Conventional wisdom is that the best time to purchase a vacation rental home on the Outer Banks is in the spring or summer. However there are other factors to consider when making a buying decision. Here are some pros and cons of purchasing in the different seasons.

Spring: Besides getting instant rental income purchasing in the spring also allows you to use it in good weather. Usually the Outer Banks has great weather in May and June. Also, you may be able to reserve it a week or two by purchasing it early in the year. Spring typically has the most new listings hit the market. This means there should be good choices in the spring as well.

Summer: A summer time purchase still provides a new buyer with some rental income. It also allows an owner to use the house during our fantastic fall season. Locals know the best time on the Outer Banks is the fall. You can have a beach to yourself and there are no lines at the restaurants. Vacation rental change over day may be the only day to see these houses so it may take more time to view properties in the summer.

Fall:  This time of year is the best time of year to purchase homes that need work. It provides you with plenty of time to make renovations. Most years contractors get very busy once the rental season is on the horizon. Sellers are a little more negotiable this time of year as well because they know they will not receive rental income for a while.

Winter: This is a good time of year to find a bargain. Sellers are not in beach mode and often want to eliminate beach home expenses when the snow is flying. Rental income begins to arrive in late winter so carrying the property will not be as hard as the fall. One negative of purchasing at this time of year is that the inventory is at its lowest.

There is no perfect time to purchase a beach house for everyone. If you come across the right property, you may want to get it regardless of the time of year because good values don’t stay on the market long. Take some time to discuss the pros and cons of purchasing in each season with Scott Team Realty and formulate a plan that best meets your wants and needs.

Having a good home inspector is especially important on the Outer Banks. North Carolina has published a good brochure with general information about purchasing property here but Outer Banks homes are subject to an environment different than most inland areas.  Since the Outer Banks is surrounded by water, wind driven rain and humidity affect Outer Banks properties much more than other areas. Having a good local home inspector inspect the house prior to your purchase could save you thousands of dollars.  Here are three things to look for in a local home inspector.

Licensed and Insured: North Carolina regulates home inspector activities. To keep their licenses they have to attend regular continuing education classes and must follow state guidelines designed to protect the consumer. Having an errors and omissions insurance policy is also important. These seem like simple requirements but without these you may be out of luck if you find a problem later.

Good Communicator: Most home inspectors are very knowledgeable about their field however some are better than others at verbalizing and putting in writing the issues they see. If you are not familiar with construction practices and terms then having an inspector who can explain how things work and how they are put together is very helpful. How can you determine if they are a good communicator?  Talk with the home inspector and get a sample copy of their report. This will help you make a decision on who you should hire.

OBX Building Experience: Flashing issues are magnified by our wind driven rain and are a common area on Outer Banks houses. Incorrect or deficient flashing around decks, windows and/or doors often results in leaks inside of the house or worse yet it causes wood to rot. Sometimes these issues are not clearly evident and require a trained eye to see. An inspector who has built houses on the Outer Banks or has been involved in the building industry here can pinpoint this type of problem quickly. An inspector who holds a NC contractor’s license also has value especially with older homes. Most insurance companies require a letter of condition on homes older than 20 years. Home inspectors who have a contractor’s license can provide these letters at little expense.

For more information on local home inspections got to our Home Inspection FAQs page. Choosing the right home inspector is an important part of the buying process. Scott Team Realty knows the best home inspectors on the Outer Banks and can help you find an inspector who will best represent your interest in your Outer Banks home purchase.

Over the last 20 years, more often than not tax assessment values of Outer Banks properties are not equal to their market value. If you’ve been following local news lately you probably saw that tax assessment values went down an average of over 20% lately.  In some cases the average was over 40%. That’s a huge change in value from one assessment to another!

Have local property values dropped that much over the last year?  The simple answer is no.  The reason for the large change in tax assessments is that neither Dare County nor Currituck County has re-assessed property since 2005. This was the end of the last up cycle in local real estate. North Carolina state law requires that counties reassess all property within their borders just once every eight years. Both OBX counties waited until the last possible moment.

Another difference in local tax assessments compared to many areas is the tax assessment for all properties within the county is based on market value on one specific day for the whole county. That day does not change until the next assessment is completed. Tax assessments will not change based on a new sale or a current appraisal. The tax assessment value you see today could be close to eight years old.

Unfortunately having so much time between assessments hurts the value of that information. In many areas across the United States buyers rely on the tax assessment value when making an offer. Relying heavily on this information when buying or selling Outer Banks real estate could cost you thousands of dollars.
 
As of this writing, only the 2005 tax assessments are available on the counties’ web sites (and easily obtained by your Realtor). Most of these old assessments will be much higher than market value. Once all appeals are heard the new tax assessments will be available on line.  When determining market value on an Outer Banks property, don’t just rely on the tax value information. Allow your local Realtor to provide you with the information on similar recent sales.  If you use tax values at all, make sure you see how the tax values of the similar sales compare to the property you are considering. 

Getting a loan today usually requires a little more time and effort but that is no different than anywhere else in the country. If you have refinanced or purchased property elsewhere over the last few years then you are familiar with this process.  However, there are a few unique aspects of getting a loan on OBX property. Using a local lender can save you time and effort.

Local lenders are familiar with issues like flood zones and vacation rental property. Just about the entire Outer Banks is in some type of flood zone. When some out of town lenders discover the property you are considering is in a flood zone they make a decision not to lend without fully understanding the minimal risk and/or ways to insure against the risk. Also, some times an out of town lender will also treat a vacation rental home as investment property.  Loans for investment property (like a year round rental home or an apartment building), typically have higher interest rates. Local lenders realize that the vacation rental homeowner has control over the property and therefore is eligible for the more favorable second home loan programs. Using a local lender can help you avoid these and other pitfalls lenders unfamiliar with this area fall into.

It is easy today to find a mortgage calculator on-line to help you determine monthly payments but that is really just part of the financing story.  Local lenders also will also be able to ball-park taxes and insurance.  These expenses are almost always included in today’s mortgage payments. Lenders from out of the area will not be familiar with these costs here. Taxes here are typically lower than most metropolitan areas but insurance is a little more expensive. Being able to ball park these expenses will help you make a much better buying decision down the road. Lastly, they can provide you with a pre-qualification or pre-approval letter. Having a letter from a local lender gives you more credibility with a seller and their listing agent than a letter from an out of town lender.
 
The lending process on the Outer Banks is unique compared to most areas. Using a local lender will likely save you time and effort.

Renting your second home makes affordability much easier. Thousands of dollars each year can be earned to offset the mortgage or other vacation home expenses. Here’s a little information about vacation rentals that will help you when thinking about buying a vacation home on the Outer Banks.
 
When a property is a vacation rental the listing agent has a few additional fields they can complete showing rental income. Many of the national real estate web sites do not carry these minor data entry points that are unique to our market so looking at listings from a local Realtor’s web site can help you get good rental information quicker.

The income number found on local Realtor’s sites could be actual numbers or an estimate from a local property management firm. The listing agent will receive a report from the property management firm that shows the last name of the tenant, their vacation period and what they paid. Usually this report shows when the owner reserved the house as well. Total income is listed at the bottom. Most Realtors upload these reports to the back end of the MLS system so other Realtors help you compare each cottage. Some Realtors also offer a vacation rental spreadsheet to their client to help them compare each cottage.

Vacation Rental management fees vary greatly depending upon the company and rent ability. Some charge as little as 10% of the rental income for a huge ocean front home that generates hundreds of thousands of dollars a year. If the cottage is a modest home away from the ocean then the property management fee might be as high as 25% of the rental income. For these fees the property management firm typically does the following:

-clean and inspect the house after each tenant
-advertise and book the cottage
-provide and collect keys for the tenant
-handle any maintenance issues with the property when the tenant is there
-handle all the money including security deposits, occupancy taxes and rents

There also is likely to be a few fees associated with renting the property that either the tenant or the owner pay. Providing linens is a good example of one of these fees.

When considering a purchase it is a good idea to talk with a property management firm about the property. They can give you a better idea of what the net income will be. Also they can make suggestions to increase rental income.  Choosing a property management firm is not as simple as it seems.  Scott Team Realty can help you compare companies to determine which company will be best for you and your vacation rental home.

Knowing a few key facts may help you decide if you want to include short sales in your Outer Banks real estate search.  Here are the top five facts about Outer Banks Short Sales:

Under contract continue to show: Often they already have at least one contract on them.  The local Multiple Listing Service has listing agents put their under contract short sales in an under contract continue to show status.  Properties with this status are included in the data feeds that go out to all the web sites. Most buyers don’t want to waste their time with a house that already has a contract on it.  So look closely to see if the status of the house is active or under contract continue to show.

“As is” purchase: Most times short sales have not been maintained like a regular home. There is no money for repairs to be made so the buyer purchases the property in an "as-is" condition.  Of course the buyer can have a home inspection once they know the bank accepts their contract.  If they don’t like what they find then the buyer can void the contract. If you are looking for a home with little or no immediate maintenance then short sales may not be for you.

Extended waiting period: It can take a long time to get an answer.  Before the seller’s lender will approve a short sale there is likely to be a long waiting period.  During this time the lender will check to make sure the seller can not bring money to closing, as well as make sure they are not underselling the property.  This can take months.  Buyers looking at short sales around the holidays should hopefully be able to close on the house before the summer season.

Attractive prices: Most lenders will not talk with a seller about a short sale until they have a contract on their house.  Therefore, a common strategy sellers use to speed up the short sale process is to under price their property. Sometimes the seller’s bank will want the buyer to pay more than that asking price.

Rental Income issues:  Buying a vacation rental short sale right before or during the main vacation rental season can be tricky. Often the seller has already spent the funds they have already received from the upcoming rental season. The buyer then may end up owning the property and not be getting the proceeds from those vacation rental tenants that paid before he owned the house.

In just about any market you can find an article about why now is a good time to buy. It’s easy to be cynical when you hear calls to action today after what has occurred in the real estate market over the last five or six years. What makes this particular fall unique compared to just about any of the other times you’ve been told to purchase Outer Banks real estate? Rarely do so many market variables favor buyers. Here’s some information on a few of these variables.

Historically low interest rates:  As of this writing, interest rates are around 3.75% for a second home loan amortized over 30 years.  Interest rates are close to the lowest they’ve ever been since amortized loans became common place in the mid 20th century.  These low rates offer you an incredible savings in interest payments.  For example, a loan of $100,000 for 30 years at 5.5% costs the buyer an additional $100 per month more than the 3.75% loan. Even a modest purchase is much more affordable now. If you require financing then history shows this is as good as it has ever been to make that purchase.

Available properties:  Despite increased sales this year, there is still a decent amount of inventory in most market segments.  For example if you are looking for a single family beach cottage in Duck under $500,000, as of this writing there is still twenty to choose from. With the foreclosure sales trending down and buyer’s interest picking up your choice of homes will likely not be as big this time next year.

Great prices: Market values are the lowest they’ve been in about ten years. For example a house on the golf course in Kitty Hawk sold during the summer of 2005 for $440,000.  That same house sold again this summer for $375,000.  Another example is a house in Duck that sold in the fall of 2004 for just under $695,000 that same house sold again in July of this year for $515,000.  There are many similar examples up and down the Outer Banks of both privately owned and bank owned homes showing these large discounts in sold prices.

Is there ever a perfect time to buy?   That really depends upon your personal financial situation but with the unique combination of market characteristics it may be time for you to take a closer look. Who knows when we will see all these market characteristics favor the buyer again.

Often today a buyer will notice the status of a property has changed to under contract continue to show.  It sounds fairly self explanitory. The seller wants other buyers to view the property and perhaps make an offer.  Just having that information is not enough for most buyers.  I'll explain what I mean by that in a moment below.  Here are the majority of the reasons why a listing staus is "under contract continue to show".

• Is a short sale: Once a buyer and seller agree on a price it could be six months before the seller's lender makes a decision.  During this time period, other offers can also be submitted for the seller's lender to review. This allows for a minimal loan deficiency.
• An abnormal condition of a contract: The contract may be contingent upon something that normally does not occur.  This could be just about anything but usually is something like the sale is contingent upon the buyer selling another piece of property or it could be as odd as contingent upon the buyer getting a job he was promised.
• Anxious sellers:  Some sellers are very concerned about a buyer being unable to fulfill the contract.  It does not matter if their concerns are ligitimate or not. A listing could go in an this status to incite other buyers to write a back up offer.

The OBX MLS system has a field where the listing agent can list the reason why the property is in this status. If a property meets the buyers' criteria and it is in this "under contract continue to show" status most buyers' agents will call the listing agent to get a better feel for the chances of that transaction closing.  If the price is right and there's a decent chance the first contract is going to fall through then it might be a good idea to show the property and write a back up offer. Who knows, you might end up getting the property regardless of this status!

Believe it or not that is becoming a more common issue in today’s market Outer Banks real estate market.  Well priced properties get almost instant interest and often may have more than one buyer making an offer. Recently a local agent listed a house in Nags Head on a Sunday.  By the following Wednesday there were two offers on the property. One potential buyer even took a day off from work and drove down from Richmond to see this particular house. It went under contract in just three days. How do buyers find these deals so quick?  Is it just good timing or do they have some sort of special advantage?

Today’s Outer Banks MLS system is configured to allow an agent to have an email sent directly to you when a property that meets your criteria is either listed or has a price reduction.  There are very few limitations on what is used for your criteria.  For example, an agent can set up the MLS system to email you all residences listed in Kitty Hawk. You can also have the criteria narrowed down to be just single family residences with three bedrooms, two baths, less than ten years old, an ocean view and over 2000 square feet. You are only limited by your imagination and how frequently you want to be notified of real estate activity! Buyers can also use similar tools from Realtor’s web sites or web sites from other third parties. Unfortunately not even the Realtors’ web sites are real time like the MLS system. Most Realtors’ web sites are updated at least once a day.  Some third party web sites are updated just once every two or three days and are limited by these infrequent updates.

Of course this type of notification requires you have an email address and you check that email. Scott Team Realty offers a service for folks without email where they receive the notification and then call you. If you are not quite ready to buy yet, then receiving the notifications is also a good way to become more educated about the market.  To begin receiving these automatic notifications take some time to talk with a local Realtor about your wants, needs and how frequently you want to receive emails. If you are not ready yet to talk, you can also complete our wants and needs page. We will then configure the MLS system to send you new listings and price changes at a level that matches your level of interest.

Without the proper help, it’s easy to make a mistake when purchasing a home on the Outer Banks.  Some mistakes are bigger than others but almost all can cost you money in the long run.  Here are three common mistakes OBX buyers make.

Not getting a market analysis: Prior to buying most buyers look at numerous homes.  During their home search they’ll compare the features of each property and make a judgment call on which one is the best value and/or best suits their needs.  If you are basing your offering price on what is currently on the market you might over pay. How do they know what is realistic for a sales price? Have your Scott Team Realty agent provide you information on similar homes that recently sold. Especially in a buyer’s market, knowing what other buyers recently paid and how that purchase compares to the house you are considering will help you better gauge what a property is worth.

Not fully completing your due diligence: Some buyers try to save money by skipping a home inspection, a pest inspection or a survey.  Some just fail to take the time to look over covenants and restrictions.  Once you close on the property it is too late to go back to the seller if you missed one of these or other important items. During your due diligence period, ask your Scott Team Realty agent to help you find the proper professionals to help you discover problems as well as anything else that might affect your decision to purchase the property.

Not buying for the future: Buyers sometimes purchase a house for a specific current purpose that does not work very well for the long run.  For example, they may purchase a house on a lot that can not be expanded. When their family grows they out grow the house. It is a good idea to look at both the short term and the possibilities in the long run for the property. That may mean checking on municipal ordinances for future expansion or simply deciding if the floor plan or location will suit a different future use. Your Scott Team Realty agent deals with these types of issues on a regular basis and is there to walk you through the buying process.

An OBX home should always be a place of good memories and great times. Allowing a Realtor to help you during the purchase process can make a big difference on your long term happiness with your Outer Banks property.