Real Estate 406 by Independent Publishing

The heart of the home Kitchens have gone from afterthought to focal point The kitchen is not what it once was. What began as a small, hidden-away room for food preparation–away from the dining room–has evolved into a spot for food storage and eating, for meeting, for entertaining, for interacting with parents, grandparents and children, and it’s also become a center for technology and media. In a survey by the American Institute of Architecture (AIA), kitchens and bathrooms remained the key areas of the home, where households focus much of their attention in terms of ensuring that 2 Real Estate 406, September 2015

these spaces reflect their lifestyle needs. And kitchens in particular are seeing added features as households use this space as the operations center within their homes. Sustainability objectives–like energy efficiency, water conservation, healthy home concerns–are seen in consumer product choices in kitchens and baths. Likewise, accessibility considerations are often reflected in the planning for these areas of the home. These are among the major findings from the AIA’s Home Design Trends Survey, which focused

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on kitchen and bath design trends. As the housing upturn continues to unfold, kitchen and bath features often are a priority in the design of new homes and the redesign of existing homes. The increasing size of kitchens during this housing recovery, in part, reflects the expansion of key kitchen features. Residential architects report the growing emphasis on pantry space for storage and even on butler’s pantries for meal staging. A growing share of respondents report the increasing popularity of double islands in kitchens, while others note the resurgence of wine refrigeration and wine storage facilities. And the kitchen continues its progression from its status in the middle of the last century, where kitchens were often attached to the back of the house, and were solely functional, just for preparing meals. From the 1950s to the 1970s, 4 Real Estate 406, September 2015

kitchens moved into the center of the home. By the 1980s, they might be adjacent to living space and have a pass-through or small window. Today, kitchens are often completely open and accessible to the entire home. “The kitchen has become what we call the ‘activator,’ the main space in the residence, and the design requirements often include high functionality to accommodate multiple activities,” said James Walbridge, AIA, chair of the AIA’s Custom Residential Architects Network (CRAN). “The aesthetics of the kitchen have also changed as the composition and material selections have elevated the space to become an essential focal point of the total design.” So, today, much of the focus on kitchens has little to do with cooking and more to do with the role as the heart of the home in the traditional sense: for family gathering, for enter-

taining, for daily activities. In fact, there was significant growth in the share of respondents to the AIA survey who said that one of the features increasing the most in popularity in kitchens was a computer work and recharging area for portable electronic devices, so children can work on homework while parents prepare food. Residential architects are also reporting that kitchen designs are intended to promote accessibility and adaptability. With households changing homes less frequently in recent years, homeowners may see themselves staying in their current home longer, and therefore are more concerned that their home will meet their evolving needs when it comes to safety and accessibility as they age. Some kitchen products that are growing in popularity—such as under-counter appliances and upper-end appliances—reflect the general upscaling of kitchens with

the stronger housing market. However, two of the strongest emerging trends fall into the sustainability category: energy efficiency and healthy home design.

creasing in popularity with almost 9 out of 10 respondents indicating that to be important. Induction cooking appliances, which are more energy efficient and generally

LED lighting, which among other considerations uses energy more efficiently, is seen by residential architects as dramatically in-

felt to be safer for occupants, also rated high on the net popularity scale in the first time it has been covered by the AIA survey.

Healthy-home concerns also were reflected in the popularity of kitchen products: Drinking-water filtration systems saw gains in popularity with this survey, while sensor faucets–which promote water conservation as well as heathy-home goals–also were seen as growing in popularity. “Another important trend we see appearing more, not only in kitchens but the entire project,” Walbridge said, “is specifying healthier construction components such as paint, caulking, glues, grout and other potentially high-VOC (volatile organic compounds) products, that may contain harmful ingredients and off-gas noxious fumes or vapors over time as they are curing.” B Provided by the Missoula Organization of Realtors®, a trade association dedicated to providing valuable programs, products and services to members, to affiliate members and the community.

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Good to be green Demand for eco-friendly homes continues to grow Sustainability is hot. Or cool. Or both. However it’s described, sustainable, energy-efficient “green” features are more popular than ever. Nationally, firms building new single-family homes report that more than 15 percent of their projects are green. By 2018, that percentage is expected to increase to 84 percent. Missoulians looking to buy, build or remodel a home have resources. Real estate professionals may have Green designation through the National Association of Realtors®, or a property home may be certified Green by the U.S. Green Building Council. Missoula’s D.J. Smith completed the continuing education and earned the Green designation through the National Association of Realtors. The training focused on the science of green building and how real estate and sustainability work together. “Interest in green homes affects real estate in so many ways,” 6 Real Estate 406, September 2014

Smith says. “It’s not a matter of ‘if,’ it’s a matter of ‘when.’” According to the U.S. Green Building Council, “Generally, green homes are healthier,

more comfortable, more durable, and more energy-efficient and have a much smaller environmental footprint than conventional homes.” Smith says when Missoulians are shopping

for a new home or considering remodeling an existing one, they should remember that houses can be somewhat Green–light Green?–even if they don’t meet all the criteria put forth for certification. And every little step matters. There may be less obvious criteria to consider when shopping, building or remodeling Green. “Look at the whole house,” he urges, “insulation, foundation, windows, shingles, appliances, recycled or natural materials, efficient heating and cooling.” Indeed, heating and cooling, or the “envelope” of the home, should be the first consideration. “The biggest one would be efficient heating and cooling,” Smith states. “That’s the number one cost of any homeowner. Is the ductwork tight? Does the furnace efficiently produce heat?” Then there are less tangible things to consider. Smith recommends thinking about how far materials had to be shipped–in an exhaust-producing vehicle–to the property, or to find out

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how much waste was produced during construction. “Walkability,” or the ability to not use motorized transportation to get to work, shopping, restaurants, etc., is also an important feature. “You can save hundreds, if not thousands, of dollars per year thanks to the walkability,” Smith notes. “You can walk to work or the store or the coffee shop.” And consumers acknowledge the long-term investment and savings associated with greener homes. In Association of Realtors survey, homebuyers who ranked energy efficiency as “very important” purchased homes that had a median price $12,400 higher than those who ranked it “somewhat important.” Despite that initial cost, however, green features are a good investment. “Green homes sustain value in ways conventional homes do not,” Smith says. Typically they are closer to public transportation, or next to open spaces like parks, or closer to infrastructure. B Provided by the Missoula Organization of Realtors®, a trade association dedicated to providing valuable programs, products and services to members, to affiliate members and the community.

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Busting the going-green myths Myth: Green Homes are Expensive Fact: Eco-friendly homes come in different types, sizes, and price tags, from a green-minded prefab that can cost less than $150,000 to an ecourban condo for $690,000 or more. The big difference is in resale value: Eco-friendly homes fetch higher prices compared with conventionally built homes. Myth: Green Homes Look Goofy Fact: Not all green homes look like grassroofed hobbit holes or extra-crunchy Earthships. That’s old-school. Eco-friendly abodes being built today can look just like traditional houses – except they may have solar panels or small wind turbines. Myth: Green Homes Need Exotic New Building Materials Fact: No. Indeed, new building materials have a negative impact on the planet because they produce greenhouse gases during both manufacturing and shipping. That’s why locally salvaged flooring is considered greener than the bamboo stuff that’s harvested from a sustainable source thousands of miles away. Myth: Green Homes Need New EnergyEfficient Appliances

Fact: It’s not very green to trash appliances in good working condition, even if they’re not rated for energy efficiency, according to the EPA. With proper maintenance major appliances, such as refrigerators and washing machines, can be useful for 10 to 18 years.

Myth: Green Homes Require Newfangled Technologies Fact: Green homes aren’t about gizmos and gadgets. They’re about better construction methods that boost energy efficiency and promote healthy indoor environments. With that said, developing eco-friendly home habits like unplugging vampire devices–devices that draw current

even when the power switch is turned off–or mastering how to program a digital thermostat can help to shrink any home’s carbon footprint. Myth: Green Homes Use Only Non-Toxic Materials Fact: Not always. Spray polyurethane foam is a petroleum-based product that’s a controversial green building favorite. Although it’s considered an energy-saving rock star because it creates a tight seal and has a high R-value (insulation), the off-gassing it creates during and shortly after installation can cause serious respiratory issues. The EPA still supports its use, but the Passive House Institute U.S. won’t certify homes insulated with the material because it contributes to global warming. Myth: Existing Homes Can’t Be Green Fact: False. Retrofitting an existing home is much greener than building a new one, according to a study by the National Trust for Historic Preservation. New green homes take 10 to 80 years to overcome the negative environmental effects of the construction process. Since remodeling older homes requires fewer building materials, retrofitting can leave a much smaller carbon footprint. B

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Taking DIY too far Risks outweigh rewards when it comes to selling your home It’s a fairly common thought. “I’ll sell my house on my own. I know it best and I’m the best salesperson for it.” Others think, “How hard can it be? I’ll put up a sign and put my house online and the buyers will start rolling in.” Some sellers try For Sale by Owner (FSBO) because they think if the market is hot enough, the home will sell easily. Others try FSBO because they want to maximize their profits and avoid paying a commission to a Realtor®. But the number of “unrepresented transactions” has tumbled over the last 20 years, from about 19 percent in the early 1990s to about 9 percent in 2014. “Some consumers just don’t realize the complexity of the transaction,” said Missoula Organization of Realtors president Mike Nugent. “People may not realize all the steps the agent helps with, or takes care of, for the seller.” Here’s a look at some of the challenges of selling a home “by owner,” and some of the benefits of enlisting the help of a real estate professional.

Pricing One of the most important roles a real estate agent plays is helping a seller determine an ac10 Real Estate 406, September 2015

curate price. Realtors have access to market data that can help a seller appropriately price a home. Studies show that homes priced right when they’re first listed sell more quickly and for a higher price than those that linger on the market. “We provide a realistic view of the market,” Nugent said, “to help facilitate the negotiation process. It takes the emotion out of it and we can let buyers and sellers know if maybe they’re not being reasonable.”

Negotiation and Regulation A FSBO seller relies on his own skill to finalize a contract. In some cases, sellers have to interact and negotiate with a variety of professionals, including attorneys, appraisers, inspectors, title companies, local government agencies, bankers and the seller and the seller’s agent. A professional is better equipped to help a seller clarify settlement or closing dates, or even a time to rent the property back from the new buyer temporarily. “An agent can verify that the buyer’s proposed use of the land is going to work with the local regulations,” Nugent said, “or they can ver-

ify that the type of house works with the different requirements of different loan programs.” Real estate professionals can also make sure prospective buyers are truly legitimate prospects, and not just “window shoppers,” wasting a seller’s time even though they can’t afford the home. At the same time, there are more industry regulations and requirements and disclosures than ever. An inexperienced seller could be left open to potential legal problems, while a Realtor can make sure the contract complies with local, state and federal regulations and protects both buyer and seller. “Doing something on your own doesn’t exempt you from following state laws about disclosure and notification,” Nugent said. “The contracts we use are vetted and recognized across the state and they include the relevant disclosures. “It lends a consistency. It’s not like you’re taking a fill-in-the-blank contract off a random website.”

Presentation and Time Management A Realtor can show a seller’s home when the seller is unavailable. Perhaps even more impor-

tantly, the agent can be a stand-in for the seller, and get valuable feedback from visitors, answer questions and respond to inquiries from other agents and buyers. And, historically, potential buyers prefer to look at a home and are more comfortable without the seller present, so they can see themselves – not the seller – in the home. “Most buyers are uncomfortable when the seller is there, at the house,” Nugent said. “They can’t get that unbiased opportunity to look at the house for themselves.” A Realtor may also be able to look at a home and offer objective feedback and suggestions for improvements, staging or minor repairs so it appeals to more buyers.

Innovation Technology has revolutionized the ways people buy, sell and shop for homes. More than 80 percent of buyers search online for available homes and more than 40 percent of buyers find the home they ultimately purchase via the internet. And while there are certainly lots of real estate search sites out there, they do not rival the MultiList Service (MLS). Through the MLS, brokers share information on properties they have listed and invite other brokers to cooperate, in exchange for potential compensation. Sellers benefit by increased exposure for their properties and buyers benefit because they can access information about any MLSlisted property while working with one broker. Buyers can also take advantage of all the data included in the MLS–school information, tax information, property history,

covenants, views, interior/exterior features, etc.–as they search. “The MLS gets the same, consistent information to all those other websites,” Nugent said, “without the seller having to worry about updating it or taking it down or monitoring it.” And a Realtor can also help a seller craft a strategy for internet promotion and marketing of a home, and most agents have the support of a brokerage to market the property to an even wider audience.

The Bottom Line Many FSBO sellers, of course, believe selling without an agent is good business for them and their bottom line. And while every so often, the stars align and all those predictions come true, most of the time, FSBO is not the way to go. Statistics from the 2013 National Association of Realtors’ Profile of Home Buyers and Sellers show that the average price of a home represented by an agent was more than $40,000 over the average price of a FSBO home. “We’ve all heard stories of FBSOs that worked out,” Nugent said, “but for every story of a good deal, there’s another story of a seller getting a terrible deal. “Every seller wants to get as much as they can for their house,” he said, “but if they’re not represented, they could be missing a lot of opportunities.”B Provided by the Missoula Organization of Realtors®, a trade association dedicated to providing valuable programs, products and services to members, to affiliate members and the community.

Real Estate 406, September 2014 11

A place to call home Deciding to buy is just the first of many steps to home ownership Where to begin? Embarking on buying a home–especially the first time–can be intimidating, but it doesn’t have to be. Doing a little homework ahead of time means buyers are more content once they’re in their new homes. Most potential homebuyers are a smidge daunted by the fact that they’re about to agree to a hefty mortgage that they’ll be paying for the next few decades. The best way to relieve that anxiety is for buyers to be confident they are purchasing the best home, at an affordable price, with the most favorable financing. Here are seven steps to help make smart decisions.

Start saving Every shopper should ask themselves: Have I saved enough money to qualify for a mortgage and cover a down payment? Some buyers set aside as much as 20 percent of the purchase price for a down payment, although some lenders allow as little as 5 percent down and government-backed loans–a great way to get into a first home–require as little as 3.5 percent. A small down payment preserves savings for emergencies, but at the same 12 Real Estate 406, September 2015

Decide how much you can afford Generally, a buyer can afford a home priced two to three times gross income. Shoppers need to remember to consider costs every homeowner must cover: property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to each family, like daycare or preschools.

Create your home wish list

time, the lower the down payment, the higher the loan amount needed and, in turn, the higher the monthly payment. Down-payment size can also influence interest rates and the type of loan a prospective buyer can get. Finally a prospective buyer may be required to purchase private mortgage insurance. Depending on the size of the loan, PMI can add hundreds to each monthly payment. Shoppers should also check with state and local government for mortgage and down-payment assistance programs for first-time buyers.

Shoppers need to be honest about which features are “must haves” and which they’d just like to have. For example, handicap accessibility for an aging parent or special needs child is a musthave, while granite countertops and stainless steel appliances are in the bonus category. Prospective buyers should come up with a top five must-haves and top five wants to help focus the search and make a logical–rather than emotional–choice when home shopping.

Select where you want to live Prospective buyers should similarly make a list of their top five location priorities, and keep

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in mind things like commute time, schools, and proximity to recreational facilities. A Realtor® can help narrow down three to four target neighborhoods based on priorities.

Ask about the costs before you sign

GO GRIZ !

A down payment is just one cost related to buying a home. A Realtor can explain what other costs buyers commonly pay – including home inspections, attorneys’ fees, and transfer fees of up to 7 percent of the home price. Shoppers should also tally up the extras they’ll also want to buy after moving in, like window coverings or patio furniture.

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A credit report details your borrowing history, including any late payments and bad debts, and typically includes a credit score. Lenders lean heavily on credit reports and credit scores in determining whether, how much, and at what interest rate to lend for a home. The minimum credit score needed to qualify for a loan depends on many factors, including the size of the down payment. Shoppers should talk to a Realtor or lender about each particular circumstance. Consumers are entitled to one free copy of a credit report each year, from each of the three major credit bureaus: Equifax, Experian, and TransUnion. Consumers should order and then pore over them to ensure the information is accurate, and try to correct any errors before starting the home-buying process.

Get prequalified Prequalification can be a great step, especially for first-time buyers. With prequalification, shoppers meet with a lender to get a prequalification letter that says how much house they’re qualified to buy. And lenders will want each prospective buyer to have their paperwork in order. Most want to see W-2 forms verifying employment and income, copies of pay stubs, and two to four months of banking statements. Selfemployed people will need a current profit and loss statement, a current balance sheet, and income tax returns for the previous two years. Every consumer should consider financing options. The longer the loan, the smaller the monthly payment. Fixed-rate mortgages offer payment certainty; an adjustable-rate mortgage (ARM) offers a lower monthly payment. However, an adjustable-rate mortgage may adjust dramatically. Prospective buyers should be sure to calculate affordability at both the lowest and highest possible ARM rate. Once all the preparation is done, the shopping for a home–and purchasing and closing–will be that much easier and more enjoyable. Shoppers can be assured they’re looking at properties that are right for them and their finances. All that’s left is closing the deal, moving in and getting to know the neighbors.B Provided by the Missoula Organization of Realtors®, a trade association dedicated to providing valuable programs, products and services to members, to affiliate members and the community.

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