Best Way to Sell My Lake Home?

My wife and decided to try to sell our lake home. It is on Norris Lake in Tennessee. Close to the Interstate and across from a State Park. There will be no homes on the other side of the water from me. We bought the lot and there were only 2 homes in the subdivision. It is now full with probably 15 homes on our street. I gave 55000 for the lot and built a house. This was in 2002 or 2003. Recently the lot next door to me sold for 150000 and it is no bigger than mine. One across the street sold for 90 and has a lot less lake access.
I would like to sell and buy a smaller home not on a lake but have a small mortgage and be debt free. 3 years ago after the home was completed it appraised for 280000. I only had 210000 in it. Now 3 years later there are giant houses in the subdivision. I dont know what it is worth because there are no real comparables. Most of the lake homes in the area require you to drive 20 or 30 minutes or more from the interstate. Mine is like 2 minutes. None have sold in our neighborhood.
What would be the best way to sell this property? Should I place an add in a northern newspaper? List it with a broker? Just put a sign out front? I dont really need to sell it and I dont know what it is worth.

In your case - that you really have little idea of comps and values and the local market, I’d look for a broker who specializes in your area. Start with the broker that marketed the other property that recently sold. Have them do a Comparative Market Analysis. They should give you a range of values - ie between $325k and $329k (as an example). List it with them for 3-6 months. Like you said, if you don’t sell it it isn’t a horrid loss, so if you get an offer you like, fine, if not okay.

If it doesn’t sell, then you can decide whether to keep it listed, or take it off and maybe do something yourself, since you should have a better idea of what is going on.

I spoke with the broker who knows the area. He said the home is worth 450000 or more in the spring when the water rises. He also said it will sell no problem.
I am wondering if the big value increase is because the neighborhood is now full of larger homes and a few smaller ones.

If it is still going up in value fast maybe I should wait, but the subdivision is about full on the lakefront side.
Im going to be debt free with no mortgage!!! I never thought I could be so fortunate, you know especially since I am only 36.

I feel great for you.

I would guess that the increased value is because of the recent building. If you have only 6 homes in a neighborhood it will only draw a few buyers. If you have 30 homes it becomes economically more active - and normally a much greater increase in value.

A perfect example was a 3-2 Ranch I bought as a principal residence at $105k. It was in a down market - and about 40% of the lots in the subdivision were empty and lots of 4Sale signs out. About two years later the market turned up, and people started building new homes on those lots all over the place. We sold 4 years after purchase for $285k.

That partly was the change in market - but also the change in perception of the area. Before it was dead market and 40% empty - which would give an outsider the impression it could be an undesirable neighborhood (it wasn’t). But 4 years later it was 95% built up, the rest of the empty lots under construction, and homes selling quickly. It looked to outsiders to be a vibrant and desirable neighborhood.

Two other observations:

  1. Don’t assume that just because you have a big rush of increased value, that this will continue. In the case of my house, it wallowed for two years with no appreciable increase before things drastically turned around. Checking back on the value, there has only been a minimal rise in comps since then. Values don’t go up in a rush for a long time. This recent runup was unusual in that so many markets were going nuts for 4 years or more. If you have had a massive increase in a short time, there is probably a good chance it will stagnate for a few years while the rest of the market catches up. Therefore it is quite likely that keeping it longer will continue to make you huge oprofits. Every market is different, of course, but keep this in mind as a general tendency.

  2. If the lake house is not a big part of your life, you should consider selling it and using the proceeds into investment. What you make off of this could be seed money for other investments, and you could leverage your holding into something bigger and better for long term investment. Before I would do this is talk to a good real estate lawyer, as well as a good accountant to talk about legal and tax consequences of the action. Also, if you go this route you should have a good idea of what you will do with the investment money - commercial - multifamily - cash in on the SFR foreclosure wave about to strike the country in the next 2 years (yes, we’ve only seen the first sense of it so far - late 2008 should be the crest).

  3. Keep the lakehouse, but use the equity to start your investment. You should easily get a 50%-70% loan at excellent terms. Loaned money is not taxed - so you would not face a tax consequence by cashing in on your lakehouse - put some of the cash away as debt service - so it doesn’t impact your monthly budget. You can use the remainder of the loan moneyu as seed for your future investment endeavors.

Or keep the lake house for enjoyment and future appreciation.

Thank you for taking the time to answer my question so well. Let me see if I understand a few things as you do. In my understanding the rapid appreciation caused by the other building in my neighborhood is probably over. I say this because the good lake lots are built on. There are non lake lots on a different street left though. Nice large homes are being built, but the majority of building is on my street. Now should I expect the 8 to 10 percent a year?

If I was to cash out equity you say I should save some of the money for debt service? Would that be to pay the new higher mortgage? I have been hesitant to refinance because my rate is 6.375. Money is a tad tight each month but I am working on that and it will get better.

I wouldn’t refi out unless you have a purpose in mind for the money. otherwise you only have money sitting there you are making payments on. However if you have a good idea what you want to do with the money (seed money to buy a small apartment building - a few SFR renaals - do a rehab and rent - then you could make a conservative refi - 75%, say. Then you put maybe $50k aside with the bank where you get the loan from and let that account pay the first several mortgage payments. That way you don’t have to worry about mortgage payments while you close on your investment - and if needed - have some down income time while you make repairs and rehab before it starts going.

For instance - if you were going to buy a distressed houes and rehab it, mnay of us would get a HML to buy it and do the rehab, then either sell, or get a tenant on a contract and refi to get rid of the expensive HML.

But what you could do is maybe get a $300k loan off your lake house at the low interest - and stick $50k in an interest bearing account to be used to make the first several months of debt service (offsetting some of the costs of the loan) with the remainder you purchase the rehab (say, $200k) do the work (say, $40k) which gives you an additional $10k as a reserve.

When the rehab is over you have a new house worth $360k. You can either sell it at $340k for a quicker sale, or if possible get it rented if you can cash flow it and refinance that at an 80% loan. That loan gives you $288k which you can use to either pay down your lake house loan, or use (with the $10k reserve and what is left of the $50k payment account) for the next deal.

You end up with the lake house worth $450k, mortgage of $300k with equity of $150k
Plus another property with a value of $350k, a loan of $288K and $62k of equity
Plus $298k in cash for the next deal and still have what is left of the $50k for payment service.

Or if you use the proceeds to payoff the lake house it will once again be mortgage free, but now you will have a rental property with equity and some cash (maybe $30k) as seed money for another deal, and you never had to worry about payments. on the lake house property.

Thjere are lots of variations to this, but I hope you get the idea.

Reverse engineer the price of the house.

If the lot next door that sold for $150,000 is the same quality and has the same lake frontage as yours, you start with $150,000. Then you miltiply the square footage of your house by the cost per square foot for building one just like it. You add the cost of the house to the value of the lot.

Of the house is in proistine condition, up to date, with excellent curb appeal, you add another 10%. If the house needs repairs, or it is out of date and needs to be refreshed, or the landscaping ios poor, you subtract 10%.

Then you put it on the market and wait. It’s not likely to sell until spring or early summer, but in the meantime, you listen to feedback from potential buyers. That will tell you if the price is too high.