A look at the second half of 2020 in Smoky Mountains real estate

As we move through the second half of the year, many of the people who contact us about buying cabins first ask if the challenges from COVID have affected the market. It’s a great question, and something we are constantly monitoring. The answer, though, is not really. The condition we were in with our market through most of 2019 still holds true today. We have a shortage of properties – especially with vacation cabins – and a flurry of ready, willing, and able buyers who are looking to own a second home or investment property in the Smokies. I do still expect there to be some people who need to get the cash out of their cabins for other life pursuits and may be under some pressure to sell, but this is still a sellers’ market. I don’t foresee that changing this year.

The number of buyers hasn’t dropped off, either. This is due to lowered interest rates on financing and a strong tourism market that keeps the rental cabin business profitable. Cabins are booked solid through September and we are seeing an uptick in the number of visitors to the area. Many of those bookings have been scheduled at the last minute. Our guests can stay in a cabin and practice social distancing just as easily as they can at home, so many people find that appealing.

New construction is still an option, too. It’s taking a little longer and it’s still as painful as ever. We’ve seen price increases in lumber and other materials, but lenders are still offering loans on new builds and the rates are as competitive as buying an existing cabin. So, it’s still a viable option if you’re in the position to be patient with the process of waiting to make your money back while it’s being built.

The most important thing to keep in mind is that the rental vacation market is still very strong. We are excited for people to come and visit our area, enjoy the national park, and enjoy the comforts of our vacation cabins. Just remember to be wary of your surroundings, be respectful of our residents and other guests in what is a difficult, stressful time for a lot of people, and bring your mask. But most of all, enjoy the treasures that are here, and enjoy the time with family and friends who come with you!

Newly built in Starr Crest Resort

The incredible craftsmanship and attention to detail creates the perfect blend of Smoky Mountain cabin getaway and contemporary rugged living in this 3-bedroom cabin! Its 180-degree (and then some!) views of the Great Smoky National Park from the 3 stories of decks, its soaring cathedral ceilings, handsome grey-stained tongue-and-groove wood floors, and modern finishes all bring this masterpiece together. The main floor boasts a spacious and open kitchen as well as dining and living spaces for easy entertaining and gathering. The generous master bedroom on the top floor features a wall of glass for privacy and allows you to take in the view while lounging in bed. The downstairs offers a common game and sitting area along with 2 bedrooms and full bath including a double vanity. All cabinets and vanities are painted maple with soft close hardware from Maddron Cabinetry.

This cabin, built this year, is located in Starr Crest Resort – one of the most popular resort destinations in the Pigeon Forge area!

Click or tap here to learn more about this cabin.

To schedule a showing, contact our team at 865-654-2111.

Entering a new season in 2020

I hope you and your family are staying safe as we navigate the global challenge of the coronavirus.

As a cabin owner, it’s important to me to keep you updated as to the values of your real estate in the Great Smoky Mountains. This is a very unusual time, and a very difficult time to predict what the aftermath of this crisis is going to mean to real estate values. However, we do have data from our last challenge with the National Park Wildfires. And, we have insights that we gained as we worked our way through the national economic downturn more than 10 years ago. So, we can see ahead at least to the end of this year.

To understand it a little better, let’s look at where we were right before this all began. We just came through the first quarter of 2020, with record sales and high values. Visitation to our area and occupancy rates broke records. We saw over 12.5 million visitors to the National Park (setting a new record). We climbed to the top of the market in terms of property values and reached pre-economic downturn figures. Inventory continued to be down being a part of keeping values high. Then the coronavirus happened…

So what to expect?  Of course April and May will be very extremely quiet. The National Park is closed at the moment as well as all our large venues, Dollywood Theme Park, our shows, our convention centers.  Rental income will be fairly dismal.

We believe two new sellers emerge out of this crisis.  Most of our cabin owners have significant equity in their cabins. We are fairly certain that there is going to be flurry of cabin sellers over the summer. These new sellers are going to use their cabin equity through a sale to help their families heal financially. The other seller is a second home owner who did not make a purchase that pays for itself and will need to sell as their discretionary income will not allow them to continue this luxury as the rental market makes a comeback. It will be about the middle of the summer before these sales will be recorded. This is important as these sales will almost surely drive values down. However we expect there to be continued demand among buyers.  So it’s not likely that we will see dramatic shortsales or high rates of foreclosures the way we did in the downturn. We believe that lending will continue to offer low rates making it attractive and possible for buyers to purchase. We think some of the more creative loans will disappear and banks will become more conservative on terms and approvals of loans. But healthy sales will continue but not at the level of 2019.

Therefore, we are going to recommend that if selling is to your advantage you go ahead and get ahead of this group.  If you are in a position to hold your property we recommend that you remodel, deep clean, enjoy your property. We are here for you if you want to discuss this in more detail.  We are working from home at the moment! But so are you! My cell is 865-765-6157, or you can email me at deborahkorlin@gmail.com – text is always wonderful as well. 

In the meantime, if you have time and want to read more sign up for my monthly email newsletter and get on my blog site.  I will continue to follow the results of this crisis and what it means to Smoky Mountain Real Estate values.  We will also update you on events as we open the National Park again and all our attractions, shopping and restaurants in the Gatlinburg/Pigeon Forge area.  We will also list investment opportunities as they appear, featuring homes and cabins currently on the market.  If you have money to invest in a cabin, let us know that as well. We have sellers who won’t list their properties on the market  publicly as they do not want their rental company to withdraw marketing efforts but they would sell.  They want to buy stocks – imagine that. They expect a rebound in several years, believe they will double their money, and then return to the Smokies to build some more over-night rental cabins with their profits! 

Goodness! It’s a crazy time no doubt!  My company and I sincerely hope and pray you are weathering this storm well and I know we will all appreciate the sunny days ahead.

Making the Most from Your Cabin Investment

As we near the end of 2019, we’re reaching that time of year where cabin owners who are thinking about their taxes in the spring make the decision to sell their investment/vacation property. Maybe that’s you. In terms of where the market is at, this is the time if you’re thinking about selling.

In my November blog, I talked about why that is true. Low inventory coupled with a flurry of buyers that hasn’t really slowed down despite the lack of properties to choose from has resulted in a resurgence of new construction. 2020 will be a season of building and property values will start to plateau once the construction projects takes root. So if you’re holding an older cabin, now could be a super good time to take advantage of the cycle and sell it. You can purchase something new for just a little bit more. 

The question we are hearing from our buyers and sellers now is how long until we reach the top of where cabins can cash flow positive? Until about two years ago, we were seeing cabins gross roughly 15 percent, on average, of what they sold for. So this means a cabin that sold for $200,000 was yielding a return of about $30,000 gross rental income. Then you’d have the split with the rental company if you were using one, and pay your expenses from your net income. That amount would vary based on taxes, HOA dues, amenity fees, etc. Now that same $200,000 cabin is likely to sell for $325,000 but with about the same gross rental income. You might be able to negotiate a slightly better split with the rental company, but you’re probably looking at around 10 to 12 percent of the sales price in gross rental income, rather than 15. So it will still provide positive cash flow.  We have also seen gross rental revenue increase in cabins that were upscale, fully outfitted and had amenities like a fire-pit;  therefore it is possible that the reduction is actually an increase for some.

So when will we plateau, or slow down in terms of market prices?  I believe it is likely when the purchase price rises to the point that the revenue only covers costs and no longer makes an income.  Then our properties become attractive to those who desire a true second home. Those in the market will be owners who only want revenue to defer some of the cost, whereas a true investor will look elsewhere for passive income. It will be much like you see at the beach where those who are wealthy and have discretionary excess income purchase a second home for their enjoyment and if rentals defray maintenance cost and HOA dues they’re pleased. 

But right now is a wonderful time to sell high if you bought low and a wonderful time to buy something that will cash flow positive pay for itself and give you a tax write off.  Where else can you stay in your investment and watch the sunset? Not in your stock and bonds!

If you’re thinking about buying a rental cabin as an investment, there’s a win for you, too. What’s important is that you buy sooner rather than later and prepare to hold it even if the market plateaus or enters another downturn. Even in the downturn more than a decade ago, our clients who prospered through it did so by using the rental income to pay the cabin off. Then, they waited until the market was on the upswing before selling. Even in those years when property values were low, rental income didn’t change.  In a downturn we become an even more attractive destination.  Vacationers who were going overseas playing in the Caribbean decided to stay closer to home and to drive to their vacation destination rather than fly. Americans believe in vacationing! It’s very close to mom and apple pie. And since we are within a day’s driving distance to 75% of the population of the United States.

Whenever you can it is always a good move to own the latest, greatest, newest, largest in short to have the best.  And sometimes that means remodeling, refreshing, or just buying new. As time marches on, make sure your investment stays strong and at the top of its potential performance! 

My team and I are always here to answer any questions you may have about our local real estate market. Call us at 865-654-2111! We would love to talk with you! We never mind giving you specific values on your property so you can make informed decisions. 

Vacation rental cabins provide great investment opportunity

Our real estate market in the Great Smoky Mountains is known among investors as one of the top 10 places to invest for overnight rentals. Vacation cabins are incredibly popular, and we attract millions of visitors every year. What makes this region such a draw for so many is the variety of offerings. We have the Great Smoky Mountains National Park at our doorstep. Pigeon Forge and Gatlinburg work to be the absolute best at hosting festivals, parties, and other events. Outside of the holiday festivities which always leave our rental market “sold out,” our local communities play host to car shows, concerts, and all sorts of other activities throughout most of the year. On top of that, our local attractions – Dollywood is well known, but also the museums, go-cart and miniature golf, and many other family-themed local businesses that cater primarily to our visitors – provide plenty of fun and entertainment.

So over the years, the vacation rental cabins have added to the experience of being in the mountains. Our rental companies have worked hard to continually develop the cabin model so that it best accommodates guests’ needs, from everything to including game rooms with pool tables to the eventual construction of indoor swimming pool areas within cabins. The goal has always been to make the cabin as appealing as possible to guests so that it stays booked as many nights of the year as possible.

If you’ve been seriously thinking about buying a vacation rental cabin and have been watching our market these last few months, I’m sure you have noticed the trend of our region as a sellers’ market hasn’t slowed down from a year ago. In an article I wrote a year ago, I shared with you that the number of available cabins on the market had begun to slow. Since then, we’ve seen that number continue to decline while the prices have continued to climb. As the prices have reached a point that is almost in line with the price to build a new cabin, we have seen building begin to make a comeback this year.

The good news in this is that even as the prices rise, the number of tourists visiting our region has risen with it. What’s more, we’ve seen the number of people staying a little further outside Pigeon Forge rise with it. In March, local media were reporting record numbers of visitors in places like Wears Valley, as there are ways into the National Park from that side of the county that have begun to be discovered.

For sellers, the important thing to remember is that as construction continues to ramp up, the window of opportunity to sell your cabin will begin to close. Eventually new construction will be as appealing as buying something existing, so we expect to see prices level off – not drop, but stop climbing as buyers shift to a building focus. For buyers, the important thing to remember is that even though the deals of yesterday are gone, cabins are still a very strong investment option thanks to our thriving tourist industry.

If you are planning to buy or sell a cabin, or build a cabin and would like to more about the current market, my team and I are always here to help! Call or text us at 865-654-2111 and we will be glad to answer any questions you have!

Buying in a sellers’ market

sellers marketAround this time last summer, I shared with you that we are living in a sellers’ market in the Great Smoky Mountains. One year later, that fact hasn’t changed. The number of properties available – particularly vacation rental cabins, since that is our primary residential market in this area – has dropped below where it was last year while the number of buyers looking hasn’t. In fact, the interest among potential buyers has continued to increase, which has in turn continued to drive up the prices of available homes. This is great news for your if you own a cabin and are considering selling it, but it has proven to be somewhat frustrating for buyers who find the prices to be a little more than they were planning or who don’t want to make a seemingly impulsive decision and end up either missing out on the cabin they love or just giving up on the idea completely.

However, if you’re in love with the dream of owning a vacation cabin in the Smokies, there’s hope. There are things you can do and ways you can approach the opportunity, even in this market. The three things you want to focus on is making the successful bid, making it make sense with your investment plans, and making sure the decision to make an offer doesn’t feel impulsive (if like many of us that is an area you struggle with).

Study the market ahead of time. We frequently send out listings via email to people based on criteria they provide us weeks, even months, ahead of their plan to visit the area and pick a cabin. Of course, just about everything you look at now will be under contract and/or sold before your trip in the fall. However, the more you know about what’s on the market and what the prices look like before you make the trip, the easier it will be for you to spot exactly what you want when you go inside the home or cabin that will be for sale when you get here. And it won’t feel quite so impulsive when it matches something else you saw weeks ago that you really loved online.

Ask your agent to preview the home. When you live in another state, making a day’s drive on a Tuesday afternoon to see a cabin Wednesday morning before driving home in the afternoon so you can be back at work on Thursday isn’t always the most practical. If you don’t have a way to view the cabin before Friday afternoon, it might be under contract by then. So one of the services we offer our clients who we know are serious about buying a property is to go and check it out for them. We know what they are looking for in a home or cabin and can usually send photos or videos, or give a call while we are at the property walking around. Then, you can make an informed decision about the specific property and if you like it based on your agent’s feedback, be able to go ahead and make an offer following the tips I suggested last year.

Consider building your own home. The other good news is that if you can’t find exactly what you want, or you have time to plan out your vision for owning property in the Smokies is that building is making a comeback because of the shortage of properties for sale. So that is an option you should consider.

If you would like to know more or need help navigating the market, my staff and I would enjoy the opportunity to work with you on your adventure! You can call or text me at 865-765-6157 or my support line at 865-654-2111. I can also be reached via email: deborah@deborahkorlin.us

Now is the time to sell!

I’m sure those of you who have been keeping up with my newsletter have heard me say this before: if you have a vacation cabin you’ve been thinking about selling, now is the time. The real estate market in our area has reached a point where buying is about the same price as building. Resort communities such as Sherwood Forest, Starr Crest, and Legacy Mountain that perform the best among rental cabin resorts in our region are selling at prices not seen since before the downturn in 2008. Plus, the number of cabins for sale in our market is incredibly low. So between the lack of inventory and the increased demand among buyers looking for cabins to buy, the prices have significantly increased.

As a result, building is making a comeback. New areas are being developed for cabin construction. As more cabins are built over the next year, the supply will start to level out and we could see sales prices slip just a bit as the demand is met. In the meantime, this could mean a great opportunity for you if you are ready to sell.

Now is the time.

One of the first steps to take in considering selling is to see for yourself what your cabin is worth in today’s market and compare it to the price you paid when you bought it. We can definitely help you with finding those two things out! Just give us a call or send an email or text. I look forward to hearing from you! I can be reached at 865-765-6157 or 865-654-2111, or by email at deborah@deborahkorlin.us.  You will be pleasantly surprised by what you discover. Remember, now is the time.

Handling the home repair proposal

When selling a home, one of the most important steps in the process is negotiating the home repair proposal after the inspection.

Last month, we looked at the home inspection and home repair from the buyers’ perspective, so this month we want to take a look at it from the sellers’ angle. Real estate agents aren’t home inspectors, and we often don’t know everything that might need fixing in a property. If you as the owner of the property know of and share a particular issue with the agent, then of course it is our job to make sure that is disclosed as part of the listing. In fact, one of the first things I do in preparing a property to list is to provide a disclosure form as part of a set of required documents giving us permission to sale their property. This property disclosure form lists out all the items in your home or cabin that you’re aware of about the property – age of the roof, any updates or upgrades to the home, any conditions that the law requires for you to share with buyers about, etc. If you haven’t lived in the home for several years, you may choose to fill out an exemption form instead. This is often the case with vacation and second homes that are on a rental program. You’re just not going to know everything about the condition of the property if you aren’t actively living in the home. Even when you do live there full-time, you may not be aware of potential problems that your buyers could end up being responsible for if they closed on the property without discovering it beforehand. So it’s in their best interest as the buyers to have a home inspection done.

The home inspector will:

  • test the plumbing;
  • test the electric outlets;
  • inspect the crawlspace for possible cracks or mold;
  • inspect the fireplace;
  • inspect the home exterior for signs of wood destroying insect damage; and
  • look for signs of water damage or problems along the gutters and on the roof that may not be noticeable to the untrained eye.

The home repair proposal

Once the inspection is completed, the buyer will identify the items that matter the most to them and coordinate with their agent – if they have one – to put them into a home repair proposal for you to consider. As a seller, it’s important not to panic when you see the repair request items. A home inspector is hired to find every potential issue in the home so that the buyer can make the most informed decision possible. Most good home inspectors will seek out problems and potential challenges so that the buyers know as much possible about what’s going on with the house before they buy it. It’s important for you to work with your agent to help you determine the best response based on your situation. If you have the resources to make the requested home repairs, that’s often the best choice. Or if you can’t do them all, pick the ones that are the most important and offer to do those. Another option is that you could negotiate a lower sales price to allow the buyers to fix the home repair items on the home repair list themselves. Your real estate agent should be able to negotiate the home repairs on your behalf and, when needed, help you find people who can do the work to fix those items so you can get accurate estimates in case the owner chooses to reduce the price instead.

Keep in mind that simply refusing to address the requested home repair proposal items could mean the buyers will walk away, and if the items are significant, you will have the same challenge with the next buyer who comes along if you don’t work out a way to fix the items. Of course, the buyers have the choice to walk away after a home inspection is completed if they don’t like the report, so it’s sometimes good to ask your agent to follow up to see if you can find out what made them decide not to buy your home. Perhaps it’s something you can fix before the next offer comes in so it doesn’t end up being a challenge to overcome with a new buyer on the next home repair list.

Working through the home inspection

When buying a home, one of the most important decisions you will make is whether to hire an inspector to conduct a home inspection. Real estate agents aren’t home inspectors, and we aren’t able to identify everything that may need  to be home inspectionaddressed in a property. If the owners know of and share a particular issue with the agent, then of course it is our job to make sure that is disclosed as part of the listing. In fact, one of the first things I do in preparing a property to list is to have the seller fill out a set of required documents that give us permission to sale their property. These forms include a document that lists out all of the items in a home that could have issues needing to be addressed.

If the owner hasn’t lived in the home for several years, they may choose to fill out an exemption form instead. This is often the case with vacation and second homes that are on a rental program. The owner just isn’t going to know everything about the condition of the property if they aren’t actively living in the home. Even when the owners do live there full-time, they may not be aware of potential problems that you as a buyer could end up being responsible for if you closed on the property without discovering it beforehand. So it’s in your best interest as the buyer to have a home inspection done.

What does a home inspection generally consist of?

The home inspector will:

  • test the plumbing;
  • test the electric outlets;
  • inspect the crawlspace for possible cracks or mold;
  • inspect the fireplace;
  • inspect the home exterior for signs of wood destroying insect damage; and
  • look for signs of water damage or problems along the gutters and on the roof that may not be noticeable to the untrained eye.

Once the home inspection is completed, you will receive a copy of the report that details all of the items they checked and the condition each was found to be in. If there are any serious problems, the home inspector will go through those with you at that time. Feel free to talk with your inspector and definitely ask additional questions when there are items in the home inspection that you don’t completely understand.

As a buyer, it’s important not to panic when you see the home inspection report. Any inspector that we recommend is going to be thorough! You are going to know more about the property than you may want to! They will tell you everything that is a problem now, everything that may be a problem in the near future, and the many things to look for in the distant future. This will place you in the best position of comfort and power, although it also will be disconcerting. It is kind of like when you go to the doctor and see an x-ray of your spine or an ultrasound of your organs. It’s a little disturbing! Just remember that a home inspector is hired to find every potential issue in the home so that you as a buyer can make the most informed decision possible. The good news is that 99% of issues can be addressed. The main questions are how best to address those issues, what might it cost to address them, and who is going to complete the remediation?

Once you have received the home inspection, this is the point where you would need to work with your real estate agent to send a request for items identified in the home inspection to be repaired or replaced, or for the owner to agree to reduce the sales price of the property to account for the repairs you will need to make. Your real estate agent should be able to negotiate the repairs on your behalf and, when needed, help you find people who can do the work to fix those items so you can get accurate estimates in case the owner chooses to reduce the price instead.

Its all part of buying something amazing! While often one of the more stressful parts of buying property, it can also be an exciting part – learning about your property and how to care for it in order to keep its value strong in the years to come.

Let the adventure begin! If you have more questions about the home inspection process, I and my staff are always here to help!

Solving the appraisal challenge in an increasing market

When buying a home or vacation cabin, one of the most crucial steps in the process if you’re working with a lender is the appraisal. Appraising the value of a property can be one of the most challenging, and probably the most stressful, aspects of the process for buyers. This can be especially true in a market where appraisal values don’t reflect where the market is at in terms of purchase value. As I discussed in last month’s article, this is mostly because lender appraisers are looking at the value of the property in a different way than everyone else, and with a different purpose. The purpose of a lender appraisal is to determine how much the lender can sell the property for in the event of a foreclosure. So even though the buyer is paying for the appraisal, the appraiser making the determination is actually working for the lender.

In our market, as we continue to work with a low number of properties for sale, the sales price of cabins has continued to rapidly increase over the last 12 months. We’ve seen a slower pace on our local residential market, but home values are also increasing. If you as a buyer have an appraisal that comes in under the offer price, that doesn’t mean you won’t be able to buy the home. You and your agent have a few different options to help you work out a solution with the seller.

Ways to address the appraisal

The first thing I tell my buyers when the appraisal comes in lower than the purchase price is, “Don’t panic.” We look over the appraisal report and re-evaluate our own comparable group of sold listings to see if we’ve missed something about the property. An appraiser can go back as far as 12 months, and is required to first use anything that’s sold within the same subdivision or resort community. The appraiser is limited on what he or she can do to review those sold properties. They rely heavily on MLS and tax records, so when those documents aren’t completely up to date, it can skew the data in a way that might hurt your appraisal.

Once we are certain our offer was appropriate for the market, if we’re comfortable with it we will ask the seller to agree to reduce the price to match the appraisal value. Remember, the lender won’t borrow on more than what the home is determined by the appraiser to be worth, so if the seller won’t lower the price then the next choice will be to see if we can split the difference with the seller or simply agree to pay more out of pocket. So for example, if the purchase price is $200,000 but the appraiser determines the value of the property to be $190,000, then you would have to either get the seller to agree to reduce the price by up to $10,000 or work out how to pay that amount out of your own pocket.

As a last resort, we can try to work with the lender to resolve it, but the truth is it is very hard to get an appraisal value overturned once it has been determined. We absolutely cannot pressure appraisers to price the appraisal value of the property at the amount a buyer offers a seller.

Next month, I’ll share some ways I help sellers to price their property correctly so that the appraisal value meets the expectations correctly. In the meantime, if you have questions about appraisals or anything else regarding the local real estate market, I and my staff are always available!