Buyers Archives - Page 19 of 29

Title insurance on new construction?

March 12, 2018 By Tayson Rockefeller Leave a Comment

won’t go into too much detail on what a title insurance policy is, though you can read the article here: https://tetonrealtyblog.com/what-is-title-insurance/ which might be a good prerequisite to this article.

It dawned on me the other day that while it is common for almost all real estate transactions to be accompanied with some sort of title insurance policy, it’s important to remember that title insurance only covers the initial purchase price of a property. For example, if a claim is made and a defect in the title is found, the claim can only be made for up to the amount of the original purchase price. The next obvious question is, how about when a property is improved or the value of a property is increased?

With all of the new construction we are seeing throughout the area, I figured this was an opportune time to bring this to the attention of home owners and investors. Probably the most common example would be someone building a new home. With low residential home inventory and relatively affordable land costs, it’s becoming increasingly common to see people buying land with savings or home equity lines of credit then preparing to build in the future either with cash or a construction loan. When obtaining a construction loan, the lender will require a lender’s policy for the build (reference previous article), but there usually isn’t a seller involved to pay for a title insurance policy like a regular transaction between a buyer and a seller.

The result of the above scenario would be a home valued at several hundred thousand dollars with a title insurance policy protecting up to the value of the land, in many cases less than $100,000. If a defect is found in the title after the home is constructed, albeit an unlikely worst case scenario, it could be a very expensive proposition for the homeowner with inadequate title insurance.

Being that title insurance is extremely affordable and is only paid one time and is not recurring, this is something that anyone looking to build a home should consider. Fortunately all of our local title companies are experienced with writing these types of policies and can answer any questions that you might have.

Fire Ponds and subdivision compliance

February 13, 2018 By Tayson Rockefeller Leave a Comment

While it may not seem like a big topic to someone in the community not involved with real estate, fire suppression compliance, (or the lack thereof) has recently been a big topic for those in the real estate community.

If you’re familiar with many of the communities in Teton County, you might have noticed that most of the newer communities have beautiful ponds. While these ponds are aesthetically pleasing to most, it wasn’t because the developer was looking to improve the quality of the subdivision, it was usually a result of the requirement for a fire water storage system. Most developers installed these systems, sold out the lots in the community, and moved on. These communities formed homeowners associations for road maintenance and other aspects of neighborhood duties, but many were not privy on the requirement to have these systems tested annually.

The fact that they systems weren’t tested went largely unnoticed for several years due to the slow period of construction. Now that construction is picking up, those filing for building permits are in some cases being told that these systems must be tested for compliance prior to issuance of a permit. Overzealous real estate agents also have a tend to research issues on behalf of customers which sheds some light on these issues now that we are seeing more and more building sites selling per year.

I communicated with Teton County Fire Chief Earle Giles who reports that about 20% of Teton Valley’s subdivisions are out of compliance. Fortunately, it’s a relatively easy process for most homeowners associations to have their systems tested. These ponds are usually accompanied by a nearby hydrant which an engineer or a pump technician can connect to and test the flow which is measured in gallons per minute, or GPM. Earle was also kind enough to provide a couple of contacts for testing, and most of these contractors will be happy to put you on an annual test program to keep things in accordance. It’s affordable, and helps retain values when it’s time to sell!

-Grant Durtstchi – 208-705-7200

-AW Engineering – 208-787-2952

-Wilder System Solutions – 208-456-2287

December ’17 & Year-End Market Stats

January 27, 2018 By Tayson Rockefeller Leave a Comment

Residential Summary:

If you’ve been keeping an eye on market reports and property sales throughout Teton Valley in 2017 when compared with the year prior, you’ll notice that sale prices are on the upswing, the median home price has increased, and the total volume has also increased. This is all great news for our local real estate market, but what are the driving factors?

One statistic that is hard to attain is: How many of these sales are resales that occurred over the last 10 years, or prior to the last market boom? Unfortunately the only way to obtain this information is to look at the history of each listing provided by the Teton Board of Realtors. Most of this is accurate, and a quick run through every residential sale in 2017 shows that approximately 40% of all sales that occurred had also sold within the last decade. That means that all of these sales, likely, were for a profit.

This information would indicate that our market inventory might be less than what we think. If the majority of the resale inventory is behind us, and spec home construction remains slow, we should anticipate much lower supply in the coming year unless something changes. As I’ve mentioned in previous articles, spec home supply is directly tied to construction costs which we know are currently high.

If the supply of residential inventory remains low, the residential market must climb to meet the rising cost of construction. If this occurs, we should anticipate list prices, and presumably sales prices to continue to rise over the coming year.

Building Site Summary:

Building site sale volume has steadily increase since 2012. Total volume for 2012 including Alta Wyoming totaled 89 sales. 2013 increased to 114 sales, 2015 again increased to 206 sales, 2016 increased to 222 sales, and 214 sales occurred in 2017.

2017 saw an average sale price increase from $82,692 in 2016 to $92,980.

The median sales price in 2016 was $66,292 and the median sales price in 2017 was $65,417.

The statistics over the last 2 years would indicate that buyers tend to be opening their wallets for more expensive parcels with an 11% increase in the average sales price. The median sales price along with the number of lots sold over the past two years would indicate that parcels seem to be selling at the same rate, and approximately the same price.

As with 2017, we have determined that the number of sales was 214. If we divide that by 12 months in a year, we come up with 17.83 sales per month. If we divide this by the number of current listings which is 518, we have 29 months worth of listings currently on the market. This is far fewer than projected numbers provided by professionals throughout the market recession. It is, however, anticipated that the number of new listings will meet the approximate number of parcels currently being absorbed into the marketplace as the number of active listings has been similar over the past several years.

Why are Building Costs so High?

November 5, 2017 By Tayson Rockefeller Leave a Comment

A couple of years ago I did an article about building costs in Teton Valley. At the time, it seemed like building costs exceeded what the average home sale price was at the time. Well, it seems like we are at that point once again, only building costs are even higher.

So, why are building costs so high? I’ve spoken with several builders and contractors. I’ve also talked with subcontractors. I was hoping I could pinpoint one major area, but unfortunately it is a number of items contributing to today’s building costs.

Labor: This is an obvious place to look when trying to balance your overall project cost. Yes, it is true, this is one of the larger contributing elements, but not to the point that it alone even comes close to the overall cost hike. Why is labor up? The cost of living is up. Home prices, rental prices, even groceries are more expensive than they used to be, even two years ago.

Subcontractors: Subcontractors are one of the main contributors as well. Subcontractors are usually defined as someone who carries out a specific task as part of an overall project. Examples include masons, electricians, plumbers and so forth. General Contractors oversee various Subcontractors who carry out most of the work. If you ask a General Contractor or “General” most of them report that these Subcontractors or “Subs” are price gouging because demand is so high. If you ask a Sub, they will report that labor costs are high and laborers are difficult to find. Personally, I think it’s a combination of both. We know the problem with labor costs and while I don’t think Subcontractors are gouging per se, they are certainly taking advantage of market conditions.

Materials: Materials are being impacted in many different ways. Remember that building materials don’t just include plywood. Industries can affect material costs. The main element in your electrical wiring is copper, which is an industry by itself. Fuel cost can have an impact, as well as regulations on imported goods which is currently having an impact on the overall dynamic. Further, just like high demand for subcontractors, I personally feel that high demand for materials results in higher prices.

In a nutshell, I’ve identified the main elements required for constructing a home. Time, labor, materials. The more complex issue is the number of contributing factors to each major element. Interestingly, it’s all gridlocked between high demand, increasing cost of living resulting in higher labor costs and changing Industries. Each of these major elements has its own set of smaller items that make up the problem. Here in Teton Valley, these elements are compounded by higher than average cost of living, and our remote location which only adds to material costs and lack of availability for contractors. I believe it is these two elements which have the biggest impact for our local market when comparing building costs with other areas, while the National trends such as high demand for builders and increasing material costs create the foundation that supports our local challenges.

So what does all of this mean for our local market? First, home prices are likely going to continue to rise to meet increasing costs of building. Second, we need to keep an eye on our rate of growth so as not to oversupply of the market, which ultimately will happen when comparing where our market is in the cycle of growth, oversupply, recession and recovery. Obviously we are on our way up, and we will likely create an oversupply which will in turn stabilized prices once again. Do I feel we are headed towards 2008 again? Not really. These cycles have been occurring for many years, by far predating the recession 10 years ago. Fortunately interest rates are still extremely low which creates a favorable environment for buyers to invest. 1% over 30 years on a 354k home (the median price in Teton Valley last month) will result in about $56,000 in interest over the life of the loan.

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