Resort & Second-Home Markets Course

RESORT AND SECOND-HOME MARKETS CHAPTER ONE 1.1

Resort & Second-Home Markets Course

Welcome to NAR’s


Only members of NAR may call themselves REALTORS and use the trademark.

• Help members become more profitable and successful

• Collective force influencing and shaping the real estate industry

• Leading advocate of the right to own, use, and transfer real property;

• Leader in developing standards for efficient, effective, and ethical real estate business practices

• Valued by highly skilled real estate professionals and viewed by them as crucial to their success.


Resort & Second-Home Specialist

•A real estate practitioner who facilitates the buying, selling, or management of properties for investment, development, retirement, or as second homes in a resort, recreational, and/or vacation destination.


RSPS Certification Requirements

1. Complete core course

2. Complete one of two options Option 1: Elective courses Option 2: Hold a designation—ABR, ALC,

CCIM, CIPS, CPM, CRS, CRB, GREEN

3. One-time application fee of $195


www.coursecalendar.com•Go to www.coursecalendar.com

•Search by date, location, topic, designations or certifications, and affiliation.


Course Goals & Structure

1. Skills and knowledge foundation2. Clients, customers, and properties3. Affluent or international buyers and sellers4. Building your business5. Overcoming bad publicity and disasters6. Tax and investment7. Regulatory matters8. Quiz

Essentials of buying, selling, or managing resort properties and second homes for recreation, investment, and development.


Learning Objectives

•Skills and knowledge foundation Developing the skills required to be successful Develop a business strategy Impact of trends and issues

•Customers, clients, and properties Market and customer/client profile Characteristics of properties Financing and ownership


Learning Objectives

•Working with affluent or international buyers and sellers Adapt customer and client services International referrals using the ICREA

Transnational Referral System


Learning Objectives

•Overcoming bad publicity and disasters Strategies to overcome bad publicity Formulate a disaster-recovery plan

•Building your business Develop and improve marketing strategies Communication and marketing tactics for

building customer and client relationships


Learning Objectives

•Tax and investment Investment terminology Tax treatment of second-home FIRPTA regulations Tax-deferred 1031 exchanges Analyzing the investment value of a property


Learning Objectives

•Regulatory matters SEC guidelines regarding investment advice Impact of regulatory, insurance, growth, and

environmental issues Sources of information Influencing regulatory and tourism entities to

shape a favorable environment


Learning Objectives

•Quiz 50 question multiple choice quiz Passing grade is 70 %


Definition

•Let’s Review . . . a resort and second-home property specialist is a real estate practitioner who facilitates the buying, selling, or management of properties for investment, development, retirement, or as second homes in a resort, recreational, and/or vacation destination.


Property Types• Single family residence• Condo• Condotel• Resort• Ranch• Luxury and unique properties• Fractional ownership• Time share• Vacation cabin• Gated community• Adult and senior community• City pied-a-terre


Buyer Objectives

•Property management•Investment•Retirement•Recreation •Enjoyment and relaxation getaway•Family gathering place•Appreciation potential•Tax strategy•Diversification


Discussion Question

•What property types and objectives do you encounter?


Resort & Second-Home Markets Course

CHAPTER ONE


In This Section

•Applying core real estate skills

•Using national statistics, trends, and issues

•Participating in community planning


Adapt Skills

•A distinguishing factor for resort and second-home property specialists is applying core real estate skills, combined with specialized knowledge.


Skill Map Regulatory Knowledge Fiduciary Duties Product Knowledge Customer Service

Financing Market Knowledge

Networking Marketing Presentation Skills Technology Use

Communication & Listening

Tax Issues

Investment Knowledge Community Involvement

Patience Negotiation


Regulatory: Must Be A Local Expert

•Be prepared to familiarize clients and customers with the laws and regulations affecting resort and investment properties.


Skill Builder Tip

Know the local codes and regulations

The specialist must be an expert in local codes, covenants, restrictions, and other laws that impact the purchase decision because buyers expect the practitioner to be a primary source of objective information. Since clients are frequently from another state or country, they typically do not have knowledge of the local laws and regulations affecting properties.


Product & Market Knowledge

•Product knowledge: Property Destination Environment


Financing

•The specialist needs to know about: Second-home down payment and qualifying

standards Approaches to second-home financing Helping a client evaluate options


Networking•A specialist’s network includes:

Builders Engineers

Surveyors Developers

Travel agents Tourist councils

Airline executives Property managers

Housekeepers Ranch hands

Hunting guides Marina managers

. . . . and others


Presentation Skills

•Maintain an appearance and personal style appropriate to the: Buyer Type of property Market area Transaction


Communications

•Know how to: Read nonverbal signals without the benefit

of being face to face Adapt communication approaches


Investment

•Know about a range of investments and how they compare to real estate in general


Skill Builder Tip

Patience is a virtueSecond-home purchases are always discretionary. Transactions can take up to a year or more to conclude; three-year long interactions prior to closing are not uncommon.


Fiduciary Duties

•May need to educate buyers on the state’s statutory fiduciary duties

•Must be comfortable with “mail out” closings


Customer Service

•Be prepared to provide a wide range of customer services

•Handle a range of aspects of the transaction that a residential buyer or seller would ordinarily handle on their own

•Spontaneity and flexibility are essential


Skill Builder Tip

Customize market materialsThe specialist must be able to customize marketing materials to feature the lifestyle or attraction that is of foremost importance to the client. Is the client’s interest in golf, water sports, or a family-friendly get-away? Customized marketing materials that appeal to a client’s interests will have more impact.


Technology Tools

•Must be comfortable with technology

•Have a disciplined follow-up system


Skill Builder Tip

Technology tools maintain contact

The specialist’s e-mail contact and follow up can serve to remind customers of why they were interested in the first place. It can also help them recall the last conversation and reduce the anxiety that distance creates.


Tax Issues

•Must be knowledgeable about: Tax treatment of second homes For investment For rental properties.


Community Involvement

•Should be active in community issues and local government

•Develop strong ties with local visitors and tourism organizations

•Serve as “ambassadors” for the destination


Negotiations

•Professional and non-adversarial manner

•Provide a neutral sounding board

•Absentee buyers and sellers or “gatekeepers” can present negotiations challenges


Who, What, When, Where, Why

•Who is the typical second-home buyer or investor?

•What kind of properties do they purchase?

•When are second-home and investment properties used?

•Where are second-home and investment properties located?

•Why and how do buyers purchase second-home and investment properties?


Buyer Profile

•Vacation-home buyer 59 years old Married, no children at living at home

•Investment-home buyer 55 years old Married, no children at living at home


Median Income

•Vacation Home Buyers: $120,600

•Investment Home Buyers: $98,600


Profile of Homes

•Single-family residences: 83% of vacation homes and 79% of investment homes

•Smaller than the primary residence Vacation homes -1,480 square feet Investment homes - 1,520 square feet


Time Rented or Owner-Occupied

•81% of vacation homes are never rented

•20% of investment homes are never rented


Distance from Primary Residence

•Median distances 220 miles for vacation homes 10 miles for investment homes


Is Every Second Home an Investment?

•30% of all buyers expect to convert their second homes to primary homes sometime in the future


Skill Builder Tip

Helping investors make informed decisionsWhile a real estate practitioner should be careful not to stray into the territory of offering investment advice (unless the salesperson is a registered securities dealer), salespersons need to be able to supply the information about properties that will help the buyers compare investment possibilities and make informed decisions about capital placement.


Sources of Down Payment and Financing

•Source of down payment for 3 out of 4 second homes is savings or equity from the previous home

•Savings as the #1 source

•Higher the price of the property the more likely it is to be purchased with cash


The “Typical” Buyer

•Vacation-Home

•Investment-Home


Marketing to Boomers & Gen X-ers

•Typical vacation-home buyer is a Baby Boomer

•Typical investor may likely be a Gen Xer


Use of a Real Estate Agent

•2/3 of second-home buyers purchased through a real estate agent or broker

•6 out of 10 hired the first agent they interviewed

•Buyers’ leading sources of information are real estate agents and yard signs


Why You Need to Know About Issues

•Clients and customers need and deserve complete information

•Community planners and regulators meet and communicate with each other

•What is an issue today in another area may become an issue in your market area tomorrow.

•Early warning system


Issues Ranked by Importance1. Dwindling affordable workforce and life cycle housing 2. Elimination of tax deduction for second homes for

state tax purposes3. Controls on growth by state and local agencies4. Availability of homeowner’s insurance5. Reduction and restriction of mortgage deduction on

primary home 6. Impact of environment restrictions on growth and development7. Short term rental restrictions 8. Cyclical and seasonal buying9. Threat of impending tax on commissions10.Mold11.Zoning ordinances12.Preservation of natural resources


Skill Builder Tip

The specialist is a primary information sourceIn many, if not most, cases the buyer of a vacation home or investment property will be from another area and will look to the real estate professional as the primary source of information about local issues and regulations.


The Short-Term Rental Debate

•Reasons – noise, competition

•Benefits – tourism, revenue, defray costs

•Impact – diminishes value, fewer buyers, private property right infringement, less housing stock

•Solutions – tourist zone, grandfathering, licensing, post owner contact info, fines for nuisance tenants


Impact Fees

•Fees imposed on new construction

•Earmarked for a specific purpose

•Increase the price of a property

•“Let development pay its fair share”


Growth Moratoriums

•Stop development and preserve an environment or the character of a town or area

•“NIMBY”

•May cause the sprawl it wants to prevent


Government-Owned Lands/BLM

•28% of land on United States

•80% of Nevada

•In western states experiencing the greatest growth rates: Alaska, Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, and Wyoming


Land Trust or Land Bank

•Local governments buy up and hold vacant land

•Prevent speculation

•Use as collateral

•De facto growth moratorium


Design Standards

•Preserve community character

•Increase property values

•Restrict construction

•Increases development costs and lead time for obtaining a building permit

•Can be exclusionary


Work Force Housing

•Critical in attracting and keeping a stable workforce

•Issue for teachers, police, firefighters, paramedics, nurses, and others who provide essential community services

•No single solution to this complex problem


Traffic Congestion

•Year-round residents feel the burden of seasonal traffic as they try to drive to jobs, school, and shopping

•Solutions may be growth restrictions, short term rental restrictions, and parking restrictions


Transportation and Access

•Major factors in sustaining property values

•Number of commercial airlines and the proximity of the airport

•Proximity to highways and roads

•Availability of alternative driving routes


MID

•Current deduction: interest paid on combined mortgage debt of up to $1 million on a primary residence and one additional residence

•Lower limits or elimination would likely force a steep decline in property values


“McMansions”

•Destruction of older and smaller homes to make way for new and larger homes

•Teardowns can raise property values

•Emotional “old versus new” conflict


Environmental Laws

•Most attractive areas are often in the midst of vulnerable natural environments

•Shore lines, wetlands, nature reserves, and woodlands

•When land availability is restricted the cost of housing increases


Environmental Liability Issues

•Be familiar with common environmental issues

•Look for signs of pollution or contamination during inspections

•Recommend environmental audit

•Reinforce the need for full disclosure


Major Federal Environmental Laws

• Clean Air Act of 1970 (CAA)

• Clean Water Act of 1977 (CWA)

• Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA)

• Endangered Species Act of 1968 (ESA)

• Federal Insecticide, Fungicide, and Rodenticide Act of 1972 (FIFRA)

• National Environmental Policy Act of 1970 (NEPA)

• Safe Drinking Water Act of 1973 (SDWA)


Hunting & Fishing Regulation

•Handled by the states

•Restrictions apply to size and placement of hunting blinds and deer stands

•Wild plant gathering

•Federal Duck Stamp


Sustainable Development

•Balancing of the beauty of the environment with the enjoyment of it

•Consequences of unchecked or non-sustainable development may not be immediately obvious, but will have an impact on the long-term viability and appeal


Takings and Inverse Condemnation

•Taking: government actions render a property unusable or inaccessible

•Inverse condemnation: government actions cause diminution of property value


Eminent Domain

•Prior: Assumed that a governmental body’s use of eminent domain was limited in purpose

•2005 Kelo decision

•Municipality eyes pieces of prime real estate as “ripe” for development and currently underperforming from the view point of community vitality and tax-base


Wind Farms

•Installations of large turbines, like modern windmills

•Wind action generates electricity

•Low impact & no use of fossil fuels

•Obstruct and detract from view


View Obstruction

•Obstruction of sunlight and scenic views

•Ridgelining


Mandatory Club Dues

•Adds to the cost of ownership

•Supports the amenities that make the community attractive

•Can create a barrier for prospective buyers who could otherwise afford the property


Flood Insurance

• Critical to the real estate transaction

• Insured property can sell at a considerable premium

• Property in federally designated flood zones can insure through the National Flood Insurance Program (NFIP)


NFIP

•Covers storm surge, wave wash, tidal waves, or the overflow of any body of water

•Excludes wind and hail damage

•Covers only structure $250,000 structure $100,000 contents

•Condos up to $250,000 per unit


FEMA Flood Maps

•FEMA maintains maps of U.S. floodplains

•Not always accurate or up-to-date

•Designation of a specific property or area can change

•Borrowers must show a LOMA or LOMR to the lender


Riparian Rights

•Rights of access and use enjoyed by a owner whose property abuts a natural body of water

•Uniformity of riparian rights among the states cannot be assumed

•Some do not recognize riparian rights


Boat Mooring

•Private boat dock commands a premium over properties lacking the facility

•Obtaining a mooring permit usually starts with an application to the marina’s harbormaster


Skill Builder Tip

Ahoy there!Find out the marina locations, harbor master contact, procedures, waiting time, and general costs for boat moorings. Knowing about regulations and procedures for boat mooring and anchorage is an important part of helping a client or customer understand how they will be able to enjoy their property.


Anchorage Rights

•Anchorage rights can become a controversial issue when boaters anchor for fishing and recreation next to the yards and frontages of expensive real estate


Houseboat Communities

•Live-aboard houseboat communities use berthing sites intensely

•“Floating homes” are an established part of the housing scene


Houseboat CommunitiesUpscale and Downscale

•“Guerilla” houseboat communities result in neighbor conflict

•May be part of the workforce housing solution


Homeland Security

•All financial institutions must implement a customer identification program (CIP)

•No specific rules affecting real estate brokers

•All business transactions, including real estate, are expressly prohibited with anyone (person or entity) on the SDN List


Skill Builder Tip

Check the SDN list periodicallyPeriodic checking of the SDN list is particularly important for real estate professionals involved in sale and/or leasing of commercial space and multi-housing units.

Go to:www.treas.gov/offices/enforcement/ofac/sdn


Community Planning Approaches

•Active participation in community planning

•Influence the direction of development

•Core skill and distinguishing characteristic of the specialty


New Urbanism Principles•Walkability •Connectivity •Mixed-Use and Diversity •Quality Architecture and Urban Design •Traditional Neighborhood Structure • Increased Density •Smart Transportation •Sustainability •Quality of Life


Charette Community Planning

•A design process that enrolls community stakeholders in intensive brainstorming and planning sessions to develop a shared vision for future growth

Resort & Second-Home Markets Course

Documents

Transcript of Resort & Second-Home Markets Course