Purchasing Your Lake Property

Helpful Tips and Pre-Qualification

Are you considering the purchase of lake property? Many questions will run through your mind as you contemplate the acquisition of lake property. What do you know about the lake? What are the current market conditions such as pricing etc? What important information should we be gathering? Below we have assembled many tips and timely suggestions which will help you make an informed decision when purchasing lake property. Follow closely as we describe what can happen without planning and pre-qualification.

“Let’s head to the lake this weekend and scout things out.” This sounds so easy, unfortunately at some point during your trip, you might come to the realization that your excursion is not providing the desired results. If you feel the trip was unproductive, you probably did not invest the time required to determine your wants and/or needs.  Remember, lake property requirements will be quite different from that of your primary residence.

What do we do next? Below we have created a checklist. Use this checklist to thoroughly discuss each item of concern. Once you have worked through the process, qualified your opinions, determined a course of action, it is time to create a property acquisition timeline. Be sure at this point you have a clear picture of your lake property wants and needs. If there are multiple purchasers, make sure everyone is in agreement on your combined wants and needs.

?    Determine your lake property needs and requirements.

               Consider the following

                    Are water activities important?

                    Do you need to be close to services, marina,

            convenience store, hospital, etc?

            Depth of water, shoreline, docking facilities

            Views

            Developed – undeveloped areas

            Main channel – smaller creeks

            Restricted – Unrestricted property usage

                          Water access – gentle sloping or bluff views

            Age of home construction

            Design of home construction

            Boat – Swim Dock       

            EMS – Fire – Police Services

            Single lot - acreage

What’s different about purchasing lake property? The purchase of recreational property is quite different in several ways, when compared to the purchase of your primary residence. A major component when valuing lake property is the amount of water frontage.

 Several contributing factors which effect valuations:

         the type of view(s) offered

         depth of water

         location of the property on the lake,

         improvements to adjacent properties

         boat dock/swim pier permits  

Recreational property continues to be in great demand. In fact, recently compiled data indicates  that thirty-three percent of all improved property acquisition was  for recreational, or investment purchases. Buyers will continue to purchase second homes, vacation property, and vacant tracts as lending rates remain attractive.

If your purchase of lake property will involve financing, your first stop should be at a lending institution for the purpose of determining current lending requirements, ie. closing costs, loan to value ratios, down payments and credit verification etc. The lender will determine what amount of funds you can qualify for. Prepare yourself by contacting a lender(s) in advance to determine what documents/records you will need to bring to the qualification interview. Make sure you ask the lender if they make lake or recreational property loans.

?    Pricing

            Consider the following,

            What can we afford?

            Will the purchase be a cash transaction or financed

            How much can we borrow?

            Terms or purchase – what is acceptable

            Possible Owner financing

Once you have determined the amount of your investment in lake property, engage the services of a qualified realtor. Realtors can provide a wealth of pertinent information; after all it is their business. A qualified realtor will discuss your wants and needs in detail. This information, along with the amount of your investment, will help the realtor determine which properties will meet your requirements. Ask lot’s of questions, take the time to acquire information which pertains to your situation.

?   Questions to ask your realtor

                        Consider the following,

                        Current pricing of waterfront property – Cost per running foot

                        Permitting – Alabama Power, 

              County Health Department,

               Alabama Dept. Environmental Management

      Restrictions/Covenants – Subdivisions

      Pricing – New Construction – Existing Homes

      Identify Most Desirable Areas of Lake

      Building Costs

      Resale Trends

      Investment Returns – Lake Property

      Taxes – Insurance

      Homeowners Associations – Fees

      Utilities – Electricity – Telephone – 

                     High Speed Internet Access

      Marine Services – Boat Docks

      Education – Schools

What are the current trends with lake property in this area? Most of the information is good news! Lake property continues to hold its value. While appreciation of lake property has reached a plateau, many good buying opportunities now exist with our present market conditions.  A growing percentage of lake property owners maintain their permanent residence in other parts of the country. Within the past three years however, we have experienced an influx of boomers who now reside on Smith Lake full-time. Many have made the decision to leave coastal areas, with its high cost of living, and predictable severe weather patterns. Within the last eighteen months the market has turned into what can be described as a "buyers market". There are now many more sellers of waterfront property than qualified buyers. During the past year we have experienced an increase in the number of lake homes offered for sale in the upper price ranges (500K and up). Prices continue to increase with new construction. Currently, the cost of purchasing desirable deep water lake property has stabilized to the point, where typical lot prices start at approximately 130K. As a consequence, market conditions have changed, reaching a point where a growing number of potential buyers should reconsider their priorities. For some, the purchase of improved property is a practical alternative to investing in the stock market. For those who will use the lake infrequently, consider purchasing a lot, adding a boat dock/swim pier as a viable alternative to the purchase of a lake home.

If you are serious about lake property, don’t make the mistake of playing the waiting game, Smith Lake will not experience a wholesale decline in the cost of lake properties during the coming months. Current trends indicate our lake property valuation, over the long term, will continue to increase. 

Create your property acquisition time line. Once you have finalized your lake property requirements: investment amount, improved/unimproved parcel, build/existing dwelling, etc., it is time to create your acquisition timeline. Allow yourself plenty of time, many items on this list will require scheduling/rescheduling.    

?     Make appointment with realtor/attorney to write purchase offer on property(s)

                           Interview Lending/Mortgage Provider(s)

            (Gather necessary documents for loan qualification)

            (Complete loan application process, if applicable)

      Make appointment for home inspection, if applicable.

      Procure satisfactory property survey documents, 

      or order new survey.

      (If improved property is located in a floodplain, 

      flood insurance is mandatory, FEMA requirement)

      Make appointment for Termite/Wood Boring 

      Insect inspection, if applicable.

      Make appointment for certified septic tank

      inspection, if applicable.

                                                      (County Health Department must be present for inspection)

      Check on Homeowners Insurance premiums 

      for improved lake property, if applicable.

      (Include protection for watercraft/docks)

      Make application to Alabama Power 

      for a dock permit, if applicable.

Sharon Miller – RE/MAX Platinum, has provided specialized real estate services for buyers and sellers of Smith Lake property over the past seventeen years. Ms. Miller ranks among the top two percent of realtors in North America.    

Copyright © 2006 by Sharon Miller - Revised August 2011

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