Everyone dreams of an idyllic spot to come home to. Vacation homes fill the needs of many people fortunate enough to have this opportunity. Below are steps I would recommend taking before making a large investment in a second home or condo.
Step One on your agenda is to visit the town or community at least once to make sure it has what you are looking for. Questions to ask yourself are: Is there a reason people come here? Are there restaurants, stores for shopping, recreation and entertainment that appeal to me? Is there adequate health care or a hospital nearby? What are the local taxes and are there any unusual taxes exclusive to the area? Will I be renting this property? If so, who will take care of management? Are there people in the neighborhood with whom I can socialize?
As you can see, there are a lot of things to think about. If you have the answers to the questions above, it’s time to move on to the next step. Search the internet, find a Realtor’s website and search the local MLS to get familiar with pricing in the area. If the pricing is affordable, I would recommend exploring the different neighborhoods and condo communities on your own and determine if these are communities in which you would be interested. Then rent a condo or home comparable to the type of property you see yourself in. Get a feel for the neighbors in a single-family home neighborhood or check out the sound-proofing or amenities in a condominium. This will determine if this property meets your expectations.
Typically, homes in resort areas are not affected by national housing trends. Resort areas have limited inventory and are in high demand. Also, these markets might be seasonal, which could work to your advantage. For example, a Breckenridge home in the mountains typically sells for more money in the summer and winter months and sells for less in the spring and fall. The same might hold true for a home near a lake, golf or ocean community. Some people put their properties on the market in the off-seasons after the peak rental season is over or to get a jump on the upcoming busy season. Sometimes the choices are good and other times you end up with the left-over properties that didn’t sell during high seasonal periods. There are usually 3 reasons properties don’t sell. Lack of good marketing by the broker, pricing is too high or something is wrong with the property. Many times it’s a combination of all three.
Step Two is to interview Realtors. If you don’t know any Realtors or have a recommendation, I would call a few and ask them about the area, complex or neighborhood and see what services with which they can provide you. It’s also important to see what kind of representation a Realtor can give you. Some Realtors can represent you as a buyer’s agent. I recommend this. These agents represent your best interests. You can get comparable sale information, know if any exterior factors will affect the neighborhood, and get better information to make a good decision. Other agents are transaction brokers. These agents just put the deal together and get it closed. They are not obligated to tell you anything about the neighborhood or any other pertinent information about the property. If you call an agent from a sign in the front yard, this broker typically represents the seller. Most Realtors can show you any listing in the community. If you are searching for a home where inventory is scarce, you may want to call a Realtor from the sign in the yard. If you see several of the signs in the neighborhood belonging to one Realtor, there is a good chance this agent knows the area very well and may know of homes coming on the market in the near future. You will want to work with this Realtor, but be sure to view the comparables and be very familiar with pricing so you don’t overpay.
A good Realtor will ask you a lot of questions and will not try and sell you anything over the phone. These questions will determine what is important to you. If you are in the community, you can arrange to meet with him or her in their office for a face to face meeting. Decide if you like this person and if not, search until you find someone you feel good with.
Once you find a Realtor with whom you are comfortable, you can proceed to step three. Step three is viewing properties that are for sale. It’s important to let the Realtor know what your time frame is to buy. If it is six months or more, I would recommend just looking at one or two homes or condos in the area you are interested in. In many instances these properties will be sold by the time you are ready to buy. This step gives you a true feel of the neighborhood. Your Realtor should be able to email you properties in the neighborhood so you have a general idea about pricing and are immediately aware when a property hits the market and if it is suitable for you.
When you have decided to buy, you will have a pretty good idea of the community in which you want to be. Be sure to visit as many homes as you can, and when you find “your spot”, you can ask for the comparable sales for the last six months. Once you have this data, be sure to read the comments about the properties and note the price per square foot. Expect to pay a premium if the view is nice, the property is in a quiet location, and the condition is good. If the property is on a busy street or views a parking lot, it should be priced at around 10% less than the other properties in the area. Also determine if it is a buyers’ market or sellers’ market. A buyers’ market means there is a lot of inventory to choose from and you will typically get a good deal. A sellers’ market means there aren’t a lot of choices available and there are lots of people looking to buy. In sellers’ markets you typically will pay very close to list price, or higher, if there are multiple offers on the property. Once you feel educated on the market, it’s time to make an offer to purchase.
Step four is to review the comps and price per square foot and you will be an educated buyer. After seeing the properties, you will know the homes that are priced right. Be sure to ask your Realtor for a print out of the listing history of the property. Many times Realtors relist homes to make the days on the market appear shorter than the actual time on the market. Other times the property may have been listed with another broker or several brokers. Determining the days on the market is important to know. Sometimes you will find homes with a long listing history, and that may indicate there is motivation on the seller’s part. Other times homes that are new on the market may be the best buy out there. You and your Realtor will determine the market conditions.
I typically advise buyers to offer 10% less than asking price if the home is priced right. In the Breckenridge real estate market I work in, homes sell for around 96% of the list price. Other markets are different. You will get an idea of sold price vs. list price by looking at the comps. Make your offer and ask for a quick response time from the seller. I recommend putting down the least amount of earnest money you can get away with. This amount varies depending on the part of the country you are interested in. If you are buying a house, always ask for a current survey from the seller. If you are buying a condo, ask to see the last two years’ meeting minutes and find out if there are upcoming special assessments. The meeting minutes will give you an idea of what the association has been thinking in the past and their plans for the future of the community. Always make your offer contingent on a satisfactory inspection and on satisfactory financing if you are getting a mortgage. Do not get obligated to a specific mortgage or specific terms on your loan. You want the ability to make a change if a better product becomes available from your lender.
Following the information above, you will be able to get a good deal, a great property, and enjoy your new home for many years to come.
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