Vacation Home Primer

Buying a vacation home requires different criteria—and sometimes a different timetable—than a primary home purchase. Help potential clients compile a smart second-home wish list.

November 14, 2014

Owning a vacation home is a long-held dream for many home owners. As a real estate professional, you can help clients who are considering this step weigh their options and understand this market more clearly by considering these nine key factors.

1. Market outlook: Is inventory plentiful? Are prices trending up or down? Is an area losing its cachet, or is it heating up? Be sure to do your research on local trends so that you can give the best advice to your clients. As for the national outlook: Sales of vacation properties performed well last year, due to affordable prices and low mortgage rates, according to NAR’s Investment and Vacation Home Buyers Survey 2014. The survey also found that the majority of buyers purchased a property to use for vacations rather than to diversify their investment portfolio. They spent a median of $168,700, and favored single-family houses over townhomes and condominiums.

2. Total costs: Owning a second home can eliminate expensive hotel stays. And with room-service burgers coming in at around $20 plus tip, buyers should calculate the total bottom line, not just the room rate. However, you should prepare buyers for another mortgage at what may be a higher interest rate than what they have on their primary residence. Also, they should consider real estate taxes, homeowner’s insurance, maintenance, furnishings, and gasoline or airfare to get there and back. If regular vacation costs aren’t part of their long-term plan of at least the next three to five years, hotels may prove more economically prudent.

3. Distance from home: The typical distance of a vacation home from an owner’s primary home was 170 miles, according to the NAR report. Some vacation homeowners find that paradise works best if it’s closer—within a two-hour drive or via a direct flight. Otherwise, the home may not be used often enough to offset costs. Real estate saleswoman Barb St. Amant, ABR, with Harry Norman, REALTORS®, in Atlanta, decided that the lakefront home she and her husband selected when their twin sons were 13 years old needed to be around 40 minutes away in order to be used frequently. Because their sons will soon graduate from college, they didn’t go to the house very often last year, but with her husband’s retirement, that may change. “We plan to reassess,” she says.

4. Nearby attractions: While location is still the mantra, what “the best location” means will vary. Top schools and proximity to work centers may be huge incentives for a primary home, but being on vacation may require proximity to ski slopes or a beach. Michael Degnan, broker-owner of Realty Executives, which oversees sales at the new Heritage Sands development on Cape Cod, says its 63 cottages’ proximity to 630 feet of private beach has been a major draw. For rah-rah college alums, being a stone’s—or football—throw from a stadium may be more key, says Jennifer Fredericks, CRS, GRI, and broker with Better Homes & Gardens Real Estate Preferred Living in College Station, Texas. Her buyers come to attend Texas A&M University sporting events. “They want to walk to the stadium in fall for games, have everyone at their house for tailgating, or buy on a golf course so they can be close but use the house for retirement some day,” she says.

5. Maintenance: Whatever the home’s size and style—single-family, townhouse, or condo—buyers want to spend as little time as possible on maintenance. Going with new construction approaches that ideal, says Robyn Erlenbush, CRB, CRS, with ERA Landmark in Bozeman and Big Sky, Mont., where buyers go to be close to Yellowstone Park and ski slopes. While certain building materials and finishes help make a home more carefree, so do homeowner associations, on-site or nearby property management companies, and concierge services that handle upkeep and repairs. Carefree living was one reason Justin Pallis, who lives in Massachusetts near the New Hampshire border, chose a cottage at Heritage Sands. “We didn’t want to worry about cutting the grass or security when not there,” he says. Advise buyers to inquire about these options when house hunting.

6. Furnishings: Yet another way for buyers to conserve precious vacation time is to select a furnished home rather than spending time shopping, especially from a distance. “Decorating is the last thing many want to do; and sellers may be wise to sell their home furnished,” says Patrick Jones, broker-owner of Better Homes & Gardens Real Estate Sonoran Desert Lifestyles in Scottsdale, Ariz.

7. Amenities: Besides the location, onsite amenities can increase the appeal of one home over another. If extended family and friends regularly vacation with your buyers, encourage them to ensure they have a sufficient living space — both indoors and outdoors, depending on the location. If socializing is the main goal, you may also want to recommend the advantages of a clubhouse or party room. At Harbor Shores in Benton Harbor, Mich., a 538-acre development on Lake Michigan, one clubhouse features a full-service restaurant. Jones in Scottsdale has found that many older vacationers seek a sense of community in these amenities, especially when traveling from afar.

8. Rules and restrictions: Single-family homes may come with no guidelines, except for those the town dictates — when watering lawns is permitted, for instance. But homes in a development or condo community often have a lengthy list to obey, such as restrictions against pets. Make sure buyers understand their rights and protections before they close.

9. Rentals: A universally appealing vacation home could add up to a revenue opportunity, and your buyers may already be factoring additional rental income into their second-home plans. However, homeowner’s associations may ban renting or restrict how often owners are allowed to rent out their property. Buyers should also ask their homeowner’s insurance agent and lender for rental guidelines and inquire about tax consequences with their financial professional. Buyers can use FHA loans on only primary residences, not rental properties and timeshares. Also, the down payment typically is higher on vacation property than it is for a primary home, says Tim Lucas, editor of mymortgageinsider, an online mortgage resource. Rules also differ if a vacation home is being used as an investment property.

One final tip: If your clients are uncertain, you may want to suggest that they rent for a year before purchasing a second home. That way they can try an area out during different seasons, to test if their fantasy meshes with reality. They’ll be better clients in the long run, once they’ve taken the time to fully understand their vacation

Barbara Ballinger

Barbara Ballinger is a freelance writer and the author of several books on real estate, architecture, and remodeling, including The Kitchen Bible: Designing the Perfect Culinary Space (Images Publishing, 2014). Barbara’s most recent book is The Garden Bible: Designing Your Perfect Outdoor Space, co-authored with Michael Glassman (Images, 2015).


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