Season Talk: Your Canandaigua Lake Investment
Questions often asked of me:
How are lake prices doing? Should I sell now?
Why are people selling? When is the best time to sell? What
is my place worth? When will the market turn around? Are my
assessment and taxes too high?
We lake property owners must view our cottage, condominium
or lake home as an investment. Just as most investments go through cycles,
so do lake property investments.
There is one major difference, however. We
can use and enjoy our investment regardless of the natural fluctuations
of the real estate cycle; we can still swim, fish, ski and enjoy the sunrises
and sunsets. No one ever makes us present a pass as we enter the
door to collect our dividends of pleasure. I have always maintained
that lake property pays intangible dividends of pleasure which can far
outweigh the paper returns of other more traditional investments.
We are aware that, for the most part, lake prices
have dropped since the phenomenal growth of the late 1980's. Fortunately,
the adjustment in our regional sales prices have not experienced the extreme
devaluation as compared to some national real estate markets. Yes,
there are those who bought during an unpredictable peak market and even
those who over-paid during the height of the market who find that, if they
must sell today, may have to take a loss or at best break even. Despite
these instances, there are still those properties (that are well located,
in very showable condition and priced right) which will almost always get
more offers, quicker and closer to their price. Some may even sell
within a week and some may even sell at a profit.
I have found the last two years to be banner sales
years for our real estate office. Owners wishing to sell their properties
today must ask themselves two very important questions. "Am I serious
about selling my property?" "Am I willing to price it at today's
market?" Keep in mind that what the owner and the Broker think the
property is worth has absolutely no merit. The only thing that determines
price is what a buyer is willing to pay for this particular property in
this location at this time. Therefore, analyzing comparable sales information
has become that much more important in understanding what buyers are willing
to spend in today's market for a property with particular features.
Buyers continue to become increasingly value conscious and are taking the
time to educate themselves about the market utilizing the same sales and
market information that is available to sellers. If you as the prospective
seller feel the time is not right, perhaps you can wait 2-4 years or 3-5
years (or whatever) in the hope of a stronger selling market.
If you are in a position where it is advisable to
sell, keep in mind that the overall market has not made a recovery; and
your particular property may be worth more today than tomorrow. Keep
in mind that, according to national relocation company statistics, you
are incurring an annual carrying cost of about 10% of the true value of
your property. (Eg. If your property is worth $240,000, your carrying cost
conservatively is about $24,000/yr. or $2,000/mo.) This carrying
cost includes taxes, insurance, maintenance and interest on your mortgage
- or if you have no mortgage, the lost opportunity cost of what your $240,000
cash could be earning for you had it been in another investment.
When is the best time to sell? Anytime.
The serious, qualified buyers are out there all the time. The "casual lookers"
usually come out in the Summer but very few of them buy. The "bargain
hunters" usually come out in the Fall to look for desperate sellers.
Of the serious buyers, some are more in a hurry than others for personal
reasons. Since some of these serious buyers are in search of a second
home, or an upgraded second home, they will cautiously take time to thoroughly
search the entire market. Over a lengthy period of time, they usually
buy at Canandaigua or at some other resort area.
Regarding Taxes: budgets determine tax rates which
ultimately determine our taxes. Over the past two years, I have generally
found assessments to be equitable with a minimal number of them too high
or too low. The system is not perfect, but every assessing office
strives to make its system equitable.
If you feel you are improperly assessed, your first
step should be to contact your assessor to review your property inventory
and comparable sales selections. If you are still dissatisfied, you
have the right to file a complaint (a grievance). The assessor's
office has forms and booklets for this process. However, it would
be helpful for you to include an independent appraisal of your property
and be prepared to have factual information to substantiate your claim.
-- Hearsay and neighbor talk does not count and could hinder your case.
Remember, if the area assessments are lowered and
the municipal budgets remain the same or increase, then the tax rate will
increase and you will find that your taxes will increase.
a difference the weather makes!
Economics and El Nino
Since 1997 there has been an increase in the
number of buyers visiting Canandaigua Lake largely due to the pleasant
weather. This trend is most apparent by the upturn in “off-season”
lake activity during this past winter’s unusual mildness. Buyers
thank El Nino for granting them the ease to visit the lake without having
to track through 2 feet of snow while coping with a wind chill index below
zero degrees. The market for seasonal lake properties was enhanced
by safe driving conditions, allowing potential buyers and real estate professionals
year round access to the more remote resort properties. Although
better weather has had an indisputable positive effect on the local real
estate market, much of the market’s success is credited to a concurrent
improvement in the economic climate.
This marked improvement in the national economic
climate has had a ripple effect benefiting resort real estate markets.
In particular, some of the major indicators reflecting this progress include
lower interest rates, low unemployment, moderate inflation and a record
setting stock market. These economic factors are largely responsible
for increased buyer confidence in resort properties. As a result,
many lake property potential buyers are experiencing a renewed interest
in lake living and are thinking now is the time to buy. Today, those
buyers who decide to purchase are finding that their most important requirements
for lake living are being met. From a supply perspective, the current
inventory of lake properties still offers a variety in prices, locations,
amenities and styles. This variety has been an important characteristic
of the lake market since buyers are increasingly studying and comparing
the inventory; and eventually purchasing those properties that they believe
are better located, maintained and priced. Educated buyers are then
using their knowledge to more confidently and effectively negotiate for
their investment on Canandaigua Lake.
Unique Factors: Buying and Selling of Lake Property
Many sellers are recognizing that lake properties
are not able to command the sale prices in the 1990s as they had in the
second half of the past decade. Increased scrutiny of market information
by buyers, uncertain future market conditions and their own personal motivations
are convincing sellers to negotiate for a fair price in the present market.
Only those sellers with what are considered “9 year prices” will continue
to display faded “for sale” signs. However, buyers should be aware
of negotiating too stringently because today they may lose their would-be
lake home, in the area of their choice at a price they can afford, to another
astute buyer. Oftentimes, a property that is priced right for a given
market excites more than one interested buyer who may be ready to purchase
that same property at a price acceptable to the seller. Remember,
lakefront buying may be 80% emotional; and if a buyer finds the exact property
they have been seeking, they will inevitably pay a 5, 10 or 15% premium
to guarantee their possession of it. Even at a premium, most buyers
come to understand that an investment in the lifestyle on Canandaigua Lake
can return invaluable dividends of pleasure!
It seems that the more expensive properties
always sell because there are a number of individuals always available
who can afford them. Similarly, there is always a market (especially,
as a secondary home) for the less expensive properties which meet many
individuals desire to allocate a certain budget for lake property.
The mid-price range of properties is most sensitive to the local economic
and financial environment. For example, several years ago the area
lost many of middle management buyers who would ordinarily purchase a secondary
home in the $100,000 - $300,000 price range. This was due to layoffs,
job uncertainties, career transfers or simply changes in lifestyle.
Many of these buyers are now reappearing on the lake property hunting scene
with difficult hopes of trying to replace their fine suburban homes with
lake homes of similar quality at the same cost. They are saddened
to find that at present these lake homes do not exist. To replace
a normal suburban home of $200,000 may cost $350,000 to $400,000 considering
you must add the price of the lakefront lot (could be $150-200,000) to
the acquisition cost. Most suburban buyers are not content to live
permanently in an upgraded or remodeled smaller cottage. Therefore,
there has been a higher demand for lakefront lots (which are very rare)
or for “tear down” cottages which still command a premium price because
of the lakefrontage. I invite you to take a drive around the lake
and view the new construction, upgrading and home improvements in progress.
Sometimes sellers and buyers of lake property
are one and the same. Having enjoyed their piece of the “Chosen Spot,”
certain long (and some short) time “lakers” place their lake
house on the market in an attempt to upgrade.
An upgrade can mean to a larger property to
accommodate a larger family or merely for personal
satisfaction. An upgrade may also be a downscale in property size
because of age, health, income, less maintenance, etc.. A smaller
property or condo/townhouse may be a suitable concept for buyers with similar
circumstances or objectives.
Sales comparison- 1996 Vs 1997
For those homeowners interested in recent lake
sales activity for Canandaigua Lake, I have put together a basic quantitative
comparison of lakefront sales in 1996 with those in 1997.
The following information was obtained from the local
assessors’ offices for the towns adjoining the lake. The selling
prices or changes in selling prices were not analyzed. However, the
data did indicate that total sales’ figures were higher in 1997.
This is most likely either the result of an increase in total sales or
an increase in sales of more expensive homes.
Number of Sales
Note: Excluded are townhouses, condominiums
and other lake access properties.
Just a word about assessments
The process of equalizing assessed valuations of
lake property continues to improve. The increasing knowledge of assessment
officers themselves, (due to improved field observation techniques, increased
use of computers with high-tech software applications and professional
training) is generating more accurate assessment valuations and, therefore,
fewer complaints. I once again remind you that if you have a complaint
about your assessed value, make an appointment with your assessor to review
your information. You will be most successful if you provide the
assessor with exact information or point out any incorrect information
on your property and, if necessary, have an appraisal to justify your case.
Hearsay information does not count! Remember these local representatives
are here to work with you and you will be treated fairly. If you
are still unsatisfied you may set a time to speak to the assessment review
In conclusion, 1997 was a banner year for lake sales
in my office.
Does that indicate a significant shift to more sustainable
positive market conditions? Are prices stagnant or is this the beginning
of an upward price trend? The laws of supply and demand will always
dictate. In the end, the dynamics of the lake real estate market
is subtlety affected by the supply of buyers serious about purchasing a
lake property in the near future vis-à-vis number of sellers committed
to selling in a specific market. Ultimately, both parties have to
proceed with a certain degree of imperfect information and a great deal
of common sense.
The only way you will find out how you will fare
in the market as a seller is to offer your property making sure it is priced
right and in the best possible condition. The best feedback for buyers
comes from their comparison shopping and accumulated market data which
should be used to draft a reasonable purchase offer. In either case,
be serious when testing the market because you may very well pass the test
and find yourself selling or owning lakefront property!
A Banner Year for Lakefront Sales"
by Nick Mendola
(Daily Messenger July 18, 1999)
From beginning to end, 1998 was a banner year
for our lake sales. Supported by a strong economy, low interest rates,
greater job stability and a pent-up demand, we succeeded in getting our
buyers to come out in full force. These serious qualified buyers
recognized attractive buying opportunities of properties at fair prices.
They also were able to conclude their negotiations so they could enjoy
the 1999 season on the lake.
The buying trend of 1998 considerably reduced
the lake inventory of homes, cottages, condos, townhouses and lots.
Unfortunately for buyers, as of this writing date, the inventory has been
only slightly replenished. Even the new 1999 offerings that were
well located, priced right and in showable condition have already enjoyed
We expect that the trend in lake property availability
will be that sellers continuously place properties for sale at scattered
intervals throughout the year. Market data from the last 5-10 years
reveals that the usual Spring and Fall increase in properties entering
the market is now more spread over the entire year. Sellers
are realizing that the serious, qualified buyers are constantly looking;
and as soon as a buyer becomes aware of the right property, they attempt
to buy it regardless of the season.
As the inventory is further diminished, the market
slowly reverts to a sellers’ market and property values can appreciate
at an accelerated rate. To paraphrase Will Rogers: “They aren’t making
anymore of it.” Meanwhile, demographic data confirms the increase
in demand for lakefront living throughout the nation and this demand is
expected to continue growing.
Sellers’ Perspective in the Dynamic Lake Market
If you are a seller with a property that has
not sold, it is important to review its condition and ask yourself if it
is properly priced. If you are considering selling, an experienced
lake broker can provide critical information necessary for a quicker sale
at the best price for your property. Keep in mind that today buyers
will be reviewing the same information while assessing a purchase of your
property. Information which ranges from: the intangible motivation
of sellers to tangible comparable data and the sellers’ costs in the property
including capital improvements, to extraneous factors such as accessibility
to the property and any changes in the overall neighborhood environment.
Any variables that could potentially affect the future value of the subject
property are increasingly being taken into consideration.
Remember to choose an agent who has experience
in selling Canandaigua Lake properties and has an established relationship
to the community. An agent, specializing in city properties or properties
located on other lakes, may not have intimate knowledge of this specific
area and certainly does not have a mature list of serious qualified buyers
continually looking for property on Canandaigua Lake. When
you are interviewing an agent for the sale of your lake property, you have
the right to know just how many listings and lake sales he/she has consummated
over the past year, 10 years, 20 years. References are a traditional
way to learn more about a particular agent’s reputation and work ethic.
You may also observe the number of “For Sale” and “Sold” signs by that
particular agent. Most importantly, be aware that it is the agent
who will be representing you in the sale of your property. That agent
should be knowledgeable from experience honed from an excellent history
of lake sales and relationships built over time with other professionals
in the area, such as attorneys, contractors and government professionals.
All of which are essential to facilitating a smooth and successful sale
in the wake of an increasingly complex process of transferring title.
Why should you ask if the agent has a broad inventory
of lake listing? Statistics show that only about 3% of the potential
buyers that call on a listing will ever buy that particular property; 97%
will buy something else. Therefore, an agent with an inventory of
similar listings can direct potential buyers to all suitable properties
at as early as their first contact. The economies of scale available
to this agent benefit sellers by significantly increasing the exposure
of their property in a given marketplace.
In many ways, the agent is more important than
the company representing you. Although the company name may have
gotten the agent to your door, your ongoing relationship with that individual
will be most important. Sellers can learn more about an agent’s strengths
and weaknesses by asking the following questions.
1. How long have you been fulltime in the Real
Estate business? In which areas and types of properties do you specialize?
2. How many properties have you sold? Where?
3. How many lake properties are you currently
4. How knowledgeable are you of this area?
5. How available are you to be reached by me,
potential buyers and by other agents who may want to show and sell the
property? Are your phone numbers easily available to all, especially
for weekend and evening showings?
6. Do you possess tools necessary to succeed
in today’s evolving real estate industry: specialized Internet site for
Canandaigua Lake property, computer software, cellular phone, fax machine,
voice mail, email, digital camera and equipment, etc.?
7. Do you have a centrally located office in
a highly visible location to attract walk-in business seeking property
in the area?
8. Do you receive continuous calls from buyers
looking for certain types of property?
9. What will be done to market the property?
(Open Houses, Advertising, etc)
10. To what value-added resources do you
have access to in order to facilitate an enjoyable, thorough and successful
sale, i.e. financing, resources for moving, school data, utilities, other
Please keep in mind that you will not only be
interviewing the agent, the agent will also be interviewing you.
The agent will be asking himself/herself:
1. Is this the kind of property I would like
in my selling inventory?
2. Are the sellers serious about selling or are
they just testing the market? – and what happens if it passes the test?
3. Are the sellers objective? Do they value
straightforward honest answers that are necessary to successfully sell
their property in a specific market at a specific period in time?
4. Are the sellers willing to price their property
at a level supported by today’s corresponding market values?
5. Is the property showable? Will they
make it showable or offer it at a substantially lower price to compensate
for its present condition?
Buyers’ Perspective in the Dynamic Lake Market
Although the trend may be edging towards a sellers’
market, sellers should heed a caveat. Buyers in the 1990s are considerably
more discerning than those of the 1980s.
The current market of buyers is much more analytical.
They scrutinize the comparative market analyses much more thoroughly and
review data more easily available at municipal databases and even provided
on the Internet. They do not want to be caught up in the 1980’s frenzy
to purchase lake properties at almost any cost when buyers occasionally
out-bid each other with offers that were in some cases over the asking
price. Today, some buyers consider the future viability of selling
a specific property, concerned that they will be able to sell their 1990
properties for as much or more than their current purchase price.
In most instances, today’s buyers are seeking
Engineer and Property Inspections including radon tests, chimney inspections,
pest infestation inspections, lead testing, etc. Where applicable,
(properties that do not have access to all public utilities), buyers and
most lending institutions are requiring septic system inspections, water
potability and/or flow tests. In instances where there are old septic
systems, their future use capability may not be adequate nor up to today’s
watershed standards and buyers along with the help of contractors and the
watershed inspector are researching new and more efficient systems so as
not to pollute the lake. Unfortunately, the zebra mussel situation
is also causing buyers to proceed with caution and take prospective measures
to deal with this problem. Water purification is an important requirement
for many buyers in order to be able to drink lake or well water; and their
investigation into such purification systems can be complex. The
aforementioned items have a monetary cost and buyers are aware that their
costs do not end with the purchase price. Additional discretionary
costs for personalizing, remodeling, redecoration and possibly an addition
to the structure further lead 1990 buyers to become in most cases extremely
cautious. Ultimately, buyers know that their efforts to make an investment
in lake property will be rewarded with immeasurable dividends of pleasure.
The market factors and psychological insight
into the buying and selling of properties in the lake market touched on
in this article only partially characterize the true dynamic nature of
the lake market. However, with appropriate information and competent
professional guidance, sellers who offer their properties in showable condition
and at fair market values will continue to enjoy sales in a reasonably
short period of time by receiving more offers, quicker and closer to their
price. Similarly, buyers who decide to work with professionals who
have an excellent history of specializing in a specific market will be
able to leverage their property searching and analysis resources.
Thus, this type of relationship guarantees an enjoyable buying experience
while securing a property that meets their needs, wants and investment