Thursday, 11 April 2013
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.
Sunday, 17 March 2013
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.
Thursday, 28 February 2013
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.
Thursday, 17 January 2013
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.
Wednesday, 12 December 2012
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.
Monday, 12 November 2012
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.
Friday, 21 September 2012
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!
Friday, 20 July 2012
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.
Thursday, 14 June 2012
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.
Saturday, 26 May 2012
OBX property values have come down over the last few years and there are many great values available today. Even in these great buying times, getting the best value for your money is of utmost importance. Here’s a few ways to help insure your OBX property buying funds go as far as possible.
Get Pre approved: Sellers are most concerned about your ability to purchase the property. If a seller is unsure if you can get a loan to purchase their property, they’ll be less likely to negotiate and/or accept your offer. A pre-approval letter from a local lender should give a seller enough piece of mind to give you their best price.
Offer a significant earnest money deposit: A large earnest money deposit shows that you are serious about buying an Outer Banks property. Sellers know it is much easier to walk away from a small earnest money deposit. What is a significant deposit? Its relative on the purchase price and other factors but three to five percent of the purchase price will likely give the seller a comfortable feeling about your intentions to purchase.
Structure the offer to close quickly: Sellers realize that the longer the closing is delayed the more likely something could happen to kill the deal. Anything could happen from the buyer loosing his job to a fire destroying the property. Also sellers have property expenses they’ll have to pay until the property closes. A quick closing minimizes those additional expenses for a seller. If you are getting a loan, talk with your lender and get an idea how quick they can approve your loan and use that time frame in the offer.
Base your offer on comparable sales: Even in the best buyer's market unrealistic or low ball offers can cause a seller to either reject an offer outright or to not take the offer seriously. Have your Realtor search the MLS for the most recent comparable sales and base your offer on what other buyers have been willing to pay. This market analysis can be very detailed like the one here or just information on the latest few sales. Even if you don’t want to pay the same amount staying fairly close to the great values other buyers have recently received often results in a more favorable response from the seller. Your Realtor should also be able to share some key factors on how the sold comparables features were better or worse than the property you are considering. Sellers are usually well informed about market values and will recognize you are a serious buyer from the offering price.
Tuesday, 08 May 2012
Using just one Realtor will save you time for enjoying the Outer Banks and will likely make a difference in the service you receive. Oftentimes Outer Banks buyers will call a Realtor about a property they have listed and then call another when they see another property they find interesting. When you call different listing agents about their property, more often than not you will be asked many of the same questions by every Realtor you call. Also, most Realtors who have made a career of selling Outer Banks real estate now have CallerID. When you contact them about a property it is likely you will receive additional follow up calls. Even if you don’t take these calls they take up your time.
Contacting just listing agents eliminates your ability to receive representation because they automatically represent the seller. Every property on the Outer Banks has good features and bad features. Of course listing agents have to tell you about all defects with the property but they would be doing their seller a disservice if they told a buyer how some of the property features are less desirable. A smart buyer will want someone who is very familiar with the area to point out all the pros and cons of each property so they can make an educated buying decision. A listing agent who represents the seller can not do this. See our buyer FAQs for more information on this.
Agents who have made a career of selling real estate want your future business and referrals. Therefore they will do all they can to make your buying experience a happy one. Choose one Realtor who you believe you can build a lasting relationship with and allow them to serve you in your property buying experience. We hope you will choose one of our agents to serve you.
Tuesday, 24 April 2012
That’s a great question that most new Outer Banks buyers might not even know to ask. Even though it is counter intuitive, it’s a fact; the average list price to sales price ratio is much higher for bank owned properties. A few reasons for this will be addressed here. Keep in mind that the only person who sets the sales price is the person paying for the property. A seller can price their property at what ever price they want but it will not sell until a buyer sees the value. The closer a property is priced to the buyer’s buying threshold the higher the list price to sales price will be.
Asset managers (those folks who are responsible for selling a bank’s foreclosure property), are usually better at pricing property than private owners. Unlike the typical property owner, the asset manager has no emotion attached to their decision making process. Their main goal is to cut the bank’s losses. Before they make a decision about a marketing price these asset mangers will receive more than one opinion of value on the property. Often times this includes a professional appraisal. They also ask for information about the property’s market segment; are prices going up or are they going down? This helps them logically determine what price will generate buyers. Often times the private owner sees value in features of their property that buyers will not accept. For example, an Outer Banks seller recently thought that dark paneling walls actually added value because they are easy to clean. In reality, dark paneled walls reduce value in the eyes of most buyers today. The bank’s asset manager also requires regular updates on their property activity and their property’s market segment. If a property is not receiving showings and/or offers then they’ll lower the price to entice buyers. On the other hand, if the house is receiving tons of activity they will be less likely to negotiate on the price. Oftentimes these asset managers are more aware of market conditions than private sellers.
Private homeowners are generally not as aggressive with their pricing because they can use the property while it is on the market. If you are seriously looking at properties today, don’t expect to purchase a bank owned property for much lower than their asking price. Over the last few months, sales prices were close to 94% of asking price on bank owned homes. Private sales were selling for less than 92% of asking price. Have your Realtor provide you with a market analysis on the property you would like to purchase prior to making an offer. This will give you a target price prior to beginning negotiations.
Friday, 16 March 2012
Vacation Rental Cottages with a built-in solid rental income make owning here even easier. Properly comparing vacation rental cottages involves more than just looking at rental income. Knowing how to compare the many vacation rental variables can save you time and money.
Fortunately, most listing agents post a few years’ of rental income history in the associated documents section of the local MLS. These sheets are a wealth of information for the potential buyer. From these sheets you can tell how many tenants are repeat guests and which weeks the owner kept for personal and maintenance use. Repeat tenants take better care of properties and usually book early giving the owner a little more peace of mind. From this information you also might find that the owner blocks off weeks that would be easy to rent providing the new buyer with more rental income. Sometimes there are other collected fees listed on these sheets. Some Realtors have vacation rental analysis spreadsheets that can help you compare apples to apples. Scott Team Realty's is in the link in the previous sentence.
Another key item to discover is the costs of the property management company. Property management fees can range from 10% to 25% depending on a myriad of variables including the income of the property and the company. Each company is different so once you narrow down your search to just a couple properties it is a good idea to discover their fees. The most common services the property management companies offer are: handle all the check-ins, advertise the property, collect the rent, pay the occupancy taxes, clean the cottage between tenants and handle all tenant issues. Other services are offered by each company and the costs associated with these services vary. Talking with the property manager of the firm of the cottage(s) you are considering can help tremendously with your decision. Your Realtor may also have some thoughts about the property management firm.
Comparing apples to apples between vacation rental cottages and vacation rental companies is not as easy as it looks. Here is some more information on purchasing a vacation rental home. Ask your Realtor to help you discover all the facts, figures and information about each property so you can make the best buying decision.
Sunday, 05 February 2012
Defining what the bottom of a market is may be different depending upon who you talk to. Looking at numerous sales indicators and their trends can give you a good idea of what is happening in the market. Unfortunately you won’t know for sure where the bottom is until many months later when trends show solid positive signs for a few months in a row. Right now there are numerous trends that have begun to show positive signs. If these trends continue it is likely we are at the bottom right now. Below is information on the positive indicator trends we have begun to see.
Inventory is at its lowest point in many years. As of this writing the total number of listings in the Outer Banks Association of Realtors MLS system was less than 2900. During the winter of 2007 the local MLS system had around 1000 more properties for sale. Decreased numbers of properties for sale is good for sellers because when properties become scarce prices go up. As this trend of fewer listings continues, chances of appreciation will continue to go up.
Demand continues to be up over 2008 and 2009 and steady compared to 2010. The total number of sales for 2011 was slightly less than 2010 but Hurricane Irene had a big impact on buyers this past fall. Sales to remaining close to 2010 (which was the best year for total sales since the boom years), is certainly a positive sign for this market.
The average sold price per square foot for detached single family homes in our local MLS has leveled off. This number shows what buyers are paying on average for each heated square foot of living area in our local MLS. We saw a pretty significant downward trend in this number between the boom times and the middle of 2010. Since then this number has stayed relatively stable and slightly improved compared to the lowest points a few months ago.
The number of sold foreclosure properties sold has gone down in our local MLS over the last few months. Distressed properties have a big impact on market values. They should have less of an impact on the market as their percentage of the entire sold inventory goes down.
So have we seen the bottom yet? One can make a pretty good argument that we are at or near the bottom right now. However, it is likely we won’t know for sure until we have turned the corner. Here's the latest on the Outer Banks real estate market. If you have not looked at Outer Banks real estate recently, it is a good time to take another look.
Monday, 09 January 2012
The residential offer is similar to commercial contracts where buyers pay for a period of time to reserve the property. During this time the buyers should complete all their inspections and determine if they can get a loan.
Since this form is so new, there is no industry standard or required amount for a due diligence fee. However, right now the good news for buyers is that most sellers are accepting next to nothing for taking their property off the market during this due diligence period. Once the market turns to favor sellers expect this to change.
During this due diligence period, if you find something you do not like about the property or you can not obtain a loan to purchase the property then you can void the contract and get your earnest money back. In fact, the contract states in paragraph 8 (g) that the buyer has the right to terminate “for any reason or no reason” during that due diligence time. Great values today are snapped up quickly. If you like what you see from the pictures and your Realtor thinks it meets your criteria, you might consider making an offer sight unseen. Once you are able to see the property if you do not like what you see then you can void the contract.
After this period is over your options to void the contract and get your earnest money back become extremely limited. Therefore it is important to make this period of time long enough to get your loan approval. Ask your lender prior to making the offer how long they will need for you to receive loan approval. That way you are sure not to run out of due diligence time. Next time you meet with your Scott Team Realty agent ask him or her for a draft copy to look over.
Sunday, 13 November 2011
“As-is” can mean numerous things but most commonly it means that the seller will not make any repairs. This type of sale has become much more popular on the Outer Banks over the last few years. Almost all distressed sales are sold this way. Banks rarely want to make repairs to a property and sellers of short sales don’t have the cash to make any repairs.
During the inspection process if the buyer finds a problem they can not live with then they can void the contract and get their earnest money back. Another option is to re-negotiate the sales price to pay for the repair. Just about every home has some minor repairs. Buyers of “as is” properties should negotiate the original sales price accordingly.
Buyers often think there must be something major wrong with the property if a seller offers their property “as-is”. More often than not these buyers are overly cautious. Some sellers don’t want to deal with supervising and paying local contractors. Out of town owners may not want to make a special trip to check on these repairs. Other times a seller may not be knowledgeable about how to fix problems. They don’t want to be saddled with repair issue decisions. Some sellers may just want to avoid negotiating on minor repairs. Some real estate agents make it their policy to only list “as-is” properties.
Keep in mind if you are buying an “as-is” property that you need to negotiate with the understanding that more items than a normal will immediately need to be fixed when you close on the property. Furthermore unlike a normal sale, you have less negotiating power with the seller if there is an item you need fixed because the agreement was “as-is” to begin with. What is the difference in value between an “as-is” sale and a normal sale? That is going to vary from one sale to the next but a buyer should pay less for a home in an “as-is” condition. At a minimum, they will have to pay for those minor repairs that the seller takes care of in a normal sale. They also are risking the money they spend on inspections with a much smaller chance that the seller will pay for any repair items. The older, less maintained property has more risk to the buyer than a newer, well maintained home. Buying an “as-is” home has its trade-offs. If you are capable of home repairs you may be able to purchase a home at a below market price. Where there is greater risk, there should also be a greater reward.
Thursday, 22 September 2011
Buying in the fall allows you time to update the property. Many of today’s best values are distressed sales and need some updating to be ready for the upcoming rental season. Purchasing in the fall gives you plenty of time to make those improvements as well as personalize the property. Often a cottage already has reservations in the spring that have to be honored. This leaves a new buyer no time to make updates before the season starts. Sometimes just a few of these updates will dramatically improve the rental income in the first year. Having the time to make these key improvements can make the difference between a successful season and a poor rental year.
Rental income is really not that far away. State law allows the property management firm to begin disbursing rental proceeds at the beginning of the calendar year. Fifty percent of these proceeds can be given to the owner prior to the tenant arriving and the remaining rental proceeds are disbursed after the tenant leaves. With the trend of summer weeks booking earlier and earlier, you are likely to receive a sizable amount of money as early as February. Couple this with the fact that a mortgage payment is usually not due until the second month you own the property; carrying the property through the winter should not be that difficult.
Purchasing in this calendar year may also have tax benefits. Most closing costs are tax deductible and you can take those deductions when you file this year’s taxes. If you wait until the spring to buy these tax deductions do not kick in for almost another year. Your tax advisor can explain how a closing this year could benefit you.
Sellers may also be a little more negotiable. Often sellers plan to have one last summer in their property before selling. They’ve had their fun in the sun and do not plan to use the cottage anymore. In their selling decisions, these folks may take into account the cost of holding the property through the winter and negotiate more than they would in the spring when they already have thousands of dollars in summer rental income on the horizon.
If you are thinking about purchasing in the next year or so, then you should seriously think about purchasing a home this fall. Not only does it make sense financially but you’ll also get a chance to use it before the summer rentals arrive.
Thursday, 18 August 2011
Claims of a vacation rental cottage paying for itself have been fairly common on the Outer Banks. Of course if you have a large enough down payment, then any vacation rental will have a positive cash flow. A few years ago during the boom, it was almost non-existent for a house to break even with a typical 20% down payment. The majority of vacation rentals for sale today still don’t but the chances of the cottage paying for itself are much better today.
Sales prices have dropped in just about every Outer Banks market segment by 20% or more and people are still coming here to vacation. Despite the high gas prices, this has been a banner year for vacation rental cottage owners Perhaps one reason for this increase in cottage rentals is that the supply of available cottages is not growing as fast as it used to. New cottage construction is just a fraction of what it used to be and many folks are converting their vacation rentals to just second homes. Another factor that has caused the gap between expenses and income to become smaller is low interest rates. As of this writing, rates well below 5% are available for buyers with good credit. Even if the cottage is not breaking even it is much easier to own a property today than it was even just a couple years ago.
When determining the cost of ownership, be sure to look at actual income and expenses when searching for an OBX vacation rental property. When actual numbers are not available then talk with the person who completed the rental projection. They should be able to logically explain how they arrived at that number. Actual expenses are usually available from sellers. Don’t forget about the maintenance expenses and a maintenance reserve. Most Realtors have a simple vacation rental analysis they can share with you. These spreadsheets have a space for all income and expenses to keep you from missing a key item. You may also want to include your annual current OBX vacation expenses in the equation. Not having these expenses will improve the bottom line. At the end of the day owning a vacation rental today will likely still cost you money, but having that place to call your own where you can make memories with family and friends is priceless.
Wednesday, 25 May 2011
In the summer, Outer Banks Realtors receive an inordinate amount of inquires on the inexpensive ocean front homes. Why not learn more when an ocean front is priced under $300,000 and a similar house four or five lots off the ocean is about the same price? Often the reason for the low price is that many of these ocean front properties are endangered by erosion. In the summer when the weather is beautiful and the ocean is calm it’s hard to believe any structure is threatened.
Erosion is a part of ocean front ownership in some areas of the beach including Kitty Hawk, Nags Head and Rodanthe. But this factor should not keep you from eliminating ocean front property from your search all together. Like buying any investment or property it is best to learn all the facts, calculate the risks and then make the best decision for your specific situation.
So how can you tell if the house you are considering is threatened? Probably the easiest way is to go take a look at how close the ocean is to the property. Is there a dune on the ocean side of the house? Is there vegetation on the eastern side of the house? If the answer is no to either one of these then it is likely the house is threatened by the ocean.
To get a better feel for the level of threat to a property, your Realtor can provide you with the state erosion rate map for that area of the beach. Here's one for Kitty Hawk. Erosion rates vary greatly on the Outer Banks depending upon the area. Just because there is hardly any space between the house and the beach does not always mean the property is going to be gone in the next few years. North Carolina and the Federal Government have been studying erosion and its causes for years here. Viewing their information can be the difference between a good decision and a bad decision.
One last variable that is new to this erosion talk is the beach nourishment occurring in Nags Head this year. No one knows for sure how the new beach will fare when it is up against a raging nor’easter in the coming years. But one thing is certain; many of the endangered ocean front properties in that area will have a better chance of surviving with this new beach. If this project is successful then the endangered properties in Nags Head will greatly increase in value.
Saturday, 09 April 2011
Lower property values have caused many sellers to become upside down on their Outer Banks residence. Top that off with a weak economy and many owners are having trouble making their mortgage payments and want to get out from under their property. Short sales are a large part of the market today. 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:
Often they already have a contract on them. The local Multiple Listing Service has listing agents put their under contract short sales in an “under contact continue to show” status. Properties with this status are included in the data feeds that go out to all the web sites. This status can be a little misleading because a new buyer has to wait for the first offeror.
They are sold with no repairs being made. 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.
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 as little time as a month or as long as a year.
Many are attractively priced. Not every buyer wants to deal with the head aches of buying a short sale. Also, 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.
Don’t count on the rental income. Buying a vacation rental short sale right before or during the main vacation rental season can be a foolish thing to do. 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.
Purchasing a short sale can be a tricky process. This is especially true in a resort real estate market. Contact an agent at Scott Team Realty to help you successfully negotiate through the pitfalls of purchasing vacation rental property.
Thinking of buying or selling? You need this!
Scott Team Realty, Inc.