Trying to buy a property in Summit County? Here’s what to expect.
Since October of 2017, there have been the fewest number of properties for sale in history. The number of properties priced under $700,000 has hovered around 100 for six months. A thousand will be sold this year.
For the past six years, the inventory has declined steadily each year. In the first half of the year, we should have about 1500 properties of all types on the market. The inventory should peak at around 2000 properties in July. This year we have under 550 properties for sale and last July the peak was under 1000. This year it will probably be less than that.
Buyers for the lower half of the market have been waiting for the next property to be listed. Every active Realtor in Summit County has several buyers on automatic notification so that they know instantly when a new property appears. New listings routinely get four or five hundred notifications sent out.
A couple of dozen buyers respond, several travel to see the property in its first few days on the market and often a couple of those make an offer. Sometimes the offer comes from a buyer who has not seen the property but has their broker walk through for an iPhone video.
Usually an accurately priced property is gone in a day or two. Only the most unrealistically priced properties stay on the market longer than that. Even million dollar plus properties will sometimes sell in a few days, but that market segment remains oversupplied.
Buyers who have been through this process and lost out have begun to add an “escalator” clause to their next offer. In short, this tells the seller that the buyer will beat any other verifiable offer by a certain dollar amount, usually with a cap, sometimes not, typically resulting in a sale at more than the asking price.
So what does a buyer have to do to get an offer accepted? The best chance begins with a full price cash offer with the escalator. Every contingency or other out for the buyer lessens the odds of success. Buyers even waive inspections, appraisals and loan conditions.
Buyers who need a mortgage should put as much cash down as possible and have a pre-qualification letter in hand from a lender to go with the offer.
Personal letters to the seller from the buyer explaining why their offer should be accepted are common and sometimes result in the seller taking a lower offer for sentimental reasons.
The point is that buyers need to convince sellers to take their offer over another and it takes planning and strategy to get this done.
This will change when a normal inventory returns and it’s not such a brutal seller’s market. But for now, this is what it takes.
Trying to buy a property in Summit County? Here’s what to expect.
The short-term rental market is changing. Every year brings more regulation, more license fees and taxes and political pressure for fewer short term units and more long-term worker housing.
Three forces are driving these changes:
First, towns and counties can’t raise enough sales and property tax revenue to fund operations so they are turning to other taxes and license fees to bring in revenue. Because tourism is the largest part of our economy, lodging is the logical source for new revenue.
Towns are going as far as to pursue online travel companies for taxes on bookings at their sites and tracking down bandit landlords on social media and Craigslist.
Second, because half of second homes are never rented, many neighbors who don’t rent don’t want short-term renters next door. Short termed properties tend to bring more traffic, parking and noise issues among other things. Many homeowner associations are limiting rentals to several weeks or more.
And third, there is a continuing perception that somehow short-term rentals are stealing housing from locals. Never mind that instead of making owners rich, short-term rentals can only help defray the cost of a second home and a long term tenant rules out occasional owner use. Also, properties that are affordable for locals to buy are generally not good prospects for short-term rental.
In addition, because so many absentee owners rent through VRBO and AirB&B, towns and associations are starting to require a local manager to monitor the property. This and licensing helps governments keep track of who’s renting and helps them collect the lodging taxes.
There will never be enough local housing and tourism will only continue to grow. If your property isn’t subject to these changes yet, it will be sooner or later.
Ask questions about these issues if you are a prospective buyer and if you are an owner, pay attention to the news.
And beware of managers who project astronomical income from renting your property short-term.
Our main short-term rental season is from Thanksgiving to April 15 in the best of years, 150 days or less when rents are the highest for the year.
Summer rentals bring half as much.
If you use a manager, you’ll pay a hefty commission out of your gross income.
If you use your place at all for Christmas, New Year’s, MLK week, Presidents week and all of March you will cut into your best revenue period.
If you are dependant upon rental income to do more than defray some of your costs, you may not be ready for a second home.
from National Assoc. of Realtors Magazine January 2018 | By Bruce Ailion
If you are a second home owner or thinking of becoming one, you may want to talk to a lawyer about setting up a limited liability corporation or other legal entity and operating the second home as an LLC.
In case you are sued by someone using the property after you bought it, you can limit your damages and protect your personal assets against losses.
Suppose a contractor makes negligent repairs to a deck and it collapses while tenants and guests are having a barbecue. The judgment in a case like this could easily exceed the equity you have in the property and even the coverage limits on your insurance policy.
Or let’s say the carbon monoxide detector is faulty and the property has a 20-year-old furnace that develops cracks, releasing gas indoors. Tragically, a family of four staying in the property is killed. The owners could face four wrongful death actions caused by negligence.
These are rare occurrences, to be sure, but they point to the gravity of risks that investment property owners can face. In fact, the scenarios illustrate one of the main differences between real estate and other types of investments like stocks or bonds: real estate can carry risks that exceed the investment in the asset.
Of course, an owner’s first layer of protection is insurance, but owners might fail to recognize that their losses can exceed coverage limits.
Investing in real estate can be a smart decision. The right property can outperform other investment vehicles.
But it makes sense to have sufficient insurance and to consider setting up an LLC or other type of entity to separate your liability from your personal assets.
Frisco Bay is going to be deepened…. Can cruise ships be far behind? The project has no expected start date yet, but is in the planning stages. 75,000 cubic yards of dirt later, Carnival cruise lines will be able to pull right up to Main St. where colorful locals will weave baskets and hats for happy cruisers to take home. Steel drums, anyone?
Having won about half of the medals from the Korean Winter Olympics… residents of Silverthorne have changed the name of the town to Goldthorne. Doesn’t roll off the tongue like Goldenthorne would, but townies didn’t want to be confused with that other Golden down in the Front Range. Silverthorne must have the highest gold medal per capita number in the world right now.
Now if Lindsey Vonn (82 wins) and Mikaela Schiffrin (43 wins) would just move to Silverthorne… every other ski town could just give up. Well, they only live 30 miles away. We could just claim them. You know… East Vail, West Vail, Eagle/Vail, why not Silverthorne/Vail?
And the debate is on… should Colorado host a Winter Olympics? We turned them down once before and there are great arguments both for and against. Some think we should have them just to get I70 fixed properly. Good luck with that. Seems that Nordic events couldn’t be run in Summit County, though. Olympics big-wigs think it’s too high here. Wimps.
It surfaces every Spring so maybe we should change the name of mud season… the innovators at the Town of Breckenridge are considering DNA testing (Really!) to track scofflaws who don’t pick up after their dogs. Fill in your own joke here.
There was a time in my 32 year career when I thought I’d seen it all and could forecast what would happen next in our market.
I am not ashamed to say now that I have no idea what’s gonna happen next.
The best any of us can do in these circumstances is to be ready for anything.
So as Red Green down at the Possum Lodge used to say: “Remember, I’m pullin’ for ya. We’re all in this together.”
Call me any time and until then, keep your stick on the ice.
Chuck Leathers, CRS owner/broker
How to describe this ridiculous market?
On the first day of 2018, there were a total of 510 properties of any type for sale in Summit County. 182 of these were land, 304 were residences. 88 residences were priced under $700,000 and nothing priced less than $225,000 was for sale at all.
There was a six month supply of residences priced over $1 million and 3.5 weeks’ supply under $700,000. Residences priced over $1 million took an average 148 days to sell. Those on the market averaged 234 days since listed.
Residences priced under $1 million took 44 days to sell and those on the market had been offered for 120 days. Clearly the market had slowed by the end of the year.
So the market has been over-supplied with expensive homes and severely under supplied with lower priced ones.
This lack of inventory in the most sought-after segment of the market is largely responsible for the third flat year of sales in 2017.A total of 2250 properties sold in 2017, 6.8% more than the year before and only 3 percent higher than in 2015. There has been a net gain of less than 2 percent over the past three years in the total number of properties sold.
The average sale price jumped by 15 percent, however, to $650,500 – a new record by far for Summit County. The median price was $505,000, a substantial disconnect from the average and atypical for our market where median and average prices are usually very close.
Clearly all prices increased, but the high-end dragged the whole market skyward. The $million plus market now accounts for 14.5 percent of residential sales, up from about ten percent last year. As construction costs continue to increase, and because nearly all new construction is in high-end single family homes, the average price for a single family home is now well over $1.1 million.
While prices have recovered and surpassed the previous historic high in 2009, sales volume has not recovered from the Depression of 2010. It’s running about 33 percent below the all-time high of about 3000 properties sold in both 2005 and 2006.
The number of listings in July, when the inventory peaks every year, has declined for the past five years. The all-time high for listed properties was about 3000 in July of 2010. In 2017 it was 904. At this rate, there will be fewer than 800 properties of all types for sale next July.And chances are good that a third of those listed will still be land. Despite the lack of existing residences for sale, land has not kept pace with the total market. In fact the average price for 182 sales of vacant land fell to $327,300 in 2017, a decline of 4.5 percent.
This is partly because all the easy to build on lots in Summit County are gone. It is also because the homes built on these $300,000 plus lots will need to be worth about four times the lot price, or $1.3 million, when completed and there are many existing homes to choose from in this price range. And million+ range represents only 14 percent of the whole market. So about a year’s supply of land remains on the market year after year.
Market conditions like this have never before existed in the 32 years I’ve been in business. Anyone thinking of selling a residence should grab the prices this market will bring while they can.
Everything changes with time and usually before you think it will. And then it’s usually too late.
This short-term rental issue is getting out of hand…. some HOA’s are restricting rentals to a month or more, the County may soon crack down on VRBOs not paying tax, and towns are getting tougher, too. And now locals are short-terming deed-restricted worker housing and getting busted. No good deed (restriction) goes unpunished, it seems.
Speaking of affordable housing… a new hostel is being built in Silverthorne – out of shipping containers… really… cargo containers. Customers will be refered to as stowaways. You know, just to add that hip millennial edginess. So is this reverse gentrification?
And after checking in to their container… hipster/stowaways can head to Breck to sip a cocktail at the new ice bar at Beaver Run. We’ve come a long way since the hippest thing you could do in Summit County was close the cover on F lift and get stoned before your first run at Copper. No, dope wasn’t legal then.
What will the Summit High Girl’s Rugby team have to do to get noticed?… They won the state championship for the 10th (TENTH) straight year! And they’ve been undefeated just about every damn year to boot! John Elway should hire our rugby coach… if not the whole team. The Broncos could use somebody who knows how to win. Congratulations, ladies.
By January 1 Lake Dillon still had not frozen…. that makes it about two weeks behind average. And as for snow, well, it was scarce. We’ll see if we catch up, but this looks like a long, cold, dry winter shaping up. Now that I’ve predicted, it’ll probably dump for the next 3 months. And kite skiing on the lake could be damp.
With no inventory, I still had my best year ever in this business.
List one, sell it, list another one… repeat 42 times.
But it worked and I passed the 1000th career sale and the $225 million mark by quite a bit. Here’s where experience and longevity paid off.
Had I not been sending this newsletter four times every year for over 30 years, I’d have been out of business.
Thank you for your support for over 3 decades.
Years like this remind me of just how important it is.
Chuck Leathers, CRS owner/broker Chuck Leathers Real Estate Company
OK…so we have a Buyer and a Seller who signed a contract for the sale of a home yesterday and last night the Buyer woke up out of a sound sleep, sat bolt upright and screamed “What am I doing?! That crafty Realtor has my earnest money and is probably making reservations for Cabo San Lucas right now. I’m toast!”
Meanwhile, the Seller is sleeping soundly and dreaming of the new minivan he’s going to buy with the money from selling his house. “I’m set…nothing can go wrong, I’ve got a contract. The Buyer has to buy or I get his earnest money. Should I get the red one with the flames or the blue one with the flying unicorn mural?”
Guys, you’re both wrong. Didn’t your Realtor tell you about THE THREE BIG OUTS? Well, listen up.
Every Colorado Real Estate Commission approved contract has several ways for Buyers to go under contract for a property and still have time to investigate and terminate the sale with no penalty.
BIG OUT #1: The Inspection. By a certain date in every contract, Buyers have the right to have an inspection done (or not) and either terminate the contract or present a list of things they want corrected by the Seller. If that list is not negotiated out in writing by a second date, the contract automatically terminates and the Buyer is gone if she wants to be.
BIG OUT #2: The Title and Homeowner’s Association Documents. All the title and HOA documents for the property must be delivered to the Buyer by a certain date. By a second date, the Buyer may object to the title and/or HOA documents. If the association documents are not acceptable, the Buyer is out of the deal automatically upon notice to the Seller. Let’s say he wants to rent the property out but the association documents forbid rentals. He’s gone if he wants to be.
BIG OUT #3: The Loan. After receiving notice of loan approval from the lender, usually just before closing, the Buyer may still terminate if, in her sole judgment, she doesn’t like the loan.
These are just the BIG OUTS. There’s several little ones, too.
Generally, Buyers are well protected by our Colorado contracts… if they pay attention to dates.
Sellers always take the risk that one of these outs will sink the contract. The best we can do is to cut the exposure time for these contingencies. We try to get the inspection and title objection deadlines out of the way in a couple of weeks or less. The loan deadline will always be the longest exposure, but pre-qualification or pre-approval by a lender can lessen that risk.
To lose any earnest money, the Buyer has to be oblivious to the process, miss all the dates, not make loan application, buy a new pickup truck the week before closing or just not show up to close. It happens, but rarely.
That’s why your crafty Realtor rarely vacations with forfeited earnest money and Sellers shouldn’t get too excited about the minivan before closing.