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Buying a Luxury Mountain Home – 11 Important Questions to Ask

buying a luxury mountain home

Buying a luxury mountain home in Summit County can mean not only quick convenience to five world-class ski resorts but also a legacy home for generations to enjoy.

Of course, you’ll want to locate your luxury mountain home in an area that is most appealing to you, whether that’s a ski in, ski out Breckenridge home or a luxury equestrian property north of Silverthorne. But there are a number of additional considerations – and important questions to ask – before you make an offer on a luxury mountain home.

I am a Summit County Realtor, certified Resort & Second Home Property Specialist (RSPS), and a long-time Breckenridge local. Additionally, I work alongside my husband, Ty Cortright, who has been involved in the construction of fine luxury Breckenridge homes since 1997.

Today I want to share with you some questions to ask before buying a luxury home in a mountain community, whether you plan to make it your primary residence or to occupy it as a second home or a rental/investment property.

Question 1: What is the real estate market outlook for luxury homes in this particular area/subdivision?

Generally speaking, luxury homes in resort communities, such as Summit County, are poised for long-term appreciation. After all, they are located in areas that are consistently popular among visitors and other second homeowners, so there’s consistently high demand.

In addition, the supply of homes in resort areas like ours is limited. Of the 619 square miles that make up Summit County, about 80% is public land – managed by either the Forest Service or the Bureau of Land Management. That leaves just 20% of land in Summit County to be privately owned and managed.

So, when you own a piece of property in Summit County, you buy something with great appeal and strong potential for resale value. You can realize strong appreciation over the long term. And, in the meantime, you get to enjoy the property, the vacations, and the tax advantages.

Of course, no one can predict the future and what the real estate market will do, but we can have a good understanding of the past. As of this writing, prices are trending upward. See today’s market stats.

Of course, all of our luxury properties and luxury subdivisions have statistics individual to them. Please know that you can always request the latest Market Report for the subdivisions you are most interested in. I personally create these reports, which feature properties currently for sale, properties under contract and sold properties, along with year-to-date and historic sales and trends. (Simply email me to request these.)

Specifically, you’ll want to understand the absorption rate for the luxury home market in the area you’re looking. Many times, the absorption rate for luxury homes is different from the market as a whole simply because you are among a smaller pool of buyers. It’s very possible for there to be a seller’s market for homes under $1M, while homes of $2M are experiencing a buyer’s market. A buyer’s market means a greater likelihood that you can negotiate on price and inspection items. You may even have more say over contract dates and deadlines.

Question 2: Have you considered all of the neighborhoods and areas that might appeal to you?

A good Realtor will be able to provide information and guidance about additional communities and subdivisions that may fit your criteria, simply by learning about your lifestyle and the type of homes you are looking for.

Here in Summit County, we have impressive luxury homes in Breckenridge, Keystone, Copper Mountain, Dillon, Frisco, and Silverthorne, as well as north of Silverthorne and south of Breckenridge. Each of these subdivisions and communities has a different feel.

When we first start talking, expect to have a long conversation about exactly what you are looking for. Are you interested in a historic property? New construction? In town or on a larger land parcel? Are gravel roads okay? I have a series of about 20 questions to get us started. We’ll talk about the real estate market trends in each of these various subdivisions as well as any new development and revitalization projects that may be on the horizon so you can get a sense for not only the current value but the future value, as well.

You’ll also want to make sure that you are considering the needs of everyone who will be using the home. Especially if you have in mind that the home will be in your family for generations, it’s important to consider the needs of all. If you have a number of older people in your party with any health concerns, you might want to choose a home at a slightly lower elevation, for example, or you might wish to look at properties with at least one bedroom on the main floor – or perhaps an elevator.

Question 3: Who designed the home, and who built the home?

Ideally, you’ll be working with a luxury agent who is familiar with the work and the reputation of the area’s custom home builders and architects. When I preview new luxury homes that come on the market, it’s the first question I ask, if I don’t know already – because it’s important.

Even if the home is not new construction and is outside the warranty, a luxury builder with a stellar reputation will do what’s necessary to keep that reputation and will often, at the very least, help you troubleshoot and solve problems. If you ever want to add on to the home, or do a remodel, it’s nice to have this information, as well.

Question 4: What community amenities/features are most important to you?

Just as with any property, when shopping for luxury, the “bones” of the home are going to be of utmost importance. You want solid, quality construction on a parcel of land that offers good exposure. You want a good floor plan, perhaps a timeless design.

Beyond these basics, there are bound to be particulars that the home does not have, but if these are easy to integrate, it doesn’t have to be dealbreaker. A home can often be retrofitted with modern technology (see below.)

It’s common in our luxury market to have stellar views and premiere locations, along with home theater, fitness room, wine room, gourmet chef’s kitchens with top of the line appliances (Viking, Subzero, Wolf), private hot tubs and outdoor seating areas with gas firepits. Expect to see outdoor kitchens, spa baths and steam showers.

Heating on luxury homes in Summit County is nearly always in-floor radiant and the building process here so prizes environmental building standards that you can expect to see a number of ecological considerations and features, especially in newer construction. These include passive and active solar, as well as “smart” features that allow owners to control lighting and window shades, temperature and humidity, electronics and entertainment, security systems and more either remotely or via an ipad on site (or both).

Again, some older luxury homes can be retrofitted with this technology fairly reasonably, but this might be something you want to get an opinion on before you purchase. One thing that can be difficult to retrofit: an antiquated heating system. If the luxury home has older heating systems or even certain in-floor heat tubing (a couple have had class action lawsuits), you might want to opt for a home that’s newer and potentially more efficient.

New construction is very popular in our luxury market, in part because it provides the latest in trends and technology, which can be particularly useful if you are not occupying the home full time.
A good luxury agent will help you understand what to look for in a luxury custom home, from the mechanical room to the roof design, and what problems you could potentially run into down the line.

And that leads us to another question: Nearly all luxury buyers have grappled with whether they would be better off buying land and building a custom home themselves. Your luxury realtor will be able to give you an idea of the current building costs and timelines as well as the general procedures you can expect in your area.

More Great Resources on Buying a Luxury Home:
Tips for Buying a Luxury Home, by Ryan Fitzgerald in Raleigh, North Carolina
8 Things That Must be Considered When Selling a Luxury Home, by Kyle Hiscock in Rochester, New York
Ten Tips for Buying Luxury Homes, by Debbie Drummond in Las Vegas, Nevada

Question 5: What are your likely costs for home care?

The HOA fees for single family homes will likely be fairly minimal, as there is often little in terms of common amenities and services. There are luxury subdivisions in our Colorado resort market with higher HOA fees, charged monthly (Cottages at Shock Hill, Columbia Lode, Angler Mountain Ranch cabins, Peak Ten Bluffs, and Muggins Gulch, for example) because they provide true lock-and-leave convenience and some even provide an on-site property manager. Services vary for each of these communities but they can be a nice option for luxury homeowners who come and go frequently throughout the year.

Keep in mind that, with so many second homes in our area, property management and home care is big business, so it’s fairly easy to make any property into one you can easily lock-and-leave – as long as you have a contract with a good caretaker who can make sure to take care of heat tape, snow removal, roof inspections and basic maintenance on your home. You can even have someone stock the fridge before you get here. I’ll help you with recommendations on professionals like this when the time comes.

Question 6: Do you wish to rent the home when you aren’t here, and, if so, what is the potential for rental income?

Luxury mountain homes in Colorado make for popular short-term rentals, and this rental income can help to offset the expenses of your mountain home. Among luxury homes in our community, it’s not unusual to see gross rental incomes in the six figures, and there are a great variety of vacation rental management companies and home care companies that can help you maintain and easily facilitate your mountain rentals, for a fee.

If you think you might want to rent your luxury home on a short-term basis, make sure you talk to your Realtor about this before the search begins. Some of the exclusive luxury subdivisions in our market restrict short term rentals, per the HOA.

And don’t forget to read my article “Luxury Subdivisions in Summit County with Strong Short Term Rental Income.”

In a resort market like ours, rental income can vary greatly, across the seasons and across the years. When we start looking at luxury mountain homes together, I can provide you with historic or projected rental income and we can talk about the outlook for the future in a particular subdivision. Read more about potential rental income or download my Summit County Buyer’s Handbook to learn more.

Question 7: What are the potential tax advantages of owning a luxury home?

I’m careful not to give tax advice, but it’s important to discuss your plans for buying a luxury mountain home with both your financial advisor and your tax professional. Purchasing a luxury home in Colorado may allow you to take advantage of certain tax deductions, and – if you rent the home, you’ll be able to take advantage of even more. (Read my explanation of potential tax deductions for your mountain property.)

Question 8: Has the home been tested for radon?

Radon is an odorless and colorless gas from granite deposits in the earth that contain uranium. This radon gas can move into your home, causing potentially serious health effects, including cancer. Many homes in Summit County already have a system installed to mitigate this problem (read more about radon from Colorado Department of Public Health & the Environment), but if the home you’re looking at does not, it’s important to make a note of that ahead of time and to understand the likely costs and strategy for mitigation. Radon mitigation is routinely done on new construction, and there is generally a way to mitigate on existing homes, but costs and effectiveness will vary, depending on the way the home was constructed. Summit County has free radon test kits, and you can have a radon inspection as part of your inspection process before closing. We can talk about that more as the time comes, as well.

Question 9: Is the luxury home located in a Wildland Urban Interface (WUI)?

A number of luxury homes in Summit County are in the Wildland Urban Interface: that zone that exists between unoccupied land and developed land where there is an increased risk of wildfires. If your home is located here, you could be subject to higher insurance premiums or even non-renewals or cancellation of homeowner’s insurance policies. We will make sure that your purchase offer includes a property insurance contingency, so you can verify that you will be able to find affordable insurance on the home.

As we look at homes, we will be looking at certain items to evaluate the home’s potential wildfire risk. The state of Colorado has published a comprehensive document with details on exactly how individual homeowners can reduce their risk, and we’ll talk about these details more as we start looking at prospective properties, but – among the considerations:

1. Roofing material. Wood and shake shingle roofs can be highly flammable. Instead, you’ll want asphalt shingles, metal sheets and metal shingles or tile, clay, concrete or slate shingles. Da Vinci and CeDUR are two companies that make synthetic shingles that closely resemble cedar shakes, and we are increasingly seeing these on new construction – and on roof replacements of high end luxury homes.

2. Defensible space. This is the area around the home that has been changed or modified to reduce the fire hazard. Wildfire experts set recommendations for tasks a homeowners should complete in Zone 1 (from 0 to 30 feet from the home); Zone 2 (from 30 to 50 feet), and Zone 3 (100 feet from the home.) See the publication noted above for specific recommendations in these areas in regard to tree spacing, pruning of tree branches, etc.

If you see that the home will require some fire mitigation after you take possession, it doesn’t have to be a dealbreaker (provided you can get reasonably priced property insurance on the home), but it’s a good idea for you to know what tasks may lie ahead. These tasks can range from simple and free to complex and costly – especially considering the cost of cutting and removing a single tree on your property can exceed $100.

Read more about purchasing property in Summit County’s Wildland Urban Interface.

Question 10: Are you planning to pay cash or finance?

Approximately 43% of the transactions in our market are paid in cash, but with interest rates low, many people choose to leverage their investment and finance. As a luxury buyer, you likely have existing relationships with loan professionals, but if you need a recommendation to a few good local lenders, just say the word.

With luxury condos, a local lender can help make for a smoother transaction in part because the underwriter will need to approve the complex and a local lender will already know which buildings are approved. Luxury single family homes in our market do not tend to have the same hurdles. Still our market does have its idiosyncrasies when it comes to financing. For example, right now, appraisals are taking an unusually long time so you want to make sure your lender is aware (and that your Realtor and lender are communicating), so everyone can understand what is realistic in terms of appraisal dates and closing dates.

It’s important to talk with your lender early in the process – even before you start looking for your second home – because a pre-approval letter will strengthen any offer you write. It’s highly likely that you will need to furnish some kind of letter from a lender early in the process of buying a luxury mountain home, or a proof of funds if you are paying cash.

As you know, with loans on a luxury property, even a fraction of a point can cost you or save you thousands over the life of the loan, so it’s nice to have some time to shop around, and perhaps get a recommendation on a lender who is based locally.

Question 11: Who will you be using as your Realtor?

Ideally, you will work with someone who understands the unique trends in the luxury home market. A realtor with contacts and experience in the luxury homebuilding industry can help you after the sale, as well, in case you’d like to do some future updates. A Realtor who is constantly showing and previewing luxury homes will help you to know where the best homes are for your unique situation and needs.

Again, I work alongside my husband, Ty Cortright, a great deal. He has 20 years of experience with some of the finest luxury homes in Summit County and, as we narrow down the choices on a custom home, it’s nice to call him in to walk through the homes with us. He lends a very valuable perspective on everything from the mechanical room to the roof design and everything in between. He can help point out the advantages and disadvantages of various features and is a great resource for my clients, from that initial walkthrough to long after the sale.

Please feel free to reach out to me anytime and we can discuss the possibilities for you in Summit County.

Here’s a little more information on how I work with buyers:

 

You might also like:

Breckenridge Luxury Homes Explore the luxury and ultra-luxury communities of Breckenridge.

Breckenridge Luxury Condos Learn more about the most luxurious buildings in Breck and see today’s listings. (Many of these units deliver exceptional rental income).

Tips for Buying a Second Home in Colorado

Purchasing Property in the Wildland Urban Interface

Real Estate and the Wildland Urban Interface

Purchasing property in a Wildland Urban Interface (WUI) brings with it some unique challenges and considerations.

Summit County, Colorado – the majestic home of Breckenridge, Frisco, Keystone, Dillon, Silverthorne, and Copper Mountain – has some of the most beautiful homes in the state. It is also a great number of properties located in the Wildland Urban Interface (WUI).

What is the Wildland Urban Interface?

The Wildland Urban Interface (WUI) is the zone that exists between unoccupied land and developed land. Typically, the WUI includes homes from 0 to ½ mile from this interface.

These areas are at an increased risk for wildfires. And that means property owners, along with local fire departments and insurance companies, have a great interest in safeguarding homes, in these areas in particular, against wildfire.

If homeowners don’t take action, homes in the Wildland Urban Interface could be subject to higher insurance premiums or even to non-renewals or cancellation of homeowner’s insurance policies. And if you’re thinking of buying or selling real estate in the Wildland Urban Interface, you need to know that a homeowner’s insurance company may even decide not to insure a new buyer.

Here are some things to consider when looking for property in the Wildland Urban Interface.

Buyers: Make sure your purchase offer includes a property insurance contingency.

The Colorado Contract to Buy and Sell Section 10.5 relates to insurability. It states in part, “Buyer has the right to review and object to the availability, terms, and conditions of and premium for property insurance.”

This section is important as it gives you, the buyer, the right to terminate the contract on or before the Property Insurance Objection Deadline, if you are unable to find property insurance that is satisfactory to you, in your sole subjective discretion.

Start the process of shopping for property insurance as soon as possible. Of course you want to know if your insurance company will insure the home, but you also want to know what to expect in terms of a premium for this WUI property.

If the property is non insurable or if the rates are cost prohibitive, you can terminate the contract and receive your earnest money back, so long as you do so by the Property Insurance Objection deadline stated in your contract. (Each state is different, so if you are buying property outside the state of Colorado, ask your agent about applicable contingencies for your state.)

If you need a referral to  homeowner’s insurance agents who understand our local market and the unique considerations for properties in the Wildland Urban Interface, contact me. I can provide some recommendations.

Buyers: Evaluate each home’s potential wildfire risk.

Much has been written about how to reduce the risk of wildfire on your personal property. The state of Colorado has published a comprehensive document with details on exactly how individual homeowners can reduce their risk (http://static.colostate.edu/client-files/csfs/pdfs/FIRE2012_1_DspaceQuickGuide.pdf) . Before looking at properties in wildfire prone areas, it’s wise to take a look at these mitigation procedures, so you can evaluate a home’s potential wildfire risk as you tour prospective properties with your agent.

Among the considerations as you look at homes in Colorado’s Wildland Urban Interface:

  • What is the home’s roof material? Wood and shake shingle roofs can be highly flammable. Instead look for asphalt shingles, metal sheets and metal shingles or tile, clay, concrete or slate shingles. (Note that some shake shingle roofs have been fire-rated and re specially treated with fire retardant polymers. Your agent should be able to tell you if this is the case.)
  • Are the roof and gutters free of pine needles and debris?
  • Are there unhealthy trees and shrubs around the home?
  • Have the owners/sellers created a defensible space around the home? “Defensible space” is the area around the home that has been changed or modified to reduce the fire hazard. Wildfire experts set recommendations for tasks a homeowners should complete in Zone 1 (from 0 to 30 feet from the home); Zone 2 (from 30 to 50 feet), and Zone 3 (100 feet from the home.) See the publication noted above for specific recommendations in these areas in regard to tree spacing, pruning of tree branches, etc.
  • Is there slash and debris on the property? How about a heavy accumulation of pine needles, twigs and other flammable organic material on the forest floor near the home? This material is termed “duff” and should be raked if deeper than 2 inches, especially near the bases of large trees.
  • Are there shrubs and small trees under large trees? These can carry a fire from the ground into the crowns of the trees.
  • Are there tree branches extending out over roofs and in the vicinity of chimneys?
  • Are there screens on vents in attics, roof, eaves, and foundation?
  • Is there a visible address sign at the road for fire and emergency vehicles?
  • Is the driveway wide enough for fire trucks to enter and maneuver?

Many property owners are learning more about defensible space and doing what they can to mitigate the potential fire danger of their property before they put their home on the market. As you tour homes in Wildland Urban Interface Areas, it’s a good idea to keep your eyes on the defensible space characteristics.

The considerations listed above are just a few things to look at. If you see that the home will require some fire mitigation after you take possession, it doesn’t have to be a dealbreaker (provided you can get reasonably priced property insurance on the home), but it’s a good idea for you to know what tasks may lie ahead. These tasks can range from simple and free to complex and costly (especially considering the cost of cutting and removing a single tree on your property can exceed $100.)

For Homeowners and Sellers

If/when you own the home, there are a number of tasks you can accomplish and resources you can take advantage of in Summit County to mitigate your wildfire risk.

Get a free defensible space evaluation.
In Summit County, your local fire department will visit your property and provide a free evaluation of the defensible space surrounding your home. It’s important to be aware that, once you receive this evaluation, you are not required to complete any of the tasks outlined, so don’t be scared to get the process started.

Depending on your area in Summit County, call:
Red White and Blue Fire Department (Hoosier Pass to Farmer’s Corner.)
970.453.2474

Lake Dillon Fire-Rescue (Dillon, Frisco, Silverthorne, Keystone, Montezuma, and Heeney)
970.262.5209

Copper Mountain Fire Department (Copper Mountain)
970.968.2300 ext. 831

Your local homeowner’s insurance agent may also be able to provide you with a free inspection for fire mitigation.

Take advantage of Summit County’s free Chipping Program.

Summit County helps its property owners create defensible space. When you clear the branches, logs and small trees from around your house and stack it, the county government will chip it and haul it away, all at no cost to you.

Visit www.co.summit.co.us/chippingprogram for more information and to get details on scheduling, starting in June and continuing through October.

It’s my sincere hope that this information helps you find your own special place in the woods. You can search Summit County homes and properties here. Or learn more about buying real estate in Summit County and Park County, Colorado.

You might also enjoy: 

For Buyers
Sign up for Free Email Notification of Properties that Fit Your Search Criteria.
Search the Summit County MLS
Summit County Map Search (Search for real estate by map)
How Susie Cortright Works with Buyers

Community Guides 
Breckenridge CO
Keystone CO

Coping with Low Housing Inventory

Four Tips for Finding a Home in a Low Inventory Market

Like much of the nation, Summit County is experiencing low housing inventory. But there are ways to cope with a tight housing market, and ways to increase the chances that you’ll find (and close on) the home that’s right for you.

When dealing with low housing inventory, it’s especially important to:

1. Get preapproved.

In a tight market, you want to be able to move quickly once you find the right home. By speaking with a mortgage lender before you even start your search, you do just that.

If you have a pre-approval letter ready to go – and ready to accompany a purchase offer – you will be giving the seller reasonable assurance that financing isn’t going to be an obstacle or an issue, and you’ll have a better chance of having your offer accepted.

Not only that, when you take the time to speak with a lender and get pre-approval, you’ll know, ahead of time, exactly how much home you qualify for, which can save you a lot of time in the long run. (Use my affordability calculator and mortgage calculator to get a ballpark idea. And contact me if you need a recommendation for a good local lender to get the process started.)

A preapproval letter from your lender is preferred over a prequalification letter.

What’s the difference between loan pre-approval and pre-qualification?
A lender may write a prequalification letter based on the financial picture you paint, without checking into anything. It is simply the lender’s estimate of how much you would be able to borrow if the information you gave is correct.

A preapproval letter, on the other hand, is usually something that has been verified by a third party. The lender generally issues this after you’ve applied for the loan and the bank has verified that the information you gave is correct. A preapproval letter says that the bank is ready to loan you a particular amount at a particular interest rate (as long as your financial picture doesn’t change before closing.)

At this point, you’ll also want to make sure your finances are in order and that you have a plan for securing your down payment. Do whatever you need to do so that you are ready to go when the right home comes along.

2. Find a Well-Connected, Creative Agent.

In a tight real estate market, it’s especially important to have an agent who is willing to get creative and dig a little.

A good, well-connected Realtor® will be able to find you properties you can’t find with a quick online search. She’ll have access to a wealth of information and resources that you might not have on your own. She may, for example, connect you with expired listings (properties with listing agreements that expired without a sale), withdrawn or canceled listings, and even For Sale by Owner options that you might not be aware of on your own.

Your Realtor® may also provide information on any New Construction developments in the marketplace, which may not appear in the traditional home-searching channels. She may send out “seller-wanted” mailings to the neighborhoods you’re targeting and network with other brokers about “coming soon” listings, as well as “pocket listings” (properties that are for sale but that, for some reason, do not appear in the MLS).

3. Sign up for Automatic Notification of New Properties.

Especially when inventory levels are low, it’s vital that you are the first to know about a property that fits your criteria.

Ask if your agent has a way for you to immediately learn about new listings. For example, I post Today’s New Listings here. I can also sign you up for automatic notification of new Summit County properties, to be sent to you the moment they come on the market.

If you’re in my market, you can sign up for these automatic notifications yourself here, or you can tell me what you’re looking for with this simple online form, and I’ll make sure you get signed up (as I also search the aforementioned resources on your behalf.)

4. Be Ready.

When you find the right home in a tight market, you want to be able to write an offer just as soon as you feel comfortable doing so. Go over the purchase offer paperwork with your Realtor® ahead of time — before it’s time to make an offer — so you know the process and the details of the documentation. If this is your first home, you can also familiarize yourself with the homebuying process by reading my article How to Buy a House.

These days, many of our real estate contracts are handled and even signed electronically, so you don’t even have to be in town to sign your offer. All you need is an accessible, reliable, tech-savvy agent.

Another tip for coping with a low inventory real estate market: When you do write your offer, make it as clean as you can. In other words, include only those contingencies that are necessary to protect yourself and your earnest money. (If you have a home you need to sell before you buy, it’s a good idea to get that taken care of first.)

With a little careful planning, you can still find a great home at a great price in a tight housing market.

If you’re searching here in Summit County or Park County, Colorado, I’m more than happy to help you personally. If you are out of my area, I would love to put you in touch with a well-connected and creative agent who can help you find the just-right home. Just reach out to me, let me know your location and a little bit about the property you’re looking for. I’ll do the rest.

Read my article, Why is Inventory So Low?

Related Resources:
Automatic Email Notification of Properties for Sale – Stay ahead with this handy tool.
Tell Me What You’re Looking for a in a Home (so I can find it for you…)
“How’s the Market?” Updates
How to Buy a House: A Comprehensive Guide
Summit County Real Estate FAQs

Inman: Why is Housing Inventory So Low?
Redfin: Why Aren’t There More Homes for Sale?

Search Summit County Real Estate >

Foreclosed and Bank Owned Homes in Summit County, CO

Breckenridge and Summit County, Colorado typically do not have many foreclosures, and, today, we have very few. Here’s how to be the first to learn about the distressed properties that do come on the market, and how to find great deals on all property. 

It’s a question that comes up a lot when homebuyers want to make sure they are getting the best deals possible. “Aren’t there any foreclosures or bank owned homes in Summit County?”

The fact is that, like other Colorado ski resort towns, Summit County typically does not have many foreclosures, and, today, we have very few.

Because the Breckenridge and Summit County real estate market features not just primary residences but also a great number of vacation homes and second homes, our real estate market has intricacies that make it different from other markets.

Sellers in our market may, for example, be less motivated to sell because there exists the possibility of renting out the home, in either the long-term rental market or the short-term rental market, until the market is more conducive to a sale at the price the seller wants.

Additionally, many of the homeowners in our market are not highly leveraged. If a property is purchased with cash or with a significant down payment, the rate of foreclosures is, of course, decreased.

While foreclosures, bank owned properties and short sales are not common in Summit County, they do happen. If you would like to be notified of these distressed properties, when they come on the market, please simply send me a message with the type of property and price range you’re looking for and ask to be added to my Foreclosure, Short Sale, and REO Notification Bulletin. I’ll send you a message each time a foreclosure – or other distressed property that matches your criteria – hits the market.

Foreclosed Homes in Summit County: The Process

So what happens when a home enters foreclosure in Colorado? When a homeowner is in default for a certain length of time on mortgage payments, a property will enter the foreclosure process.

Homeowners actually have a specified time to cure the default before the home is foreclosed upon. Many times, a homeowner will work out a solution with their lender. Perhaps their home will be sold through a short sale, a sale of property in which the sales price is less than the actual debt owed on the property.

But if the foreclosure process begins, it does so according to a very strict timetable, which, for Summit County, is explained in detail here: http://www.co.summit.co.us/DocumentCenter/Home/View/371

The Summit County Public Trustee Office schedules foreclosure sales weekly on Fridays at 10 am at the Old County Courthouse, 209 Lincoln Avenue, in Breckenridge.

To view all properties in Summit County currently in the foreclosure process, visit the Public Trustee’s Foreclosure Search at the Summit County, Colorado website: http://apps.co.summit.co.us/ForeclosureSearch/index.aspx

But keep in mind that properties can be withdrawn from the public sale auction all the way until this date and time (Friday at 10 am), so, many times, there are no foreclosures available to bid on.

When bidding on foreclosure sales, there will be a maximum bid increment announced at the time of the sale. This amount will be based on the initial bid set by the lender and the appraised value of the property from the Summit County Assessor’s Office.

In order to purchase a property at the time of the public sale, you must have sufficient cash, certified checks, or a wire transfer to pay for the minimum bid. Read more about foreclosure bidding policies in Summit County: http://www.co.summit.co.us/DocumentCenter/View/6971

Of course, it’s important to keep in mind, always, that at a public foreclosure auction sale, you are buying the property “as is.”

Bank Owned Properties (REOs) in Breckenridge and Summit County

Properties that are not sold during the public sale auction become bank-owned properties, also known as Real Estate Owned Properties (REOs). These can be good deals, but they are often priced competitively to ensure the bank gets as much as they can from the property.

When dealing with REOs, the bank typically has taken care of outstanding property taxes (though, of course, you’ll always want to do a title search to make sure there are no surprises.)

Also, know that inspections on Bank Owned Properties (and all distressed properties) are especially important because these kinds of properties could be in fairly rough shape and are sold “as is.” No matter how good a deal it seems you’re getting, you want to make sure you know what kind of repair expenses you’re looking at.

Another thing to keep in mind when purchasing a Bank Owned Property, the process will likely take longer than a traditional sale, so you’ll need to be patient. (Sometimes very patient.)

Finding Deals Outside of Foreclosures, Bank Owned, and Short Sales

Many people ask about bank owned and foreclosed homes because they think they offer the best buy, but that isn’t always the case.

Give me a call at 970.389.8338 or send me a note to learn more about distressed properties in Summit County or to discuss your other options for finding the best value for your money in the Summit County real estate market.

Absorption Rate in Real Estate: What it Is and Why it Matters

Absorption rate in Real estate

by Susie Cortright

If you read my real estate blog, you know that I love data. I love analyzing real estate statistics, mining for trends, and using this data to help guide my clients’ decisions.

Among other statistics, I often like to cite absorption rates for a particular price range or other segment of the Summit County real estate market. This is a useful piece of information because it reflects the liquidity of a market.

For sellers, the absorption rate can help us to know how best to price a property. For buyers, the absorption rate can help us to know how negotiable a list price is likely to be and how likely the seller might be to allow certain concessions.

What is Absorption and Absorption Rate?

There are two ways to look at Absorption Rates. One is as a percentage, and one is in terms of the number of months it would take to sell the current inventory in a given market.

Absorption as a Percentage

Absorption is the rate at which homes are selling in a particular market (or segment of a market) during a particular period of time. It’s calculated by dividing the number of home sales in a particular month by the number of homes for sale at the end of that month.

If there are 943 properties listed for sale in Summit County and, in the past month, 159 sold, the absorption is 159/943 = .168, or 16.8%.

Calculated this way, if the absorption is higher than 20%, it is commonly thought to be a Seller’s Market. If the absorption is lower than 15% it is a Buyer’s Market.

Absorption Rates as Months of Inventory

More commonly, we see Absorption Rates expressed in terms of months. In other words, it is the number of months it would take for the current inventory to sell, under the current conditions.

Defined this way, the absorption rate in real estate is simply the number of months it would take to sell the homes that are currently listed.It tells us the rate at which a market – or a particular sector of the market – sells over a specified time frame.

This sector can be narrowed down and defined as, say, particular price range or a particular property type. So we might look at the Absorption Rate for the Summit County residential market. Or we might look at the Absorption Rate for, say, Breckenridge-area condos under $750,000.

With a little analysis, these Absorption Rates can help us to identify Buyer’s and Seller’s Markets, and they can help us compare the current market with the historical market, giving us a sense of where prices may be headed. (More on that in a minute.)

How to Calculate Absorption Rates

Calculating the absorption rate of any given real estate market or market sector is simple arithmetic.

As an example, we’ll calculate the absorption rate for Summit County residential properties, taking data current as of today. (July 15, 2015).

Absorption rate is typically calculated using the previous six months (or 12 months) of home sales.

1. We’ll begin by looking at the number of home sales in the past six months. In Summit County, at the time of this writing, 761 residential properties have sold in this 6-month time period.

2. To determine how many sold per month, we would simply divide 761 by 6 = 126.83. In other words, an average of 126.83 homes have sold per month.

3. There are currently 943 residential properties listed for sale in Summit County. In order to determine the number of months it would take to sell this much inventory, we would, of course, divide the number of homes currently listed by the number of homes that sell each month. 943 /126.83 = 7.43. That means we currently have a 7.43 month supply of homes for sale in this market. If the present conditions continue, and if no new listings were added or withdrawn, it would take a bit over 7 months to sell all of the residential properties currently on the market.

Why Absorption Rate Matters

Absorption Rates are just one of many indicators and metrics that we can use to get a feel for the current market. They become even more useful when you look back on past absorption rates and see how they compare with the current rates.

We can then apply the principles of supply and demand to predict certain things about the real estate market.

If you are listing a home and the absorption rate in the market has just dropped, a Realtor may advise pushing the price a bit — listing for a bit higher — because there is a trend toward high demand and lower supply.

If, on the other hand, an absorption rate has just increased — in other words, if the number of months of inventory has just increased – the market has slowed and a listing agent may advise that the price be set more conservatively. She would also notify the client that there may be negotiations to bring the price even lower. The absorption rate in this situation is indicating a trend toward lower demand and higher supply.

Absorption Rates and Buyer’s and Seller’s Markets

The National Association of Realtors defines a Seller’s Market as that which has fewer than 6 months of inventory and a Buyer’s Market as that in which there is 6 or more months of inventory. Of course, every market is different, but, conventionally, we think of:

1-4 months of inventory = Seller’s Market

5-6 months of inventory = Balanced (or Neutral) Market

7 or more months of inventory = Buyer’s Market

Of course, this makes sense because, if there are a lot of listings and not many buyers, the absorption rate will be high, and this is good for buyers. Buyers will be able to aggressively negotiate prices and sellers will be more likely to resolve inspection items and give concessions.

If, on the other hand, there are not many listings but there are a lot of buyers, the absorption rate will be low, and it will be a seller’s market. This will be good for sellers because there will often be multiple offers on a single property, and the sellers will be less likely to come down in price or bend over backward on inspection items and concessions.

Niche Absorption Rates

What’s really useful about absorption rates is that we can calculate them based on very particular parameters — not just countywide, but using the data for particular price ranges or property types, even using square footage parameters, or the number of bedrooms.

This data tells us, among other things, which kinds of homes are selling the fastest.

In Summit County, for example, the absorption rates vary significantly from one price range to another. With a price range of $0 to $200K, the absorption rate, in months, is 2.5. In the price range of $2.8M +, its close to 40.

What are Today’s Absorption Rates and Months of Inventory?

For current absorption rates and months of inventory data in Summit County, Colorado, contact me. I’m always happy to run the data that is most relevant to your particular situation and that will help guide you in your real estate decisions.

If you live outside Summit County, I’m happy to help you locate a knowledgeable Realtor. Reach out to me and let you know what you need. I’ll do everything I can to help you.

** If you own a property in Summit County, request the latest Market Report for your complex or subdivision. This report will feature properties currently for sale, properties under contract and sold properties, along with year-to-date and historic sales and trends. These are nice to look at, even if you are not planning to sell anytime soon, and I’m happy to provide them. Just email me. **

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