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But… That Lot is Smaller!

November 27, 2023 By Tayson Rockefeller Leave a Comment

I know I have written about this before, and I’m sure there is an article buried in the archives harping on the same issues here, but I think it’s an important topic.

Whether you are a Seller looking to value your own land, or a Buyer looking to acquire land of your own in the Tetons, understanding what impacts value is extremely important. This comes up time and again, particularly when it comes to the size of a parcel when compared with another. While the size of a parcel can obviously have an impact on value, it may not always be as much as you think. As an example, the difference in value of a 2.5 acre parcel compared with a 3.2 acre parcel (despite a 20%+ difference) will often be negligible. To further elaborate the example, the value of a 1 acre parcel adjacent to a 2.5 acre parcel in the same development may not only be negligible, but in many cases the smaller parcel could carry significantly more value. With that being said, let’s go through my list of value considerations when comparing parcels or lots that are otherwise “like in kind”, such as those in the same development, or in nearby developments.

In particular order, and of most significance to least in terms of my opinion of value, take a look, below.

1: View. While I wouldn’t necessarily always put this attribute on top, it is often of great consideration, particularly in subdivisions comprising 1-5 acre parcels, which is a typical size throughout the county. A parcel with view protection by way of building envelopes, terrain, roadways or otherwise can have significantly more value than one with some type of obstruction, or potential for obstruction. This can become even more important when it comes to Teton views.

2: Location. I’m not necessarily talking about location inside of a particular area, but location compared with another property sale or listing. A parcel adjacent to a main county or state roadway would often be considered of lesser value when compared with one nearby that might have more privacy. Location considerations can also come in the form of nearby features, which leads me to the next point.

3: Features. As indicated above, features and location often correspond with one another. A row of trees, a fire suppression pond, a berm, canal or any number of property features (which don’t necessarily need to be on the properties themselves) can impact value or bring added value.

4: Subdivision Attributes. While the property that one might be investigating may not even be in a subdivision, the chances are likely that one in the market for a building site is going to be looking at properties that are. However, not all subdivisions are created equally. Some offer advantages such as paved roads or favorable covenants and restrictions. In many cases, properties with minimal restrictions or no restrictions at all can bring more value than one with firm design criteria or subdivision restrictions. On the flip side, a development with great quality as a result of a well-organized homeowner’s association with robust design guidelines can also create an advantage compared with another nearby development that does not. These considerations can come in many different shapes and sizes. Another great example is rental restrictions.

5: Environmental or Adjacent Property Considerations. Examples can be wide-ranging, but might include high ground water which could prohibit certain construction types or add cost to construction methods, nearby factors such as farm equipment or older homes, and so on. The list can go on from here, but like many of the other considerations above, can also dovetail with some of these other listed items.

6: Size. Last, but not necessarily always least as I prefaced in the beginning of this article, size. I hope this article has made it easier to understand why acreage and its impact on value can be deceiving. Remember that a larger parcel often carries the same benefits with respect to flexibility and rights that a smaller property may have. If you’ve read many of my other articles, you’ll know that typically when it comes to subdivision parcels, most properties can accommodate a single family home and guest quarters, whether it’s 1 acre or 100 acres. Further, splitting land can challenging and oftentimes impossible. Teton County’s land development code does not provide opportunities for additional dwelling units without specific and rare zoning considerations. While size can definitely have an impact on value, it needs to be significant enough to the point that it may no longer be comparable with another property. These limitations on smaller parcels could include room for livestock, limitations on building a barn, or providing ample space for a detached guest house.

Rental Analysis – How do I understand Rates and Projections?

November 11, 2023 By Tayson Rockefeller Leave a Comment

There is a lot to unpack here, and it’s important to know that rental markets change extremely quickly in the scheme of things. While COVID played a significant role in the short-term rental industry and our market locally, the long-term rental industry has been evolving at a fast pace as well. I’ve made some market predictions about both industries over the years and despite the outcome one thing is for sure, you don’t necessarily rely on what you hear today, because it’s inevitably (almost) always yesterday’s news.

Valuation
When it comes to valuing real estate, real estate agents (not appraisers and not offering appraisals) and appraisers use similar methods which include different types of valuation. The easiest, and most common is the comparable sale method. We essentially adjust the sales price of comparable properties based on differences between the property we are valuing and the property that has actually sold. Obviously markets change, so we generally don’t look back further than 6 or 12 months. The sales information is normally available mostly as a courtesy of the multiple listing service, a database of sales activity stored by local Realtor associations. Since Idaho is a non-disclosure state, counties often find difficulty valuing property for the purpose of tax assessment, so the public data is often skewed.

Depending on the area, rental data may be collected by a multiple listing service. However, in our area, it is not. The reason for this is based on several factors, but in my opinion it is primarily because Idaho does not require licensure for property managers. For this reason, property managers in the Teton Valley area are generally not members of listing services or Realtor associations, so they do not record the data. Even in Wyoming where property management does require a real estate license, much of the data goes unrecorded. So, how is the data tracked? Depending on whether we are talking about short-term or long-term rentals, there is some data that might be available, but often, you need to take it with a grain of salt.

Short-Term Rental Analysis
Much like the Zillow “Zestimate”, there are “data mining” companies and tools available that can help generate valuations even without multiple listing service data. Because Idaho is a non-disclosure state, Zillow does not have access to sales data. They do, however, have access to listing price data. Presumably when a property sells (even though Zillow may not have access to the actual sales price), they can make some assumptions based on market conditions, how long the property was on market before it sold and other metrics to estimate (or zestimate…) the sales price to help generate the “Zestimate”. There are similar tools available in the short-term rental industry available such as AirDNA and other data providers that are able to collect data. While I’m not an expert on AirDNA, my assumption is that they collect data from their own subscribers that report information, as well as data they receive from some of the marketplace giants like Airbnb and VRBO. I also assume that this data may be skewed based on what they receive. If it’s just a blocked calendar, one probably should not assume that it is necessarily a paying guest since it could certainly be a homeowner blocking their own calendar for personal use. Even though this data may in some instances be conservative, this is my best guess as to why we often find AirDNA provides data that may be unattainable in the real world (here in Teton Valley).

Long-Term rental analysis
This one is even more challenging. Not only are property managers not typically a member of the multiple listing service, but they rarely collaborate. This, coupled with the seasonality of long-term rentals (and short-term rentals, for that matter), can create some volatile expectations for both investors and tenants. Many years ago before the market hardly began to improve after the fallout in 2008, I distinctly recall many conversations with those trying to prepare studies and gathering data in order to do so. Similar to my life today, I was completely underwater trying to provide this data as a courtesy, often off the top of my head. While I’m generally pretty good at doing so, and can spit out fairly accurate information, it’s unlikely that any of the data was extremely scientific when it came to absorption, rates, and so on. While short-term rentals at least have some available information that might point to market conditions such as National software providers like Airbnb or VRBO, the local rental market does not. As a result, long-term tenants often find themselves jumping from property manager to manager and newspaper ad to marketplace listing to get a grasp on inventory, or lack thereof. I will give a shout out and link below a great effort set forth by the Community Resource Center of Teton Valley. They (painstakingly I’m sure) canvas the most well-known sources for long-term rental listings throughout the community and compile them into one list. It’s not perfect, and not up to date to the minute, but it’s pretty darn good.

The bottom line? When it comes to understanding rental markets in Teton Valley, trust your local professionals. While Realtors have a pretty good handle on most things around here (really, the local industry is lucky to have such a hardworking, professional and honest group) not all of them are heavily involved with property management. The best advice that I can give is to trust local property management companies. Similar to our group of real estate professionals in the area, all of the property managers in Teton Valley are extremely well versed and honest. Since I’m listing shout-outs (and yes, I do have an interest at stake here), Kerstyn at Teton Valley Property Management is amongst the very best.

Community Resource Center of Teton Valley

Teton Valley Property Management

My Property Isn’t Selling, What Should I Do?

October 13, 2023 By Tayson Rockefeller Leave a Comment

It’s funny how quickly markets change. Just yesterday (as I write this in October of 2023), properties were selling so quickly that buyers were all but waving inspections to get their foot in the door. I am also reminded of the changing landscape of the rental market, though I won’t rub it in with the “I told you so” comments for now. Regardless, and interestingly, prices haven’t budged much. This is mostly a product of supply and demand, but it’s also a different topic.

Speaking of prices, let’s get back to the issue at hand. Many property owners and Sellers haven’t adjusted to the market conditions today. Things are taking more time to sell. There is actually a way to calculate how long something should take to sell, and I have written several past articles relating to absorption. In addition, prices have adjusted. In some sectors of the market the prices have continued to rise, but most have stabilized, if not fallen as a result of affordability issues related to increasing interest rates. If you’re asking the subject question and you haven’t been educated on the average amount of time it takes to sell a property (or realistic valuations), then the answer is probably simple. Ideally, we set expectations before listing a property and take a realistic data based approach to valuation and where to begin marketing in terms of a listing price. The mentality of “we can always come down” can be more damaging to the prospect of selling a property than one might think.

This article, however, is aimed more at those considering not “what should I have done”, but “what should I do now”?

First; I would suggest evaluating absorption to make sure that you don’t have an unreasonable expectation. If the market data suggests that it’s going to take 6 months to sell a property, and you’re asking this question 3 months after listing, patience may be the answer.

Second; let’s take a look at pricing. If you made a decision to list at a higher number with the mentality that you can always reduce the price, it may be time to do just that. This being said, you may need to reduce more than you otherwise would have needed to. I would suggest taking a look at the original valuation, as well as market conditions that may have changed. Are we now outside of peak months? *Yes, I have an article on this as well* Have the interest rates now changed market conditions? The bottom line is that market absorption calculations only work with properties that are listed at actual market values. If you are provided with data that suggests that there is 6 months’ worth of inventory and a suggested listing price of $850,000, yet choose to list the property for $975,000, you can bet you are going to be outside of the absorption window. Additionally, those that provide this data, whether it’s an appraiser or a real estate agent, can’t control the market and they don’t always hit the nail on the head. It’s important to have follow-up discussions and plan your next move ahead of time.

Finally; let’s talk about seasonality. We talked about the seasons and how they can impact marketing time, but the seasons also come with… seasons. If you listed a property in July, and you’re making adjustments in December, it might be time to discuss updating the photography to something that doesn’t scream: “I have been on the market for 7 months!” This is usually most important in reverse, Winter photos should always be updated in the when things green up in the Spring or early Summer months.

Shared Wells, Are They Legal In Idaho?

September 20, 2023 By Tayson Rockefeller Leave a Comment

I’m going to call this a “read at your own risk” article based on limited knowledge of the subject, but I also feel the need to provide the data as it is so much different than what we have historically understood. The topic? Shared Wells.

Historically, multiple property owners have (or maybe thought they had) the ability to share one well with multiple homes. There is/was always a limit as to the number of homes which the Department of Environmental Quality would be involved for water monitoring. A separate entity that controls water in the State of Idaho, The Idaho Department of Water Resources (IDWR) position on shared wells was that most of the water would be returned to the aquifer, and a shared well between multiple homes was really no different than each home having an individual well as long as the usage did not exceed the state’s limitation for water usage for domestic water for each parcel without water rights, 13,000 gallons per day including up to 1/2 acre of landscaping.

Recently, however, an amended Snake River Basin moratorium for issuance of new water rights has created some challenges when it comes to shared well systems. A byproduct was (I assume inadvertently) prohibiting new water rights for shared wells. Since one parcel would be sharing a well with other unrelated parcels, legally, that apparently requires an additional water right with minimum CFS (Cubic Feet per Second) or diversion rate requirement to provide sufficient water to the additional homes. Since new water rights are not being issued, technically, in order to legally have a shared well, these owners would need to find an additional groundwater right that meets the CFS requirements or find a way to mitigate water from other areas, essentially by drying up other acreage.

Historically, many communities and municipalities have been able to share wells, but that would require municipal or domestic water rights. Since water rights are so valuable in Idaho, new developments with shared well systems that are not a part of an existing system or municipal system may become challenging, and that unfortunately trickles down to small systems including one to three homes sharing wells for the purpose of efficiency.

Stay tuned on this topic and (of course) do your own research on this contentious matter.

My data and source for this article was my interpretation of a conversation with an employee at the Idaho Department of Water Resources on September 20^th, 2023.

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