouring a slab or crawlspace. They're also more effective if the soils are sketchy.
Sketchy soils mean possible permafrost - permanently frozen soils. A traditional concrete foundation will melt the soil, causing instability and shifting. Pilings can be driven through icy layers, sometimes even to bedrock, depending on location. With both pilings and post-on-pad foundations, the bottom of the house sits off the ground, leaving a space for air to flow and keep the ground beneath close to its natural condition. Both types of foundations also allow for jacking and leveling if (and in the case of full-blown permafrost, when) the house shifts. Keep in mind that jacking and leveling aren't cheap, and they wreak havoc with sheetrock.
Engineers are the best point of reference for evaluating whether soils are stable and foundations appropriate. The Department of Soil Conservation maps soils and can give you a general idea of what's beneath a particular property. You can also pay for core samples to be augered up and analyzed, but keep in mind that much of Alaska's permafrost is discontinuous, so it can show up on one part of the property and not on another.
Friday, January 30, 2009
Thursday, January 29, 2009
SO YOU WANT TO BUY A CABIN
A cabin in the woods - isn't that everyone's Alaskan dream?
The biggest obstacle to that dream is usually financing. Unless they have running water (most don't), electricity, and road access, cabins don't qualify for conventional financing. Even with all of that, they may not meet residential square footage minimums. Or the acreage may be too large.
If the cabin doesn't qualify for conventional financing, you'll need to seek out a nonconforming loan from a local lender. Generally a minimum of 25% down will be required, and the term often can't exceed 15 years, though the terms may be flexible depending on the property and the buyer. The interest rate will also be higher than conventional financing.
Another option is owner financing. Generally owners would like to see a substantial down payment and a relatively short loan term - ten or fifteen years may be the most you can negotiate. A good credit score is a big help in negotiating an owner finance package. With the stock market shaky and bank interest rates at all time lows, owners may be more interested in financing than they were when times were flush. A note of caution: because promissory notes contain "due on sale clauses" (the lender can call the entire note due if ownership transfers), sellers negotiating an owner finance should own the property outright.
The biggest obstacle to that dream is usually financing. Unless they have running water (most don't), electricity, and road access, cabins don't qualify for conventional financing. Even with all of that, they may not meet residential square footage minimums. Or the acreage may be too large.
If the cabin doesn't qualify for conventional financing, you'll need to seek out a nonconforming loan from a local lender. Generally a minimum of 25% down will be required, and the term often can't exceed 15 years, though the terms may be flexible depending on the property and the buyer. The interest rate will also be higher than conventional financing.
Another option is owner financing. Generally owners would like to see a substantial down payment and a relatively short loan term - ten or fifteen years may be the most you can negotiate. A good credit score is a big help in negotiating an owner finance package. With the stock market shaky and bank interest rates at all time lows, owners may be more interested in financing than they were when times were flush. A note of caution: because promissory notes contain "due on sale clauses" (the lender can call the entire note due if ownership transfers), sellers negotiating an owner finance should own the property outright.
Wednesday, January 28, 2009
ACTS OF GOD
Saturday morning, I sat working at my computer when I felt a tiny vibration. Earthquake. I stopped and waited. A few seconds later came the jolt, followed by a couple smaller shakes. I got up, went into the hall, poised for running outside if a bigger rumble followed.
Positioned on the Pacific Rim, Alaska's volatile when it comes to seismic activity. Saturday's shaker was a 5.7, epicentered in Cook Inlet, closer to Homer than Anchorage. No damage reported.
Should you buy earthquake insurance if you live in Alaska? It's certainly something to look into. But check the fine print. Earthquake policies are often written with high deductibles and payout limits that make them not such a great deal.
Unrelated to Saturday's quake, Mount Redoubt started rumbling over the weekend. Scientists says there's a 50 to 70 percent chance it will erupt. Alaskan volcanoes typically blow with more ash than lava, spewing fine particles of dust and glass into the air. Breathing is not a good idea, but other than engines, we don't have to worry about property damage.
Positioned on the Pacific Rim, Alaska's volatile when it comes to seismic activity. Saturday's shaker was a 5.7, epicentered in Cook Inlet, closer to Homer than Anchorage. No damage reported.
Should you buy earthquake insurance if you live in Alaska? It's certainly something to look into. But check the fine print. Earthquake policies are often written with high deductibles and payout limits that make them not such a great deal.
Unrelated to Saturday's quake, Mount Redoubt started rumbling over the weekend. Scientists says there's a 50 to 70 percent chance it will erupt. Alaskan volcanoes typically blow with more ash than lava, spewing fine particles of dust and glass into the air. Breathing is not a good idea, but other than engines, we don't have to worry about property damage.
Tuesday, January 27, 2009
IF YOU'RE LOSING YOUR HOME
It's painful, isn't it, turning on the evening news and learning about another round of layoffs, with numbers not in the thousands but the tens of thousands. Among the pain and suffering to follow will be more and more foreclosures.
What if you can't make your house payments? First, contact your lender. It's not easy these days. Lenders are busy lobbying Congress to stop the proposed foreclosure relief measure that would allow bankruptcy judge to adjust what borrowers owe on their mortgages. But be persistent. Call and fax and write. Get legal help if you can.
If you decide to sell your house, be up front with your Realtor. Bound by confidentiality, your financial distress will not go public in the sales process unless you authorize your Realtor to share it. Your Realtor can help you work with the lender to arrange a short sale. But Realtors need all the facts, and that starts with you being forthright.
I read recently that Lance Davis of Les Bailey and Associates became the first Alaskan Realtor to earn the Certified Distressed Property Expert Designation. Unfortunately, it will probably be a good niche for awhile.
What if you can't make your house payments? First, contact your lender. It's not easy these days. Lenders are busy lobbying Congress to stop the proposed foreclosure relief measure that would allow bankruptcy judge to adjust what borrowers owe on their mortgages. But be persistent. Call and fax and write. Get legal help if you can.
If you decide to sell your house, be up front with your Realtor. Bound by confidentiality, your financial distress will not go public in the sales process unless you authorize your Realtor to share it. Your Realtor can help you work with the lender to arrange a short sale. But Realtors need all the facts, and that starts with you being forthright.
I read recently that Lance Davis of Les Bailey and Associates became the first Alaskan Realtor to earn the Certified Distressed Property Expert Designation. Unfortunately, it will probably be a good niche for awhile.
Monday, January 26, 2009
ANCHORAGE VALUES HOLD
According to an article in the Saturday edition of the Anchorage Daily News, real estate values are holding in Anchorage, despite sharp declines elsewhere in the nation. In fact, there's still something of a seller's market for homes priced below $500,000.
Local Realtors Clair and Barbara Ramsey compiled the data for the ADN. They note decreasing activity among sellers and builders as a factor in keeping our market balanced. We're fortunate to have not yet seen massive layoffs (it helps that our economy relies little on manufacturing) or foreclosures (loans up here having been mostly "non-creative").
As I've noted here before, values in the Mat-Su Valley (aka Palin country) and Fairbanks have fallen more sharply, but still not at the alarming rates seen elsewhere.
Local Realtors Clair and Barbara Ramsey compiled the data for the ADN. They note decreasing activity among sellers and builders as a factor in keeping our market balanced. We're fortunate to have not yet seen massive layoffs (it helps that our economy relies little on manufacturing) or foreclosures (loans up here having been mostly "non-creative").
As I've noted here before, values in the Mat-Su Valley (aka Palin country) and Fairbanks have fallen more sharply, but still not at the alarming rates seen elsewhere.
Friday, January 23, 2009
ALASKA'S NO PLACE TO ESCAPE
Not from the recession, anyhow. Our unemployment is running around 7.5%, and depending on which economist you ask, it looks like we'll lose about 3400 jobs this year. Most of the state's job loss will be in the construction, transportation, and resource extraction. Fairbanks is one of the few towns in the state (and the country) that will stay steady or see modest employment gain.
That's not fabulous news for real estate values. But it could be much worse. We're a resourceful bunch, and we'll get by.
That's not fabulous news for real estate values. But it could be much worse. We're a resourceful bunch, and we'll get by.
Thursday, January 22, 2009
TAXING QUESTIONS
A few oddities about assessed values in Alaska: First, many Alaskan communities aren't first class cities, nor are they part of a borough (our version of counties). In those communities, there are no property taxes. Sounds like a great deal, doesn't it, until you realize that most of these places are not connected by road to the rest of the state, and you might be paying $13 for a gallon of milk or orange juice.
Secondly, to my knowledge there are no real estate transfer taxes in Alaska. That means that what you get when you sell or what you pay when you buy real estate is considered no one's business but your own. You'll receive requests from the assessor's office asking what you paid, but you don't have to tell them. This makes the assessor's job tough. If there were a transfer tax, the assessed value could be adjusted to the sales price every time a property changed has. As it is, our deeds say that the property sold for $10 and other good and valuable consideration. Translation: assessors, figure it out for yourselves.
Then there's the matter of not having to let assessors inside your house. Couple that with not needing permits for most places outside municipal rules (large swaths of Fairbanks, for example), and it's pretty tough for assessors to get a good idea of what you've really got. This is why you'll see the occasional tax-obsessed homeowner who refuses to put siding on his $300,000 house. He knows the assessor can't come in to see all his real improvements, and he hopes the weathered plywood or Tyvek exterior will give the illusion of a shack.
Finally, all assessments are done based on data collected the year before, so they're not completely in synch with the market. It's a lot like Enstar raising the price of natural gas by 22% this month. Even though gas prices have dropped, they're working off last years high costs. Likewise, assessors assemble data from the previous year and use it to adjust your taxes for this year.
Secondly, to my knowledge there are no real estate transfer taxes in Alaska. That means that what you get when you sell or what you pay when you buy real estate is considered no one's business but your own. You'll receive requests from the assessor's office asking what you paid, but you don't have to tell them. This makes the assessor's job tough. If there were a transfer tax, the assessed value could be adjusted to the sales price every time a property changed has. As it is, our deeds say that the property sold for $10 and other good and valuable consideration. Translation: assessors, figure it out for yourselves.
Then there's the matter of not having to let assessors inside your house. Couple that with not needing permits for most places outside municipal rules (large swaths of Fairbanks, for example), and it's pretty tough for assessors to get a good idea of what you've really got. This is why you'll see the occasional tax-obsessed homeowner who refuses to put siding on his $300,000 house. He knows the assessor can't come in to see all his real improvements, and he hopes the weathered plywood or Tyvek exterior will give the illusion of a shack.
Finally, all assessments are done based on data collected the year before, so they're not completely in synch with the market. It's a lot like Enstar raising the price of natural gas by 22% this month. Even though gas prices have dropped, they're working off last years high costs. Likewise, assessors assemble data from the previous year and use it to adjust your taxes for this year.
Wednesday, January 21, 2009
ASSESSING THE WHINE
Hear the whine in the air? Alaskan property owners are receiving their property assessment notices, and some of them aren't happy. One disgruntled owner wrote a letter published in yesterday's Anchorage Daily News, complaining that his property value has gone up $3600 since last year.
Excuse me? You're complaining because your value went up? In this economy? Yes, I know that values have dropped in much of the Lower 48. But values have remained relatively stable in Anchorage. Some, like yours, have even gone up. That's cause for celebration, not complaint. There are folks down south, maybe even in the Valley and Fairbanks, who'd love to be in your shoes.
Yes, you'll have to pay a little more in taxes. Let's assume a mill rate of 20 - that's a whopping $72 more per year you'll contribute to the overall good of your community. And did I mention that the health of your community is vital to the value of your home?
I'm tempted to look you up in the assessment data base and offer you $3600 less than the assessed value for your home. I bet you won't take it.
If you have a legitimate complaint about the assessed value of your home, take it to the assessor's office. Mistakes do happen, and through the appeal process you may get an adjustment. But no whining, please, over a tiny increase in market values.
Excuse me? You're complaining because your value went up? In this economy? Yes, I know that values have dropped in much of the Lower 48. But values have remained relatively stable in Anchorage. Some, like yours, have even gone up. That's cause for celebration, not complaint. There are folks down south, maybe even in the Valley and Fairbanks, who'd love to be in your shoes.
Yes, you'll have to pay a little more in taxes. Let's assume a mill rate of 20 - that's a whopping $72 more per year you'll contribute to the overall good of your community. And did I mention that the health of your community is vital to the value of your home?
I'm tempted to look you up in the assessment data base and offer you $3600 less than the assessed value for your home. I bet you won't take it.
If you have a legitimate complaint about the assessed value of your home, take it to the assessor's office. Mistakes do happen, and through the appeal process you may get an adjustment. But no whining, please, over a tiny increase in market values.
Tuesday, January 20, 2009
YOUR NEIGHBOR MATTERS
Perhaps even more than most Americans, Alaskans pride themselves on independence. So perhaps some could relate to a quote in a recent article on America's financial woes, in which homeowners were complaining they didn't want their tax dollars spent bailing out their neighbors who'd overextended by buying too much house.
Sounds good, but real estate values don't happen in isolation. The time to speak up about bad mortgage practices is while they're happening, not after the fact. Because now if that house next door forecloses, the value of your house drops. Simple supply and demand, accentuated by the effect of run-down homes on values of nearby properties. But Alaska's a long way from those troubled real estate markets in California and Florida and Nevada, so why should we worry - or pay?
A key principle of value has to do with economic factors that extend beyond real estate. Only when our overall economy is strong in terms of employment, availability of credit, and other key indicators will your real estate values also be strong. So don't be short-sighted. Your neighbor does matter. We all do.
Sounds good, but real estate values don't happen in isolation. The time to speak up about bad mortgage practices is while they're happening, not after the fact. Because now if that house next door forecloses, the value of your house drops. Simple supply and demand, accentuated by the effect of run-down homes on values of nearby properties. But Alaska's a long way from those troubled real estate markets in California and Florida and Nevada, so why should we worry - or pay?
A key principle of value has to do with economic factors that extend beyond real estate. Only when our overall economy is strong in terms of employment, availability of credit, and other key indicators will your real estate values also be strong. So don't be short-sighted. Your neighbor does matter. We all do.
Friday, January 16, 2009
MORE ON INSURING YOUR ALASKAN HOME
The tree from the roof has been transformed to a nice pile of logs. Another homeowners tip: watch for carpenter ants. These pesky critters killed said tree, which was toppled from the neighbor's yard. We don't have termites in Alaska, but carpenter ants do their share of damage both to trees and houses. Call an exterminator if they become a problem.
When you're shopping for homeowner's coverage in Alaska, there are a few points to keep in mind. One is that some insurers place unreasonable restrictions from Outside on Alaskan properties. For instance, they may want evidence of fire hydrants in close proximity. That doesn't happen in many Alaskan locations.
Log homes can be another sticking point. Some (but not all) insurers penalize log homes with higher rates, the logic being that if one log burns, the whole wall has to be replaced. Actually, burns rates on log homes tend to be slower than for stick frame, not to mention that it's the rare stick frame fire that leads to only a portion of a wall being replaced.
Lastly, Alaskan homeowners sometimes end up bearing the burden for disasters elsewhere in the country. After Katrina, one company dropped Alaskan homeowner coverage altogether. It's hard to follow the logic - we're not prone in the least to hurricanes. But apparently we're clutching the tail of the insurance food chain, and it's easiest to cut policies or raise rates here.
When you're shopping for homeowner's coverage in Alaska, there are a few points to keep in mind. One is that some insurers place unreasonable restrictions from Outside on Alaskan properties. For instance, they may want evidence of fire hydrants in close proximity. That doesn't happen in many Alaskan locations.
Log homes can be another sticking point. Some (but not all) insurers penalize log homes with higher rates, the logic being that if one log burns, the whole wall has to be replaced. Actually, burns rates on log homes tend to be slower than for stick frame, not to mention that it's the rare stick frame fire that leads to only a portion of a wall being replaced.
Lastly, Alaskan homeowners sometimes end up bearing the burden for disasters elsewhere in the country. After Katrina, one company dropped Alaskan homeowner coverage altogether. It's hard to follow the logic - we're not prone in the least to hurricanes. But apparently we're clutching the tail of the insurance food chain, and it's easiest to cut policies or raise rates here.
Thursday, January 15, 2009
INSURING YOUR ALASKAN HOME
Crash. That's the sound of a tree falling on your house. I know, because I woke up to that sound at 2 a.m. today. After last week's cold snap, Anchorage is now being treated to outrageously warm temps ushered in by 60 to 90 mile per hour winds. It's still dark, so I haven't been able to assess the full extent of the damage to the roof. At least I can't see daylight from my office. Yet.
So this seems a good time to talk about homeowners insurance in Alaska. When making an offer on a home, I recommend including a contingency regarding the potential cost of insuring the home. It might read something like this: "Offer is contingent upon buyer's satisfaction with homeowner's insurance quotes, to be obtained within five days of acceptance." Nothing magic about the five days - it could be ten or fifteen or whatever number is acceptable to both buyer and seller, keeping in mind that sellers don't typically like drawn-out contingencies that leave the deal up in the air. I
f you have an inspection contingency built into the contract (and I hope you do), the insurance contingency could be tied to that. Or it may be that the language of the inspection contingency covers insurance disclosure. There's a chance that Alaska's state regulations allowing for Buyer rescission based on new disclosure information could cover insurance disclosure, but state regs don't explicitly deal with how earnest money is treated in the event of rescission. When there's any chance for differing interpretations, it's best to write the contingency into the offer as long as it's structured in so that the seller doesn't see it as a major obstacle.
Why do buyers need to check insurance rates? Because if there have been three or more recent claims on the house, it may be either uninsurable or very costly to insure. I know - it doesn't seem fair. We understand auto insurance rates going up for drivers who have a bunch of accidents or tickets. But was the demise of my neighbor's tree the fault of my house?
No matter. The insurance companies make the rules. Our job is to know what they are and make sure we're not getting into rates we can't afford.
So this seems a good time to talk about homeowners insurance in Alaska. When making an offer on a home, I recommend including a contingency regarding the potential cost of insuring the home. It might read something like this: "Offer is contingent upon buyer's satisfaction with homeowner's insurance quotes, to be obtained within five days of acceptance." Nothing magic about the five days - it could be ten or fifteen or whatever number is acceptable to both buyer and seller, keeping in mind that sellers don't typically like drawn-out contingencies that leave the deal up in the air. I
f you have an inspection contingency built into the contract (and I hope you do), the insurance contingency could be tied to that. Or it may be that the language of the inspection contingency covers insurance disclosure. There's a chance that Alaska's state regulations allowing for Buyer rescission based on new disclosure information could cover insurance disclosure, but state regs don't explicitly deal with how earnest money is treated in the event of rescission. When there's any chance for differing interpretations, it's best to write the contingency into the offer as long as it's structured in so that the seller doesn't see it as a major obstacle.
Why do buyers need to check insurance rates? Because if there have been three or more recent claims on the house, it may be either uninsurable or very costly to insure. I know - it doesn't seem fair. We understand auto insurance rates going up for drivers who have a bunch of accidents or tickets. But was the demise of my neighbor's tree the fault of my house?
No matter. The insurance companies make the rules. Our job is to know what they are and make sure we're not getting into rates we can't afford.
Wednesday, January 14, 2009
ALASKA'S ECONOMY
I'm not an economist, but when you're thinking of real estate, it's smart to take the overall economy into account. First, foreclosures. Too many, and property values take a hit. Part of it's the increasing supply, part is the run-down factor of these properties, and part is the psychology of the market, the effect of consumers when they drive past a legion of "foreclosed" or "bank-owned" signs.
Though Alaska received nearly $20 million from the US Department of Housing and Urban Development (HUD) to rebuild neighborhoods with lots of foreclosures, there really aren't many of those neighborhoods in Alaska. Our housing market didn't spike like a lot of markets, so it hasn't fallen off as much either. We didn't see a huge amount of house-flipping, so we're not seeing huge numbers of investment properties foreclosing now.
Perhaps most important, those of us in the real estate industry were a bit parochial about lenders. Even during the boom days, we encouraged buyers to use in-state lenders. Alaska Housing Finance add-ons like the first-time homebuyer and energy programs required in-state financing. And there wasn't a whole lot of "creative lending" going on up here. Result: fewer foreclosures now that the national economy has tanked. But of course we have some, and $20 million will go a long ways toward sprucing up some of our neighborhoods.
Though Alaska received nearly $20 million from the US Department of Housing and Urban Development (HUD) to rebuild neighborhoods with lots of foreclosures, there really aren't many of those neighborhoods in Alaska. Our housing market didn't spike like a lot of markets, so it hasn't fallen off as much either. We didn't see a huge amount of house-flipping, so we're not seeing huge numbers of investment properties foreclosing now.
Perhaps most important, those of us in the real estate industry were a bit parochial about lenders. Even during the boom days, we encouraged buyers to use in-state lenders. Alaska Housing Finance add-ons like the first-time homebuyer and energy programs required in-state financing. And there wasn't a whole lot of "creative lending" going on up here. Result: fewer foreclosures now that the national economy has tanked. But of course we have some, and $20 million will go a long ways toward sprucing up some of our neighborhoods.
Tuesday, January 13, 2009
FHA RAISES LOAN LIMITS IN ALASKA
If you're looking to buy a home and don't have 10 or 20 percent down, FHA is a great way to go. A government subsidized program, FHA doesn't lend money. Rather, it insures mortgages offered by private lenders who use FHA guidelines. No, it's not one of those government programs that ranting radio folks say brought down our economy. FHA has been around for a long, long time, and it has always had tough requirements.
One is the buyer's debt to income ratio, which must meet strict criteria to insure that the buyer isn't getting in too deep with mortgage payments. Another is the loan limit, designed so the loans continue to reach the target group of less-advantaged homeowners. Sample loan limits for single family homes in Alaska:
Anchorage: $290,950
Fairbanks: $271,051
Juneau: $349,600
Homes financed under FHA must meet criteria certified by FHA appraisers. Buyers must occupy the home and must bring 3% downpayment to the table. In other words, with an FHA mortgage, the lender typically finances 97%. And FHA allows buyers to use gift money toward the 3%, as long as it's documented and doesn't come from the seller.
For more on FHA loans, contact your lender or visit the FHA website.
One is the buyer's debt to income ratio, which must meet strict criteria to insure that the buyer isn't getting in too deep with mortgage payments. Another is the loan limit, designed so the loans continue to reach the target group of less-advantaged homeowners. Sample loan limits for single family homes in Alaska:
Anchorage: $290,950
Fairbanks: $271,051
Juneau: $349,600
Homes financed under FHA must meet criteria certified by FHA appraisers. Buyers must occupy the home and must bring 3% downpayment to the table. In other words, with an FHA mortgage, the lender typically finances 97%. And FHA allows buyers to use gift money toward the 3%, as long as it's documented and doesn't come from the seller.
For more on FHA loans, contact your lender or visit the FHA website.
Monday, January 12, 2009
LOW ENOUGH?
Gas prices may be going up again, but mortgage rates remain low. How do you decide if they're low enough to refinance?
One rule of thumb is to refinance when the rate is a full percentage lowers than your current rate. Note that refinance rates are often slightly higher than rates quoted for home purchases. So if you hear rates are 4.9%, they might be 5 or even 5.15% for a refinance.
The other consideration is how long you plan to stay in your home. If you think you'll move within the next one to three years, you probably won't save enough in interest to recoup your closing costs. Rolling closing costs into the loan may make it seem "free," but you're financing more to cover them, which means that you'll pocket less cash when you sell.
If you're planning to stay in your home five years or more, give serious thought to a 15-year mortgage if you can possible afford the monthly payments. You'll save tens of thousands (if not hundreds) in interest. With an online amortization calculator, you can run the numbers for yourself.
One rule of thumb is to refinance when the rate is a full percentage lowers than your current rate. Note that refinance rates are often slightly higher than rates quoted for home purchases. So if you hear rates are 4.9%, they might be 5 or even 5.15% for a refinance.
The other consideration is how long you plan to stay in your home. If you think you'll move within the next one to three years, you probably won't save enough in interest to recoup your closing costs. Rolling closing costs into the loan may make it seem "free," but you're financing more to cover them, which means that you'll pocket less cash when you sell.
If you're planning to stay in your home five years or more, give serious thought to a 15-year mortgage if you can possible afford the monthly payments. You'll save tens of thousands (if not hundreds) in interest. With an online amortization calculator, you can run the numbers for yourself.
Friday, January 9, 2009
TOO MUCH OF A GOOD THING
The furnace is fixed and I can once again post without the annoying sound of my chattering teeth in the background, so let's get back to refinancing. This morning's news included reports that the average rate for a thirty-year fixed mortgage has dropped to 4.9%. And word on the street is that we may see rates rise again by the third quarter of this year, if not before. Sounds like time for a refi, right?
Certainly time to explore the option. We've already talked about finding out whether you've got enough equity in your home to qualify for the refi without plunking down a lot of cash. For the past decade or so, people went around thinking a house was something you yanked equity out of whenever you needed some spare cash, sort of like the proverbial money tree. Lots of homeowners feLL into that wrong-headed and short-sighted view. They called it leveraging, which is all well and good till the bottom drops out, the equity dries up, and you have to plunk down a chunk of change or ruin your credit with foreclosure and possibly bankruptcy. And till the combined effect of all those equity draws sends the economy into a tailspin.
You don't hear much about HELOCs, or Home Equity Lines of Credit, these days. Same for cashout refis. And that's a good thing. Because a lot of people in our industry saw a piece of our current financial crisis coming a long ways back. People ratcheted up their spending, buoying up the economy with money extracted from inflated "values" that were bound to come down. There's a lot of talk these days about consumers not spending like they used to. A whole lot of that is wrapped around the fact that we were spending too much before, drawing on equity in our homes that flipped itself around quicker than you can say "mortgage crisis."
So quit blaming the folks who got low-income, government subsidized loans. Most of them had to plunk down their own money to do so. It's the rest of us who are really to blame, living hot-fat off programs that encouraged us to borrow at no cost against values we didn't really have. But no one wants to hear that. It's a lot easier to blame the poor.
All right. Off my soapbox. Next we'll talk about interest rates and timing your refi.
Certainly time to explore the option. We've already talked about finding out whether you've got enough equity in your home to qualify for the refi without plunking down a lot of cash. For the past decade or so, people went around thinking a house was something you yanked equity out of whenever you needed some spare cash, sort of like the proverbial money tree. Lots of homeowners feLL into that wrong-headed and short-sighted view. They called it leveraging, which is all well and good till the bottom drops out, the equity dries up, and you have to plunk down a chunk of change or ruin your credit with foreclosure and possibly bankruptcy. And till the combined effect of all those equity draws sends the economy into a tailspin.
You don't hear much about HELOCs, or Home Equity Lines of Credit, these days. Same for cashout refis. And that's a good thing. Because a lot of people in our industry saw a piece of our current financial crisis coming a long ways back. People ratcheted up their spending, buoying up the economy with money extracted from inflated "values" that were bound to come down. There's a lot of talk these days about consumers not spending like they used to. A whole lot of that is wrapped around the fact that we were spending too much before, drawing on equity in our homes that flipped itself around quicker than you can say "mortgage crisis."
So quit blaming the folks who got low-income, government subsidized loans. Most of them had to plunk down their own money to do so. It's the rest of us who are really to blame, living hot-fat off programs that encouraged us to borrow at no cost against values we didn't really have. But no one wants to hear that. It's a lot easier to blame the poor.
All right. Off my soapbox. Next we'll talk about interest rates and timing your refi.
Thursday, January 8, 2009
IS IT WARM YET?
It's 7 a.m., and I'm sitting next to a roaring fire, my boxer at my feet. She's wearing her dog sweater. I'm wearing my wool hat. The temperature outside is -13. The temperature inside is 50 and holding. So far.
Last night when we came home from curling (we lost, don't ask the score), I could tell before I took off my coat that it was cold inside. Sixty-three, the normal sleeping temperature, but it was early for that. Cold air was blowing through the heating vents. We reset the furnace, it fired, and we went to bed. I woke up thinking I'd gone camping. Forty-nine degrees, and this time the reset didn't work.
Thirty years ago, when I first came to Alaska, we cooked and heated with the same oil stove, fed by fuel from an elevated fifty-five gallon drum. No one told us that fuel oil gelled at -40. It got cold inside. Very cold. At least there were no pipes to freeze, because we had no running water.
Now I'm monitoring the fire and two space heaters, one in the downstairs bathroom and one pointed at the water pipes in the garage, while waiting for a callback from a furnace repair person. We're planning to replace the furnace in the spring, taking advantage of the AHFC rebate. But evidently the old one needs some TLC to limp through till then.
Take-away points:
--have your furnace or boiler cleaned, tuned, and serviced annually
--have a contingency plan if the heat goes out: woodstove or fireplace (keep chimneys clean), space heaters (monitor carefully), close off parts of the house that don't have water pipes
--consider heat tape for pipes in parts of the house prone to freezing
--take heating and freeze-up potential into consideration before purchasing. Look closely at property disclosures for evidence of past problems. Talk with a reputable engineer about freeze-up potential and prevention tips.
Last night when we came home from curling (we lost, don't ask the score), I could tell before I took off my coat that it was cold inside. Sixty-three, the normal sleeping temperature, but it was early for that. Cold air was blowing through the heating vents. We reset the furnace, it fired, and we went to bed. I woke up thinking I'd gone camping. Forty-nine degrees, and this time the reset didn't work.
Thirty years ago, when I first came to Alaska, we cooked and heated with the same oil stove, fed by fuel from an elevated fifty-five gallon drum. No one told us that fuel oil gelled at -40. It got cold inside. Very cold. At least there were no pipes to freeze, because we had no running water.
Now I'm monitoring the fire and two space heaters, one in the downstairs bathroom and one pointed at the water pipes in the garage, while waiting for a callback from a furnace repair person. We're planning to replace the furnace in the spring, taking advantage of the AHFC rebate. But evidently the old one needs some TLC to limp through till then.
Take-away points:
--have your furnace or boiler cleaned, tuned, and serviced annually
--have a contingency plan if the heat goes out: woodstove or fireplace (keep chimneys clean), space heaters (monitor carefully), close off parts of the house that don't have water pipes
--consider heat tape for pipes in parts of the house prone to freezing
--take heating and freeze-up potential into consideration before purchasing. Look closely at property disclosures for evidence of past problems. Talk with a reputable engineer about freeze-up potential and prevention tips.
Wednesday, January 7, 2009
REFI COMPLICATIONS
Yesterday I talked about one aspect of the refi quandary - getting an appraisal. With the financial crisis, lenders have tightened up on the ratio of their investment vs. yours. You may have gotten your original financing at zero down, but on a refi the lender will probably want you to have more equity than zero - ten, maybe twenty percent. A lot will depend on your lender and your credit history.
Back when the market was booming and money was flush, we didn't worry about having enough equity for a refi - it was pretty much a given. And we counted on the same equity to cover the refi closing costs, in a rollover from what's called a "cash out refi." Heck, we often walked away with money in our pockets.
That whole scenario has more or less skidded to a stop for folks who did low or no down payment on a mortgage within the last few years in an average or below-average market where values have dropped 10, 20, or even 30 percent. Unless you have a chunk of change, the refi won't happen.
The first step is to get the facts. Talk to your lender about refi terms. If you're unsure about your home's value and don't want to plunk down the cost of an appraisal, you might find a Realtor to give you a BOV (Broker Opinion of Value). I used to charge $100 for this service, with a refund off my commission if the house were listed with me for sale within a year.
Back when the market was booming and money was flush, we didn't worry about having enough equity for a refi - it was pretty much a given. And we counted on the same equity to cover the refi closing costs, in a rollover from what's called a "cash out refi." Heck, we often walked away with money in our pockets.
That whole scenario has more or less skidded to a stop for folks who did low or no down payment on a mortgage within the last few years in an average or below-average market where values have dropped 10, 20, or even 30 percent. Unless you have a chunk of change, the refi won't happen.
The first step is to get the facts. Talk to your lender about refi terms. If you're unsure about your home's value and don't want to plunk down the cost of an appraisal, you might find a Realtor to give you a BOV (Broker Opinion of Value). I used to charge $100 for this service, with a refund off my commission if the house were listed with me for sale within a year.
Tuesday, January 6, 2009
THINKING OF REFINANCING?
Interest rates are nice and low, and rumor has it they may be headed lower still. So is now the right time to refinance?
That depends a lot on your circumstances, including what you owe on your house, when you last refinanced, your future plans for your house, and your current interest rate. Even back when the market was flush, I had clients who'd refinanced so often that they were upside down in their home, not to mention what they'd dished out in refi closing cots.
One of your first considerations should be what you owe on your current mortgage versus what your house is worth in today's market. In most cases, the bank will require you to purchase an appraisal as part of the refi process. That will set you back $300 to $600, depending on where you live and the type of financing you're using. Different programs require different forms, with appraisals for federally subsidized programs (actually, it's the mortgage insurance or loan guarantee that's subsidized) requiring lengthier forms that take more time for an appraiser to complete.
Is there any advantage to requesting the last appraiser who valued your house when you're getting a refi appraisal? If your most recent appraisal was in the last year or two, you might get a price break. Or you might not. It depends on your market, the individual appraiser, and whether the form is the same or different. And lenders aren't as lenient as they used to be about letting home owners choose appraisers. You may find the appraiser has been selected for you.
In any event, appraisers typically share data from their previous appraisals, so in theory they should all come up with roughly similar values for your house. But appraisal is an art, not a science. If you do have a choice of appraisals, folks in the industry may offer some suggestions as to which appraisers are most conservative or generous.
I prefer middle-of-the-road appraisers, those with reputations for fair and accurate valuation. A generous appraisal might sound nice up front, but no one wants their plans dashed down the road when they discover what they thought their house was worth is actually an inflated value.
That depends a lot on your circumstances, including what you owe on your house, when you last refinanced, your future plans for your house, and your current interest rate. Even back when the market was flush, I had clients who'd refinanced so often that they were upside down in their home, not to mention what they'd dished out in refi closing cots.
One of your first considerations should be what you owe on your current mortgage versus what your house is worth in today's market. In most cases, the bank will require you to purchase an appraisal as part of the refi process. That will set you back $300 to $600, depending on where you live and the type of financing you're using. Different programs require different forms, with appraisals for federally subsidized programs (actually, it's the mortgage insurance or loan guarantee that's subsidized) requiring lengthier forms that take more time for an appraiser to complete.
Is there any advantage to requesting the last appraiser who valued your house when you're getting a refi appraisal? If your most recent appraisal was in the last year or two, you might get a price break. Or you might not. It depends on your market, the individual appraiser, and whether the form is the same or different. And lenders aren't as lenient as they used to be about letting home owners choose appraisers. You may find the appraiser has been selected for you.
In any event, appraisers typically share data from their previous appraisals, so in theory they should all come up with roughly similar values for your house. But appraisal is an art, not a science. If you do have a choice of appraisals, folks in the industry may offer some suggestions as to which appraisers are most conservative or generous.
I prefer middle-of-the-road appraisers, those with reputations for fair and accurate valuation. A generous appraisal might sound nice up front, but no one wants their plans dashed down the road when they discover what they thought their house was worth is actually an inflated value.
Monday, January 5, 2009
FINAL THOUGHTS ON ALASKA'S ENERGY REBATE
It's supposed to warm up by Thursday, so I'd better wrap up my thoughts on staying warm. Alaskans, have you taken down your window screens? If you leave them up, they trap moisture in the cold and can cause rotting. Ditto for stuff piled up in closets. If there's an exterior wall, you could be growing mold and mildew - not good stuff to be breathing when you're trapped inside. Let that air flow!
"Very, very popular" is how AHFC Home Energy Rebate Officer Rosie Ricketts described response to the program. Ricketts ran the program on the last go-round, and she's excited to be back, helping to "create a mind change."
"We need to consider how we use our own personal energy," she adds. My last few posts provide an overview of how the program works. For details, go to www.akrebate.com or call 877-251-3228. Remember, funds are limited, so don't delay.
And speaking of "free" money, you did apply for your Permanent Fund Dividend Check, didn't you?
"Very, very popular" is how AHFC Home Energy Rebate Officer Rosie Ricketts described response to the program. Ricketts ran the program on the last go-round, and she's excited to be back, helping to "create a mind change."
"We need to consider how we use our own personal energy," she adds. My last few posts provide an overview of how the program works. For details, go to www.akrebate.com or call 877-251-3228. Remember, funds are limited, so don't delay.
And speaking of "free" money, you did apply for your Permanent Fund Dividend Check, didn't you?
Friday, January 2, 2009
ALASKA ENERGY REBATES: PART 3
I hope you Alaskan homeowners are planning to check into AHFC's Energy Rebate program if you haven't already. You'll benefit from a nice reduction in energy costs plus free improvements to your home.
Thinking of selling? We're not, but if we were, consider how much more marketable our house would be with a four star plus rating and new garage doors, new exterior doors, a new furnace, and added insulation.
Buyers, consider a clause that makes your offer contingent on your satisfactory review of a full year's utility costs and a boiler/furnace servicing and inspection within the past year. It's cold enough outside - there's no sense breaking the bank to stay warm indoors.
Thinking of selling? We're not, but if we were, consider how much more marketable our house would be with a four star plus rating and new garage doors, new exterior doors, a new furnace, and added insulation.
Buyers, consider a clause that makes your offer contingent on your satisfactory review of a full year's utility costs and a boiler/furnace servicing and inspection within the past year. It's cold enough outside - there's no sense breaking the bank to stay warm indoors.
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