I haven't checked all the MLS areas yet, but I did look at the statistics in a couple of them last week, and there are some very telling signs about the waterfront marketplace. In looking at all the residential lake properties (homes and cabins) that went on the market from January 1st, 2010 until last week (15 months), I found that only 15% of them had sold or were pending in one of the MLS Areas, and 17% in the other. That doesn't leave a real likelihood that your lake place is going to sell during the term of your listing contract, so it is probably time to face reality on this issue.
So here is the reality...
For Sellers
There aren't enough buyers in the marketplace for you to put your lake home or cabin on the market hoping that someone might come along at a price you hope to get out of it...IF that price is more than 10% higher than what you would pay for it yourself. Be honest! Now is NOT the time to test the waters, so you are better off just waiting a year of two if you really don't need -- or want -- to get moved on. By not putting your place on the market, you will help the entire marketplace by keeping inventory lower, and you won't get so frustrated with your agent in the process because they aren't getting you all the activity you expected.
Just sit back and enjoy the lake for the time being, and hope for things to get better sometime soon. That may not happen, but unless you have a spectacular property that is incredibly unique and appealing (again, be honest) you are only going to hurt yourself by having it on the market at a price that is much over the actual value. And here are a few of the things that could happen:
- You won't get a lot of showings...and maybe not any.
- You will become frustrated with very few showings, and the negative feedback on pricing from those who do come to look at it.
- You will get more hopeful on each showing you have, and start telling yourself that you will "take anything to get rid of this place!"
- You will find yourself dropping your price again and again as you become more motivated, which may appear as a sign of desperation to potential buyers. And if you don't drop your price, you still won't get anyone to look at your property. You will likely find yourself lowering your price to a level below what your agent originally suggested, and then having to look for offers even below that.
- If you do find a buyer to put an offer in, it will most likely be quite a bit lower than you think appropriate. And the entire negotiation will be based on hard feelings and mistrust as you try to come to an agreement, unless you just decide to accept their offer -- or something close to it -- and get moved on.
- Finally, we have the appraisal and underwriting issue. Remember that if you do come to an agreement on a sale price that is hard to justify based on current market conditions, it still may not get to closing. This is a very challenging time to find support for prices that even appear inflated -- especially on lake properties where there are few comparables.
For Buyers
As a buyer in this market, you are certainly in the driver's seat. There are more good lake properties out there -- those with great sand beaches and superb lots -- than I have ever seen. In the past, those cabins were usually scooped up by neighbors, friends, or relatives...but not anymore. Money is tougher to come by now, and with all the inventory on these lakes, those closely held transactions are much more rare. So remember that many of these sellers are either upside down on mortgages or have lost a lot of equity that they believed they had several years ago. If you approach this as someone who is trying to take them to the cleaners, you probably won't get very far.
Here are my suggestions on finding a very good deal on a lake home or cabin, and having the seller want to work with you to get it done:
- Look at a lot of lake properties...not just on the Internet, but in person. If you are working with a good waterfront agent, they will want you to do that so that you can educate yourself on values. I normally don't let anyone look at less than a dozen lake properties, and I prefer to show them twice that many. You will see that a few stand out from the rest of the group. But if you only saw a few, it would be hard to recognize those that were a cut above the rest. Of course, if you are in a much more defined geographic area and price range, there may not be as many available to view.
- Have your ducks in order. If you are going to spend $4 per gallon for gas and a day or two to drive around much of the state to view these, then spend an hour talking to a lender to make sure what you can qualify for. I can't tell you how many times I've been out with a buyer who finds just the right property to fit their needs, but then has to figure out how they can make it work. Most lakeshore buyers usually can make it work out and know about how much they can afford, but just take care of this step upfront to put yourself in a stronger purchasing situation.
- Don't think all properties are overpriced! The reason I like my buyers to look at a lot of properties is that they will end up getting a sense of what the true values are. As you wander through all the junk out there, looking at ideas to add rooms or do major updating, you will find that most of the time it will cost you a whole lot more money to do those improvements than to find a structure in very good condition already. And lots are even more important. A level, sandy lot on a good lake is generally worth about twice as much as a comparable lot with mucky shoreline or high up on a hill. So make sure you consider that value as you compare one property to the next.
- Put yourself in the seller's shoes. Once you find that property that truly stands out from the rest, and is in the same price range as the others, you have come across a nugget. It may be that the other lakeshore buyers don't know as much as you do yet, so don't let them find out. If you feel it is the perfect spot for you, don't get too greedy on the purchasing end. Even at the list price, you have probably found yourself a great deal, but most sellers have at least some room to negotiate as long as it is reasonable. It's when buyers aren't reasonable that negotiations deteriorate.
- Act quickly. It is now the spring market. And even though it may be somewhat slow, this is the time of year when buyers have the most motivation. There are some very good deals out there right now, and if you find the one that you feel is right for you, then it probably is! Don't delay, or you may be kicking yourself for a long time.
- Finally, if you are OK with doing some remodeling and fix-ups, there is an incredible supply of lake properties that fit into that bundle. And, as you can probably guess, many of those sellers have been battle tested for a year or more already, just hoping someone comes along to make them an offer...while they keep dropping their price. There are also some real gems in this group on great lots and very good lakes. So if you don't mind doing a little work, you can be a little more aggressive on your offers here, and you will find some bargains. And generally, even low offers will be more of a blessing than an insult to a lot of these sellers.
I hope this helps you look at this year's spring market with realistic eyes, whether you are a buyer or seller. If you have any other questions, please give me a call or email.
Dan Anderson
866-327-9889
info@lakehomes.com
