Upstate Buyer: How to prepare to purchase a second home

As with our neighbors the bears, spring also stirs increased activity from second home buyers. So if you’re emerging from hibernation and contemplating an Upstate house buy, here are some things we’d recommend you address to make your search the most pleasant and efficient. There is also a bit of strategy advice related to sales prices and bank appraisals that we think could make the difference in your walking away with the keys.

UNDERSTANDING THE AREAS
I’d highly recommend logging a few weekends “researching” the hubs to get a feel for what’s on offer beyond the houses in different parts of The Catskills and Hudson Valley. The vibes can really vary between region. Do you like to ski and want rugged, mountainous terrain, or does bucolic rolling farmland send you? Are you excited to plug into a community’s activities and organizations, or is a quiet country escape the goal? Shopping and restaurants: How far are you willing to drive for a quart of milk? Do you need to be in the hot and trendy towns, or will a 30 minute drive suffice? Rent and play local for a few weekends and you’ll get a sense of what your priorities are.

TO RENOVATE OR NOT TO RENOVATE
One of the key questions I ask buyers is their tolerance for renovation. Particularly in Sullivan County, an area in transition, there is still a lot of inexpensive inventory that needs upgrading and updating. If you are willing to put in the dollars and the effort, it is a much less competitive space. Overwhelmingly buyers want a home to be as updated to today’s style and standard and as turnkey as possible, which is why a “modern farmhouse renovation”, for example, is sure to garner an above market price. So being able to see the potential beyond the shag rug and mirrored closet doors, or to take a seasonal pad and make it a year round charmer, means you will see far less competition when you go to make your offer.

BANK PRE-QUALIFICATION
Speaking with a bank is important for two reasons: First, you’ll learn not just what they deem you can afford to purchase the house, but they’ll share details like closing costs, and will widen your awareness to understand that the mortgage payment should be considered along with taxes and insurance (and possibly fuel) to really understand the size of the financial “nut” you’ll need to cover.

The second reason is that you want your ducks in a row, with a pre-qual letter at the ready, for that moment when you find your dream house. It can be a very competitive market, and bidding wars on the most desirable houses is common, so the ability to act swiftly is key.

We recommend using a local/regional bank, if possible. Local banks understand the quirks of our country housing, including spring-fed water , cesspools and other items that national banks might not look kindly on. Please ask for suggestions and we’ll happily share a number of names that actively write mortgages in our part of the world.

CASH IS KING (This is the strategy item)
This recommendation is finance-related, but is really about strategy. It is often the case with those properties that tick a lot of the market’s boxes (great kitchens, bathrooms and windows; on-style fixtures, land that’s been maximized for usage and enjoyment, etc.), that buyers will offer to pay more than the bank will subsequently appraise the property for. I’ll post a separate blog that explains why there can be that disconnect, but that’s when you need a reserve of cash above the 20% down that banks conventionally require, to have a stronger chance of being the winning bidder.

An example from several years ago: I was marketing a 932 square foot lakefront cottage. 2 bedrooms, 1 bath, gut renovated to a very high standard. “Overbuilt”, really, given the square footage. Stone fireplace, bank of French doors out to the deck, with a sprawling lawn that stretched to the water’s edge. The first buyers I showed fell in love with it. As we sat on the dock I explained that at $450,000 (listing price) it would certainly not appraise, but that in terms of the market, I was confident a buyer would still buy in this price wheelhouse.

I put them straight on to a mortgage banker I’d dealt with many times, and her advice was to go straight to the appraisal, before anything else, including the inspection, which they did. It came in at $350,000, which, frankly, was higher than I expected.

Then the question was how much the buyers were willing to put down in “additional cash”, that is, above and beyond the 20%, to reach an offer price that the seller would accept. Their answer was to offer $50,000 above the appraised value (total $400,000), and we got that deal done. So they paid 20% of the $350,000 bank valuation ($70,000) plus $50,000 in cash and financed the rest. The $120,000 cash translated to 30% down.

If you find yourself smitten by a property that is catching other buyers’ eyes as well, one of the best tools you can have in your toolbox is the ability to put down more than 20%, allowing the seller to get a strong price (from you) while eliminating or reducing their appraisal risk.

For more information on any of these items, please contact us or reach out to your Country House Realty salesperson directly.