Teton Realty Blog

Teton Region Real Estate Market Stats, Articles & News

Changing the way we negotiate

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I distinctly recall hearing stories from customers in different areas of the country before the recent real estate boom changed the real estate world, particularly in rural areas. Stories about negotiations pushing home prices 10% over the asking price seemed pretty crazy to me, but in some cases, here we are.

It’s important to look at the date on this article, this information is likely going to be accurate only for a few months, but it’s good to earmark where things have been. I’ve got articles from 2014 with much different advice.

Price: Asking prices and offer amounts seem to change weekly, if not daily in this market. With the lack of public sale information and the unknown as to how far things are selling over the asking price this one’s hard to nail down without the advice of an agent that is in the thick of current trends. I have seen sale prices anywhere from $5,000 to 15% over the asking price depending on the sector of the market. We will usually see significant increases over asking on condos and townhouses, but that does not preclude any other type of Real Estate depending on the initial asking price. I should also note that some things are still selling under, it’s all about the tactic of the seller.

Finance and Appraisal: This one has been incredibly tough for buyers looking to get into the market. It’s frustrating and disheartening when a finance contingency is holding up the ability to compete with cash buyers. As a result, we’ve seen buyers agree to waive appraisal contingencies, assuming they have the cash balance to cover the difference. Waiving appraisal contingency and providing a pre-qualification letter with 5% down is difficult, but we haven’t seen too many problems with appraisals. Appraisers seem to be in the know with real estate prices. However, cash is still king, and hard to compete with as mentioned.

Inspection: Fortunately we haven’t seen a shift in our market where buyers have been (or need to) waving inspection contingencies in order to compete. Deposits that are immediately non-refundable are rare, and personally, I hope it stays that way. These are big investments and buyers need the opportunity to vet properties inside and out. This market also produces a number of site-unseen offers (often there is no choice with the quick timing of things) and I believe it would be unreasonable for sellers to expect buyers to waive contingencies altogether as a result.

There are a handful of other negotiating tips and tricks like escalation clauses and the like, and there’s a time and place for different tactics to achieve maximum results. I know I sound like a scumbag real estate agent when I say this, but as mentioned above, it’s absolutely paramount to have a local agent that has a close ear to the ground.

It will be fun to come back to this article 2 years from now!

The Importance of Performance

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For those of you who haven’t witnessed this crazy real estate market, things are booming. The market is changing almost daily, and the value of a home a week ago probably isn’t the same as it is today.

With these crazy markets, it’s important to follow through and meet all of the obligations of any agreement that you have, primarily as a Buyer. The purchase agreements we often use are provided by the Idaho Realtors association. These contracts have some boilerplate, key deadlines and obligations for Buyers to meet in most circumstances. In addition, there may be a number of built-in contingencies or Buyer obligations beyond the traditional ones. I will outline a few of the most common examples below.

– Earnest Money Delivery: Depending on how your contract is written, it may be stated that the earnest money is already delivered, or shall be delivered within a certain time frame. As a Buyer, it is your responsibility to make absolutely certain that you deliver these funds in accordance with what the agreement states. For example, if the agreement states that the earnest money shall be delivered in the form of a personal check within three business days of acceptance to title company x, make sure it’s there. If the earnest money is not received in a timely manner, the Seller can elect to terminate the agreement.

– Proof of Funds or Loan Approval: Another common example is the requirement to deliver proof of funds and/or a loan approval letter within a certain amount of time. The agreements are typically written in a way that provides the Seller a few days to cancel the agreement if you don’t deliver these items by the deadline.

– Closing/Loan Funding: This is a big one. It is important to stay in close communication with your lender and remind them the importance of closing on time. Like everyone else, loan officers are busy and it’s easy to set a file aside and pick it up a couple of days too late. Make sure everyone involved in the transaction from real estate professionals to title companies knows exactly who the loan contact is, and try to set up reminders for appraisals and periodic check-ins. Other obligations and contingencies exist, so it’s important to have your real estate representative prepare a timeline with key dates and deadlines. Make sure you pay close attention to the difference between a business day and the calendar day, and understand that business days end at 5:00 Mountain Time. Sellers have obligations too, but in a Seller’s market it usually doesn’t benefit a buyer as much to try to act on these deadlines.

Real Estate themes of 2020

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As you might imagine, the common real estate theme for 2020 was the craze of city dwellers looking for a rural escape. 2020 was one of the busiest years on record (if not history) when it came to sales volume, velocity and dollar volume. We didn’t quite hit 700 land sales in Teton Valley and Alta, but it was darn close. That’s a far cry from 281 land sales in 2019. Residential sales likely would have been the same had there been the inventory to promote those sales.

Aside from the market itself, I didn’t hear as much in terms of tiny homes, which I would have easily identified as the “theme” for 2019 and the years leading up to 2019. Interestingly, there wasn’t much talk of tiny homes in 2007 either, the last memorable real estate boom. In fact, most people were going big as opposed to building small.

I did hear quite a bit about was vacation rentals. While I believe many of the land sales were simply the usual group that wants to own a piece of Teton Valley, many did ask about the viability of renting in the areas they shopped. This isn’t all that uncommon though. The year started out with what I described, those looking to transition to the area permanently which led to a number of questions related to the school system, hospitals, internet speeds – everyday life in Teton Valley. The last half of the year is where I noticed an influx of second homeowners. Much like those seeing the window close on their opportunity to own a piece of land, it seemed others had a similar feeling when it came to purchasing a home. To justify the increasing costs, and to capitalize on income to offset the cost of ownership, I had quite a few discussions about vacation rentals.

I’ve written articles in the past about short-term rental restriction, mostly a power that only homeowners associations possess. With such a variety of owners and investors in each development, it may become challenging to amend subdivision documents to restrict short-term rentals, but I can foresee that becoming a topic in the years to follow.

2021 will surely be an interesting year in real estate. Most builders are booked out one to two years, and rising construction and material costs haven’t seemed to subside. If the majority of current construction is custom work for individual homeowners, inventory will likely remain low. Property owners that have been waiting in the wings may identify 2021 as the time to sell, if the inventory remains low. I am personally interested to see how National trends and factors impact the market, interest rates and the overall economy can have substantial influence as well. Regardless, I’m looking forward to “normal”, whatever that is.

2020 Real Estate Market Report & Past Predictions

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# Sales
Earlier this summer I wrote about the sudden market craze and it’s impact on land sales. Then, there were 292 (August 16th) land sales with around 100 more pending sale.  I predicted by year end we would hit 600 sales in Teton Valley & Alta. We’ve hit 582 as of this writing with 100 more pending sale. We’ll see how many of those close this year.

While we’re talking sales, residential is also way up in terms of # of sales. 365 YTD with another 75 pending, to be exact. That’s way up from 2019 with “only” 289 sales, but land is what stands out here.

Sales Prices
Sales prices, as you might guess, are also up significantly. Both land and residential averages are slightly skewed as a result of a few seemingly fantastical sales prices, but the average land price is down, likely due to affordable lots being snapped up.

The averages sales price in 2019 was $132,821 while 2020 is down about 20% to an average sales price of $118,775.

The average residential sales price in 2019 was $449,732. The average price based on sales to date is $585,480, up nearly 25%.

New Homes & Construction
Building and building permit (and building costs) numbers are strong, but rising build costs seem to be keeping things at bay. The county is reporting 112 permits (not including city permits) for the Spring & Summer season. Not having historical data, I’ll use sales data to make a point;

2020 YTD has seen 145 sales built in 2019 and 2020.
2019 saw 175 sales built in 2018 and 2019.
2007 saw 302 sales that were built in 2006 and 2007.

Past Predictions
I’ll bet that the market will outpace my 600 land sales prediction by year end, possibly by a significant margin. This is historical. After all, 2007 (my universal point of reference) saw only 626 land sales. While digging through past posts I found an article I wrote in 2016 about the potential impacts of the 2016 Presidential election. The post didn’t have much to do with elections at all (I think the point was that elections don’t usually impact real estate) but more with Real Estate cycles in general. It quoted a Harvard article written by Teo Nicolais talking about market cycles. Using his methodology (barring any major interruption such as global war) we should be in the midst of a Hypersupply phase on the cusp of a slowdown with rents on the verge of dropping. This is clearly not the case, but I would certainly call the Covid-19 pandemic a “major interruption”. No, it hasn’t slowed real estate or refinances with historic rates, but I would argue that it has slowed construction and speculative real estate as a result. If construction costs don’t come down, or worse, continue to rise, will this create (or continue to inflate) a bubble? Possibly. It all depends on how the market reacts to the increasing prices and sales volume such as that data provided above.

On that note… (Sorry, I’ve got to say it) – It is a great time to consider selling NOW. If it’s in the cards, let us provide some data to help. It’s easy, free, and no one in our firm is pushy. Learn More Here.

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