Teton Realty Blog

Price Reductions, You’re Doing it Wrong

July 13, 2022 By Tayson Rockefeller Leave a Comment

Who’dve thought we would be discussing price reductions today, with such a crazy market just yesterday. First.. Am I indicating that prices are falling and it’s a buyer’s market? Not necessarily. We are however seeing market stabilization, but some sellers aren’t ready to come to those terms just yet. We are continuing to see listings surge on with new listing prices 5-10% over the last quarter. Many of these listings are sellers that don’t want to leave money on the table, understandably so. The market is moving directions quickly, and none of us want to leave money on the table. In addition, some sellers are listing with “make me move” prices, and there is nothing wrong with that.

With the above said, don’t put yourself at a disadvantage, particularly if selling is a priority, and not just something to take advantage of if the price is right. If your motivations are the former, take a hard look at an analysis provided by a broker to see if it makes sense. As the market stabilizes, many brokers and brokerages are finding themselves with too much overhead and two little selling inventory, which may result in taking listings with unrealistic listing prices, or even providing unrealistic advice, though I hate to admit that it would happen in our community, as most of my colleagues and competitors are, in my opinion, some of the best in the Nation.

Notwithstanding, if you do find yourself in the position to reduce price, do it based on data. In many events we are seeing “panic” reductions, and in some events for properties that are appropriately priced. We all have concerns about the selling season, but don’t reduce too soon.

My second tip, only reduce once. Multiple price reductions lead the market to believe that they should wait for the next reduction. I understand that we don’t know how many times you may need to reduce, hence the need to look at the data closely. Unfortunately we aren’t currently in a position where reducing too much will bring the sales price back over the market value. Regardless, you need to act carefully, but not (too) quickly. Price reductions should be concise, well thought out, and substantial enough that you only do it once – but not so much that you leave money on the table. A good real estate agent will help you plan the starting price appropriately, and provide the data as to how they arrived at the suggested price in a comprehensive way that is also easy to understand in order to make an informed decision.

Property Assessments, Are Taxes Going Through the Roof?

June 14, 2022 By Tayson Rockefeller Leave a Comment

Unless you were living under a rock for the past 2 years (which might have been nice) you probably know that property values are up significantly. Until now, we haven’t seen County assessed values follow suit. With the recent release of 2022 assessed values, many are concerned that property tax increases are soon to follow. However, this doesn’t necessarily mean that your tax bill is going to go up proportionately.

In Idaho, each county is allowed to increase its property tax budget by up to 3% of the highest property tax budget of the past 3 years. The county can also increase their budget to account for new growth.

In order to calculate the tax rate, each taxing district within the county (Teton County has 18 taxing districts that each have slightly different budgets and needs) determines a levy, or the rate of which the county will multiply the assessed value to determine each property’s annual tax bill.

As an example, let’s say that district 1 has a total budget of $900k. In 2021, the total market value of every property in district 1 is $70m. To determine the levy, we would simply divide 900k by 70m, or 1.287%. If your assessed value is $300k, we simply multiply that by 1.287% to arrive at your 2021 tax amount of $3,861.

Now, let’s run a hypothetical based on what we are seeing today. We know that the total budget is going to increase with the new growth and the state’s allowance to increase the budget by up to 3% (ahem, inflation). Let’s assume that the new budget is $990k, and the collective value of all properties has risen to a whopping $110m. Using the same math, we divide $990k by $110m and arrive at 0.9%. Your value went from $300k to $450 this year. The math puts your 2022 tax bill at $4,050. While your tax bill has risen, it hasn’t risen 150% like your assessed value has.

The good news? Property values are up, and I know an agent that would love to sell your house.

Key Dates:

Mid-November – Current year tax bills mailed
December 20th – FIRST HALF TAX PAYMENT DUE
March 15th – Agricultural Exemption Applications Due
April 15th – Application deadline for Hardship Tax Relief or Circuit Breaker Program
April 15th – Application deadline for Homeowner’s Exemption
June 20th – SECOND HALF TAX PAYMENT DUE
First Monday in June – Assessment notices sent out
Last Monday in June – Last day to appeal current year’s property values
Summer – County begins planning budget for following year
Second Monday in September – County certifies budget

Application for Agricultural Exemption

Agricultural Lease Agreement

Interest Rates, Ideas for Buyers and Market Impacts

May 6, 2022 By Tayson Rockefeller Leave a Comment

It’s no secret, interest rates are definitely on the rise, and likely will continue to do so. It’s interesting hearing about all of the potential impacts. A lender friend of mine provided some good insight recently. Interest rates are still very low from a historical standpoint, and there are still some great ways to minimize the impacts of rising rates. These include mortgage points that come with a variety of options and the ability to have these points negotiated into a transaction or even paid by the seller. A mortgage point is effectively a way to buy down the interest rate up front. This can be a great tool to help buyers keep up with today’s real estate prices, which don’t seem to be going down despite interest rates creeping up. Buying mortgage points can also work well for buyers that intend to keep their loans long-term. Typically a “point” is equivalent to 1% of the purchase price and that will usually reduce the interest rate anywhere from 1/8 to 3/8 of a percent. Other options include a 2-1 (or even a 3-2-1) buy down which reduces the first year by 2 points in the second year by one point, which is where the highest amount of interest is paid on a loan while the principal of balance is still high.

Obviously interest increases are coming as a way to combat inflation, and it’s probably the lesser of two evils. Interestingly, supply chain issues, high building costs and other factors on the supply side are keeping new inventory at bay. Whereas real estate is primarily supply and demand based, this has created an interesting dynamic for both buyers and sellers. Personally, I do believe that the cumulative total of these issues will have an impact on the market, but without the increase of supply, I’m interested to see how much (if any, I should add).

New Construction Contracts

April 20, 2022 By Tayson Rockefeller Leave a Comment

We all know that construction costs are sky high with no relief in sight. This is creating issues for sellers, builders and buyers alike. This article is geared towards buyers purchasing existing spec homes, usually from a broker representing a builder. These contracts will usually include the building site, the construction and usually the landscaping. Obviously, working with a general contractor with a parcel that you own (custom build) is a separate topic, with different financing requirements.

Types Of Contracts
Historically, we have seen regular purchase and sale agreements that give the buyer an opportunity to review the finishes and quality of construction upon completion. That method has been almost entirely replaced with a non-refundable deposit up front with a provision for the contract to be canceled only if the completion is not done by a certain date. This leaves the door open for quality control issues and very little room for changes along the way. In addition, we are starting to see contracts with built-in price escalations based on material costs. This usually gives the buyer an opportunity to withdraw from the transaction in the event that the costs increase beyond the buyer’s budget, but I wouldn’t be surprised if there were agreements that locked the buyer into these potential price increases as well.

What’s Included?
In some cases builders working with brokers will use a traditional State purchase and sale agreement with an addendum or exhibit outlining items that are included in the sale along with the finish schedule, but sometimes they have builder contracts which can be daunting to review and understand. Regardless, it is important to understand what is included in the purchase price. A clear understanding of appliances, landscaping or partial landscaping, window coverings and other items in addition to the home and building site are important aspects.

Change Orders
It has become increasingly common for a builder to simply provide a finish schedule of materials used. Builders are also building in language for potential changes based on availability of materials in the event something needs to be substituted. The issue is that many materials are ordered far in advance and therefore cannot be changed. General contractors would historically hold meetings for finishes along the way, but with the lack of available materials, builders are finding themselves ordering appliances, tile and flooring, doors, windows and trim even before concrete is poured. In many events, this is limiting buyers to very basic modifications such as paint colors.

Financing
Unlike those working with a general contractor to build a home as opposed to buying a spec home directly from a broker or builder, conventional loans are typical. This simply provides that the buyer completes the appraisal and underwriting loan process after the certificate of occupancy is issued. This obviously opens the door to issues with interest rates. Buyers will want to be forward thinking and conservative based on their budget or debt ratios to ensure they can still qualify for the home they have contracted, particularly if they have a contract with a deposit that is not refundable. For those working with the general contractor directly, “one time close” loans can provide some reassurance and create a safety net, but these types of loans are not as common unless building a custom home.

Preparing For Closing
Another risk factor and major consideration are things that may or may not be included, and how to acquire those items within a reasonable time frame as you approach closing. Just like building materials, many items such as furnishings, window coverings, appliances that may not be included in the sale can be hard to find and/or have incredible lead times. Buyers have to weigh not only the risk of purchasing something for home that they don’t yet own, but also need to be careful about making large purchases on credit that may impact their debt ratio in order to qualify for their loan as they approach closing.

Brokers
As a final note, many of these spec home builders are working with the broker to take the direct communication element out of the equation so that they can focus on what they do best. Use your real estate agent’s knowledge to your advantage to help you understand all of the points above, and to create a homogeneous working environment with your lender to ensure a process that is as painless as possible. It is also very important to work with your broker to understand expectations and to be prepared for delays and changes along the way.

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