Checklist For Readiness

It’s no secret the real estate market on the Outer Banks is starting to shift. Even as we move into a seller’s market, keep in mind a majority of our home sales are secondary homes. This means more than 50% of our home buyers will spend up to 2 years searching for the right home. They can do that because they aren’t physically moving into the home.

Being a discretionary purchase, they have the time to wait for the right house. That means even if you have the upper hand in terms of lower inventory and potentially rising prices, buyers still want what they want. Your home can still sit on the market for a prolonged period of time if it’s not set up to sell in today’s real estate market.

We’ve put together a checklist of readiness to ensure your home can hit the market and sell for the best price in the fastest time frame. Consider the following market statistics:

  • In 2019 there were 1,842 single family homes sold
  • Currently there are only 1,079 single family homes listed for sale
  • Almost 60% (58%) of all properties sell in the first 90 days
  • Median days on market is 69
  • They are selling within 4% to 5% of asking price

If closed sales for January and current Under Contract numbers are at record highs, we could easily see 2020 hit the 2,000 single family homes sold mark. That means we barely have half the homes on the market right now that could potentially sell this year.

The following checklist is designed to get you the most for your home in the current market.

1. Have a Home Inspection
Let’s face it, the last time we had this kind of market shift in 2000, a home built in 1985 was only 15 years old. Today, that home is now 35 years old. In the extreme weather environment we have on the OBX, a lot can happen in 35 years. If your home is more than 10 years old, you need a pre-listing home inspection. The number one cause for deals to fall apart is a home inspection revealing more than the eye can see. Buyers get nervous and walk. When that happens, the entire world knows your home sold, then un-sold, and everyone wants to know why. The items discovered will most likely become a material fact and have to be disclosed to future buyers. If an inspection is done beforehand, major items can be addressed and taken care of. End of story. There is no reason to list your home blindly and set yourself up to negotiate the “unknown” 2 to 3 weeks into a sale.

2. Maintenance items
Even if a home inspection reveals no issues, sometimes systems will be at the end of. their life expectancy. Buyers today do not want to walk into automatic maintenance without expecting a deep discount. If your 20 year roof is on year 18, it is wise to replace it. There’s no guarantee you can add that cost to the top of your asking price, but what it can do is sway a buyer towards your property versus another. The number one concern for buyers today is condition. Your home does not become more valuable because the systems work. However, it does immediately become more saleable.

3. Powerwash/Clean
This should be a no-brainer, yet all the time I show or preview homes that look like they’ve been abandoned. Everyone likes things that look nice. Take an honest look at your home’s exterior and interior. One of the easiest spaces to turn off a buyer is the carport and outside shower area. Buyers say all the time, you can tell how well the owners have cared for this home by how those areas look. Clean up the leaves, sand, junk that can accumulate. Power wash the gunk off the decks and siding. Get the interior a nice spring clean. First impressions don’t generally get a do-over.

4. Prepare the entry way
What will buyers see as they approach your home, climb the stairs and enter the front door? Is it inviting? Is the door rotted or rusted. Does the key work easily? Are there spider webs or over grown plants and weeds? This will set the tone for the entire showing. Sometimes buyers will change their mind about seeing a home all together if the entry isn’t pleasant. Be mindful of the best way to enter your home. If your electronic keypad is on a door that isn’t the best entry, insist on giving your agent a key to the best entrance and have buyers go in that way. I recently went into preview a $750,000 home that was quite lovely. The entrance had imported tile, great artwork and felt very welcoming. The agent gave me a keycode that opened a door to an empty two car, cold, garage. This is not the first impression you want.

5. Yardwork
No matter what time of year you list your home for sale, take a good look at the landscape of your yard, which is the main aspect of curb appeal. Having branches scraping the side of your car as you pull into the driveway is not a good look! Do what you can to clean it up for whatever is appropriate for the season.

6. Declutter or staging
Whether you live in the home or it’s your vacation home, have a professional eye look and give advice on how to stage it to sell. Most people need to see space, rather than. stuff, in order to envision themselves in your home. Less is more when it comes to wall hangings and nick-knacks. Updating bedspreads and shower curtains is an easy way to give the home a fresh look. If the home is being sold furnished, some fresh, beachy furnishings can make all the difference.

7. Upgrades
With the new HGTV culture, buyers expect homes to be already updated. This type of preparation can take several months to do. These are the things you want to plan 6 months to a year before you list your home for sale. Depending on whether you live there or rent, everyone can also get a chance to enjoy the upgrades as well. Before spending any money, decide what your budget is and have an agent come over to advise the best use of that money. Some updates will prove a better return than others. We talk to hundreds of buyers a year, so we have a clear idea of what will get you the most for your money. Be prepared though, construction costs have doubled in the last 10 years. You’ll want to really follow a plan to stay on budget and get the most out of it.

8. Property Management Details
With the growing popularity of VRBO and Air BnB type of rental arrangements, there are some real challenges when selling. Those types of reservations, when done solely through the property owner, are automatically not transferrable when selling. If a buyer is relying on the income of your home to make the purchase, you could run into some real issues at the closing table. Even if you are renting through a traditional property management company, there can be cancellation fees you incur if the new buyer doesn’t stick with the company. It’s becoming increasingly more important to employ the proper timing strategy to sell, depending on the source of your weekly guests. Talking to an agent ahead of listing about how the transfer works will help avoid any major stresses once the home is under contract.

COVID-19 & the OBX Real Estate Market

The real estate market is adapting quite well to the current restrictions and Stay at Home order that is in place for North Carolina. While we are doing some things the same, since our market is largely based on out of town property owners, many things have changed to keep things going smoothly.

Here’s what’s new:
1. Virtual Showings – While my listings always feature high end professional photography, this week I’m also getting them all set up with 3D Virtual Tours. This will give prospective buyers the feeling of actually being in the room. We are doing FaceTime and Zoom showings for buyers as well.

2. Virtual Open House – Our local MLS is implementing a new feature to promote and hold and Open House virtually. The details of this feature are still being released. This is an exciting update to a market like ours. I can see this being a great new tool used on the regular after this event is over. I’ll be setting up a few of these in the next week. Contact me if you’d like to participate.

3. Appraisals – Local lenders have assured me that when it makes sense, underwriters are giving appraisers the green light to perform desktop appraisals. This way, properties with high risk inhabitants don’t have to be exposed, yet we can still make progress on the sale of the home.

4. Lenders – With the IRS unable to process any transcript requests before closing, our local lenders have been authorized to skip that requirement for the time being. It will no longer be needed to receive a clear to close. This is showing great versatility and willingness to keep transactions moving.

5. Virtual Closings – While NC does not currently support virtual notaries, you may be in a state that does. We have been doing out of town closings as long as I’ve been in the business, so that part of it is nothing new. Virtual notaries are approved in 35 states. So if you have a closing coming up and need documents notarized check and see if they can do it online instead.

6. COVID-19 Addendum – NC Realtors did quickly create and distribute a special addendum regarding this pandemic that allows buyers and sellers to have a little more time to close if delays occur related to the shutdowns. It also allows the buyer to cancel if they get laid off and become unable to close due to not obtaining loan approval. Lenders will still be verifying employment 5 days before closing.

7. Some not so welcome news – minimum credit scores have been raised to 640 or 680, depending on lender. This is up from 580 minimum. We are also seeing some lenders no longer locking in Jumbo rates. So we may see Jumbo loan guidelines get an overhaul and be much stricter (anything over $510,400), and some no longer doing these loans at all for a while.

Overall, it’s all about adapting. Which we are doing. If you are thinking about buying or selling, we can still make that happen for you.

In fact, of the 112 properties that have gone under contract in the last 30 days, more than 50% of them were also just listed in the same 30 days. Some will be more comfortable moving forward at this time, and some won’t. Either way, please let me know how I can help.

February 2020 OBX Market Update

For 2020, it looks like good news for the OBX market finally!  Some spots are really on fire right now.  My prediction is we should see some pretty steady growth in the area for the next 3 to more likely 5 years.  This is right in line with the 20 year cycle I’ve mentioned before.  If you remember 2000, we had the big building boom, we started seeing inventory levels drop and noticed a feeling of something big happening.

This is the same feeling we have right now.  Inventory levels are low, interest rates are super low and activity is on the rise.  Here are the specifics:

  • January residential sales were up 22% over January 2019
  • January 2020 had the highest January sales numbers since 2005
  • Under contract numbers for January are up 18% from Jan 2019 and are even up 17% just compared to December 2019
  • Residential inventory is down 11%

Let’s now look at how each area is performing:

Corolla

306 Active Listings      36 Under Contract      10.5% of inventory selling

Duck

68 Active Listings        21 Under Contract      24% of inventory selling

Southern Shores

47 Active Listings           9 Under Contract      17% of inventory selling

Kitty Hawk

35 Active Listings        18 Under Contract      35% of inventory selling

Kill Devil Hills

101 Active Listings      44 Under Contract      31% of inventory selling

Nags Head

121 Active Listings      44 Under Contract      27% of inventory selling

While Corolla is still behind the curve, I do feel like this may be the last year it’s struggling.  It’s about time for a turn around.

If you are thinking of selling now, or in the next year or two, please give me a call so we can discuss what needs to be done to get your home ready for the market.  Buyers needs have changed quite a bit.  To ensure a fast sale for the most money, you’ll need to put your home through my proven checklist of readiness.

2019 OBX Market Report

Being a Listing Specialist requires a certain level of understanding of the local market statistics. Taking an in depth look at the trends causing homes to sell is critical to knowing the big picture.

In the chart presented below, I’ve broken down the relationship between the following:

  • The number of days a home took to sell – which means receive a ratified contract
  • The percentage of final sales price to the original listing price
  • The percentage of final sales price to the listing price at the time of sale

Each of these figures on its own tells a lot, and when combined into a complete picture, tells us many more things. Here are the basic takeaways from this particular data:

  • Out of 2,142 total sales, 32% sold in 30 days or less
  • The homes selling in the fastest amount of time receive the highest percentage of asking price as the final selling price – 97%
  • Properties sold in 31 to 60 days make up 15% of all sold
  • Yet, it seems even these quick sales a small adjustment in price was needed
  • 47% of all properties sold last year did so in 60 days or less

With nearly half of all sales taking place in 2 months time, it presents a clear picture that buyers are ready and willing to take action when they find the right property. Selling at 97% and 95 of asking price, this tells us that price is the main attraction to their fast action. They see value and move quickly.

What does overpricing your home actually cost? Notice the bottom 20% of properties sold, took 6 months to over 1 year to sell.

  • Final sales price was 12% to 17% lower than the original asking price
  • Continue paying monthly for a home they no longer want to own
  • Any repair issues that may have popped up
  • Additional repairs requested from buyer during the sale from inspections
  • Missed opportunity cost from waiting it out

Overall what we can take away from this kind of detailed analysis is, pricing your home to fit the current market conditions will actually net you more in the end. This is why as a highly skilled agent, I’ve learned to always ask you the question – Is it more important to get your price, or to get the home sold?

I’ve studied the data and know, you’ll net more by approaching the market with a value-based price than by “leaving room to negotiate.” That is an outdated strategy that just doesn’t work anymore.

December 2019 OBX Market Report

This month I want to take some time out to go over from a linear perspective, why the Outer Banks market is still experiencing some challenges.  Below you’ll find a snapshot review from 2005 in three year increments to show how things have transitioned during this particular market cycle.

Year                Units sold      Average Price sold

2005                   2104               $555,973

2008                   1045               $427,718

2011                     1333               $370,569

2014                     1611               $370,351

2017                     1995               $385,774

2019                     1959               $401,186

Here’s what this tells us:

  • 2005 was considered the peak
  • 2008 was the beginning of the decline, starting with a 50% drop in units sold
  • 2011 – 2014 was the lowest point for price, showing a 32% drop for the overall OBX market (some areas it was a higher percentage)
  • Units sold has made an incredible rebound from the peak in 2005 with only a 7% difference in the number of homes sold from then to 2019
  • Average price has only recovered by 5% since 2011
  • Average price is still 28% less than the peak in 2005
  • In 8 years, the pricing has changed by only 5% for the entire market

You can see here that while we are selling almost as many homes as before, the appreciation has been extremely slow.  Thus, expecting the price of your home to change drastically in a short period of time on the Outer Banks has proven to be non-existent.

This can also explain why if you purchased a home on the Outer Banks between 2009 and 2017, there may not be much, if any change to the market value of your home.  This is more amplified on the Northern Beaches (Corolla, Duck, 4 Wheel Area) as those pockets of our market are still experiencing an excess of 14 months of inventory.

Without strategic timing, real estate still remains a long-term investment for maximum return.  If you have been thinking about selling your home, consider the following:  If this cycle mimics the last century of recorded history, we are right about year 11 of a 20 year cycle.  Based on that, we should start to see prices really making changes around 2023 – 2025.

Keep in mind though, buyers’ demands have changed.  They no longer want to put in sweat equity, they want homes move-in ready with updates already done.  If you want to wait out the market for the next up cycle, now is the time to start planning any maintenance and upgrades to make your home more valuable and saleable.  If you would like a list of where to best spend your remodeling dollars, send me an email and I will get that to you.  Construction costs have changed drastically since I first began my career in 1997.  Most projects have nearly doubled in cost.  It is prudent to get a trained professional to give you some guidance on how to get the most out of your home projects.

Mid-Year OBX Market Update

Here are the mid-year fun facts about the Outer Banks market:
– Inventory is up 12% – this is a little alarming since it was only up 7% last month
– Residential Sales are up 4% – this could be due to the smokin’ hot interest rates!!
– Distressed sales continue to decline, making nearly zero impact to the market
– There have been 75 new building permits issued so far in Dare County
– In 2018 there were a total of 131 for the year

Town specific notes of interest
– Corolla total number of sales YTD is pretty flat, up only 2%
– Duck total number of sales YTD is up 30%!!!
– Southern Shores is also flat at a rise of only 2%
– Kitty Hawk is similar at a rise of 3%
– Kill Devil Hills is going the opposite direction and is down 4%
– Nags Head is also an anomaly being down 19% in total number of sales YTD

While it looked to be a flat year through June, the sudden increase in properties under contract
looks to make for an interesting fall. Across the board rents seem to be down and traffic
doesn’t feel as thick this year. It’s not uncommon to see sales go up in a down rental year. I’ve
been selling since 1997 and I’ve seen this trend happen every 5 to 7 years.

A lot of people think it’s due to Air BnB or VRBO. I personally think it’s just one of those years
that people are taking more expensive, overseas trips. Doing something a little different this
year.

The Depreciation Factor When Selling

The Depreciation Factor When Selling Your OBX Beach Home

In the height of the real estate boom from 2002 to 2006, doing a 1031 Tax Deferred Exchange
was such a common occurrence. We think about it a lot more in a rising market. However,
even though the Outer Banks market is still in recovery mode, a 1031 exchange may still be a
very necessary process, even without massive profits from actual sales price. All due to one
word…depreciation.

Specifically the way it works is the gain, not the profit or equity, from the sale of your
investment/beach/second home could be subject to Federal and State taxes. Also subject to
federal taxes at the time of sale is the depreciation taken over several years on the property.
That amount is taxed at a whopping 25%!!! This could really sneak up on you!

Below is an example of how to determine a potential capital gain when selling without an
exchange.

Step 1: Calculate the Basis
$300,000 Original Purchase Price
+ $ 50,000 Improvements that haven’t been expensed in a previous tax year
– $ 60,000 Depreciation taken
$290,000 Net Adjusted Basis

Step 2: Calculate Capital Gain
$475,000 Sales Price today
– $290,000 Net Adjusted Basis
– $ 25,000 Cost of Sale (commissions, transfer tax, fees, etc)
$160,000 Realized Capital Gain

Step 3: Calculate Capital Gain Tax Due
$15,000 Recaptured Depreciation = 25% x Depreciation taken
$24,000 Federal Capital Gain Tax at 15% x Realized Capital Gain
$32,000 Federal Capital Gain Tax at 20% x Realized Capital Gain

Please Note:
* Income less than $39,375, the long term capital gains tax rate is zero
* 15% if income is less than $434,550 20% if income is more than $434,550
* This does not include any potential state capital gain taxes

What can you do if you want to sell and avoid paying Federal Capital Gains Tax?
– You can defer the federal tax by performing a 1031 exchange for a property of equal or
more value than the property you are exchanging, and acquiring the same.
debt/mortgage equal to or exceeding the debt on the relinquished property.
– You can move into the home and make it a primary residence for 2 of the last 5 years
and rollover up to $250,000 if single and $500,000 if married.
– You can reduce tax liability by doing some major improvements that are not expensed in
any previous tax year.

This is an overview of the process. For more detailed information on your specific tax
implications contact a tax professional. To find out more about doing a 1031 Tax Deferred
Exchange we recommend Realty Exchange Corporation at www.1031.us.

6 Reasons to List Your Home in the Summer

Although it sounds reasonable to think with all the guests coming, it would be better to just sell the home in the fall or spring, take a look at these six (6) reasons you could be missing out by waiting. Contact me today if you want more information!

1. Outer Banks Inventory

Inventory has been our biggest challenge in terms of pricing.  June, July, and August are historically the time of year when our inventory is the lowest.  Why not take advantage of that incredible opportunity? Lower inventory could mean higher prices.

2. High Volume of Visitors

The Outer Banks will have over 3 million visitors each year.  Obviously, the majority of those folks visit during the summer months.  We cannot get that kind of exposure any other time of year!

3. Perfect Time of the Season

The home is fully open and operational.  Buyers will have inspections done before closing.  When the house is winterized during the fall/winter there are extra costs to open the house back up for those inspections.  Right now, everything is up and running and easy to inspect and ensure to the buyer the home is in good condition.

4. Sweet Outer Banks Summertime

It’s a beach house!  When does the beach look the best?  Summertime of course. Your beach house will show the best with the sun shining, deck chairs out, pool open, hot tub running!  Buyers get excited about these things and it helps to sell your home.

5. Serious Inquiries

Buyers this time of year are serious about buying!  If a potential buyer is going to take time out of their much-anticipated vacation to look at your home, it means they are serious about buying.  They’re here with all decision makers too.

6. Outer Banks Rental Income & Fees

With the average transaction taking 45 to 60 days to close, sellers can collect most or even all of the rental income.  A late summer or early fall closing also means sellers don’t have to worry about fall maintenance and carrying the home through the winter months.

March 2019 OBX Market Report

Let’s take a quick look at the highlights of the market activity so far this year.

  • First Quarter residential sales are up by 4% from last year
  • Actual March sales are down from last March by 9%
  • Under contract homes are up 9% from last March
  • Inventory is on the rise. Up 9% from last March and the highest number of homes for
    sale since June 2017
  • Land sales are down 33% and average price went from $100,000 down 50% to $50,000
  • Distressed sales continue to fall with only 18 active listings in the entire area
  • New building permits last year total were 49, we are already at 33 for this calendar year
  • Overall rental companies are reporting a decline in the number of homes booked this
    year over last year

Summary: We had a slow start to the year for rentals because of the government shutdown.
Most of our visitors come from the VA/MD/DC area and with no income in January, fewer
vacations were booked. It does seem to be picking up some.

As predicted earlier this year, I am not surprised to see this activity report. We have solid
activity, but are not expecting a banner year, which is normal after coming off a few hot and heavy
years of activity. Nothing to worry about long term, just keep watching.If you feel like this might be the year to sell, but just aren’t sure, click here to read “What to do if you don’t HAVE to sell your home.”

What to do if you don’t HAVE to sell your home

So, what does all of this mean? Most property owners we speak to all say the same thing. “We
don’t HAVE to sell.” Which is very true, especially when a seller is not physically moving from
the home. The main reason they say that is because the pricing strategy presented in
alignment with the current market statistics is typically lower than they had hoped for.

It’s no secret, the Northern Outer Banks market is still in the midst of recovery, now with a
rising inventory. We’ve tracked these cycles for many decades and the results are always the
same. It’s a 20 year cycle. If the major down happened in 2009, we are merely half way
through before the next possible boom, based on recorded history.

Now, if you find yourself in the very common situation of having a home here on the OBX that
you aren’t using as much anymore, don’t like the current market price, and feel like you don’t
have to sell it, here’s what you need to know.

What exactly are my options if I don’t have to sell?

  1. 1. Recognize the big picture. Just because you don’t HAVE to sell, does not automatically
    mean that keeping the home is the best financial decision. Talk to your financial planner
    and tax advisor and get their opinion of the big picture financially.
  2. Consider the amount you personally use the home. If you’ve gotten to the point of
    only visiting the home once a year, it could actually end up costing you more in the long
    run to keep it. We have very extreme weather on the Outer Banks. Homes left alone
    with deferred maintenance can often times develop big ticket repair items the longer
    they sit.
  3. Place the home in a trust. If you have children who are available and willing to step in
    and take over the management of the home, there could be some tax advantages in
    your estate by leaving the home to them in a trust. Check with a tax advisor for more
    detailed information. I found this article helpful as a starter.
  4. Consider making improvements. Outside of the economic market conditions of supply
    and demand, one of the other reasons some homes are experiencing a challenge on
    pricing is due to being in the original state. Buyers today have very different
    expectations of homes than they did when I started in 1997. If you are planning to keep
    the home for a few more years, do the improvements, enjoy them, then sell when you
    are ready. One word of caution, consult a real estate professional first so they can help
    you maximize where to spend your money so it makes the most impact to a future
    buyer.
  5. Place the home as a year round rental. Yes, that means less income overall. It also
    means less expense. Tenants in a year round situation generally pay their own utilities,
    do the cleaning, change the filters and more. There is a huge shortage of affordable
    year round rental homes in the area. This is also something you can manage yourself,
    with very little time and energy. Hire a maintenance guy to check on the place and
    handle the minor issues that come up. If you’re already not using the house, why not
    have just one family enjoying it year round.
  6. Consider short term retirement in the home. So many buyers I’ve worked with over
    the years actually bought the home for future retirement. It’s unclear why more don’t
    actually do it. However, if you decided to just retire here for 5 years, enjoy the beach,
    do some improvements, the home could have a much different value then.
  7. Take a closer look at what the home is costing each year to own. This is probably the
    best advice I can give. More often than not, the amount needed to price strategically
    compared to the amount it will cost to own the home for another 3 to 5 years is usually the same. I know it can be challenging to drop that price another $25,000 in order to
    sell, but what will it cost you to own it annually for the next 5 years? That’s not
    including any major deferred maintenance that will come up along the way.

The truth is, timing is everything. If you’re ready to sell, take a serious look at these options
and decide the best course of action. First of all answer the most important question I
presented in the beginning….

Just because I don’t HAVE to sell, does that mean keeping this home is in my best financial
interests?

When you commit to looking at the big picture, as well as all other possible options and
calculate the best move for your situation. If you need help discussing these or any other
strategy, please feel free to reach out!