Waterfront Pricing

So is there a correlation between linear feet of waterfront and fair market value?

Let's forget orientation to the sun, size of lot, or house features; and just focus on waterfront footage for a moment, examining our Lake Sammamish examples from recent blogs.

Of the twelve sales of Lake Sammamish waterfront properties in the past six months, one had a shared beach and one had a shared dock. The one with shared beach sold for $9500 per linear foot of waterfront.
The one with the shared dock sold for $48,148 per linear foot of waterfront.

The others sold as follows:
$33,000 per linear foot - 20' waterfront
$32,895 " - 38' waterfront
$65,560 " - 50' waterfront*
$25,397 " - 63' waterfront
$32,000 " - 75' waterfront*
$22,000 " - 75' waterfront
$20,202 " - 99' waterfront
$18,550 " - 100' waterfront
$20,642 " - 106' waterfront
$27,500 " - 120' waterfront*

The properties with asterisks had exceptionally large lots, or significantly more higher-end houses on the property. It is interesting to note that there appears to be a general relationship between linear feet of waterfront and market value. Ignoring the shared beach or dock, here is a graph of this correlation:

Using just this information, a property with 67' of waterfront on Lake Sammamish might be expected to bring a fair market price of $1,675,000 - $2M, depending on other factors such as quality and size of the house and lot, slope, and sun orientation. Six of the twelve recent sales on Lake Sammamish sold for over $2M, the others for less.

CoreLogic puts this specific house at a median value of $2.35M, but the range begins at $1,717,025. Given the steep slope of lot, and the awkwardness of the house layout, it makes sense to discount the price.

Using other variables identified in this previous blog, and looking at the closest sold comps, I would list this house initially at $1,875,000 for a quick sale - and promote the heck out of the Zillow valuation of $2,575,000. Given the issues identified above, I would encourage the Seller to keep the price under $2M, depending on his needs and timing. Pricing this too high might discourage some buyers, and delay the sale. A more reasonable valuation may result in multiple bids.

The top sales agent for Lake Sammamish however thinks that this particular house will garner a sales price of $2.6M. Her rationale is that the comps for Zillow and Realist do not encompass only waterfront comps, and therefore, they are too low. She may be right, as she knows this particular market very well.

Message me at HomeLandInvestment@gmail.com for a complete list of King County waterfront homes for sale, if you are looking for waterfront.

Happy Investing!

Seller Financing on High End Homes

Six out of thirteen recent sales of Lake Sammamish waterfront were purchased with cash. The other seven were purchased using conventional financing. In the cases of conventional financing, the borrower would have had to use a "jumbo" loan.

A jumbo home loan (or jumbo mortgage) is a mortgage loan that exceeds the conventional conforming loan limit. The conforming loan limit is set by Fannie Mae and Freddie Mac and in Washington, the current conforming loan limit is $417,000. It is not unusual for a jumbo loan to provide up to $3 million to qualified homebuyers. The benefits of a jumbo loan include the following:

• Purchases up to 90% LTV
• Rate & Terms 90% LTV
• FICO’s down to 660
• Fixed, ARM, and interest only ARMs available
• First time homebuyers are permitted
• Max LTV on Cash Out is 75%
• Loan amounts up to $3M on single family primary residence in most states

If the median home price for a waterfront home on Lake Sammamish is $2.7 million, then a borrower would have to come up with at least $270,000 cash plus closing costs to purchase a home using a jumbo loan.

Suppose a potential borrower only had $150,000 right now, until their tax refund, until the sale of their current house, until their divorce settlement is final, until cashing out when the stock market is up, or any number of other reasons why a high income borrower may not have all the cash necessary for a purchase of this size. What is a Seller to do?

If the goal is to maximize the number of qualified buyers looking to purchase their waterfront property for maximum dollar value, a Seller might consider offering seller financing. But very few do, probably because their real estate agents never ask about it or don't understand it.

I am always surprised in my own search for free and clear property, that listing brokers have not even had the discussion with their Seller clients about the possibility of seller financing. It is a little-used tool to maximize profits on the sale of a property.

In our example above, suppose the Seller were to offer $120,000 in seller financing to help his purchaser in buying his waterfront property. The Seller is likely to attract more buyers, now willing to pay a higher price because they can get the financing they need. So the Seller is likely to get a higher price for his house.

In addition, the Seller can set the terms of the promissory note with the Buyer borrower. He can charge a higher interest rate for a second mortgage. He can require cash-out in a year, two years, or however long he is willing to hold the financing. So the Seller now earns more interest on top of receiving a higher price for his house.

So why not? It is a tool that every listing broker ought to be discussing with their Seller clients if they are serious about getting the best price for the house.

Happy Investing!

Marketing King County Waterfront

Keeping with the waterfront theme we have been exploring in this blog all week, let's take a look at how to market a Lake Sammamish waterfront property.

With extremely tight inventory, low mortgage interest rates, an increasingly affluent workforce, and high demand for waterfront property, the most important marketing decision will be in pricing the property correctly. While homes in this price range sell any time of year (less so in the dead of winter), the Spring is an especially pretty time to sell, with trees and flowers budding, and more clear sunny skies.

With the median home selling in approximately 60 days in this price range, we would expect to receive an offer within this timeframe, if we have priced our property correctly. A properly-priced property will receive the most foot traffic in the first two weeks of listing, given timing of market materials and date of listing on the Multiple Listing Service. If there is insufficient traffic within the first two weeks, it is very likely that the property is priced too high.

What would be a reasonable amount of foot traffic for a property that is priced over $1M? There is no magic number for this, as many people will review a listing online, and make a go-no go decision based on an internet search first.

But there ought to be a steady stream of showings in the first two weeks. If not, I would consider a price drop at this point. Any price drop will create a bit more buzz and interest, as it will reappear in online searches. I have found that most buyers will not even make an offer, unless the price is within 2% of market value. This is why it is so important to price correctly at the beginning.

Automated site visit surveys solicit feedback from brokers on what they liked and didn't like about this house. This feedback loop is critical, as it allows for adjustments to pricing or marketing where needed quickly.

Because this is a high end home, it would be important to create high quality marketing materials that create interest immediately. The most important marketing piece will be the listing on the NWMLS. Here is where a lot of traditional real estate agents miss the boat by focusing on features of the house (number of bedrooms, number of baths, type of appliances, interior finishes, etc.) instead of focusing on LIFESTYLE BENEFITS.

EVERY listing on the NWMLS identifies features, so marketing materials that focus only on features waste valuable marketing opportunities.

Purchasing a home is an emotional decision, and any marketing materials should be designed to elicit an emotional response. What makes this location so appealing? What is the best part about living here? Why did the current homeowner buy this house? What is so special about this particular property? What kinds of recreation, fun, amenities are associated with this location? What possibilities are available within the current house configuration?

Professional photographs that accompany the listing description should also focus on fun and lifestyle, while giving the prospect a better understanding of the house. Staging may include items that reinforce the lifestyle that is purchased along with the property (boating accessories, firepits, cozy seating areas that maximize views, etc.).

High quality professional flyers should be available INSIDE the house, for prospective buyers to take with them. They should tell a story about the lifestyle of the house, answering many of the questions identified above. There is more room for longer messages on a flyer. And prospects who take flyers have a reminder of this particular house that they may review later.

Our flyers also contain lifestyle descriptions, photographs, and marketing information that form the structure for our online advertising. Again, we generally have more description space, and more creative opportunities to tell stories online. We should tell a story, or many stories, about our property. Our online presence can automatically be syndicated to several dozen online sources. And our online presence needs to be focused on LIFESTYLE.

Flyers or postcards can be mailed to the immediate neighbors, designed to hit their mailboxes at about the same time that the listing comes onto the NWMLS, to generate maximum interest in the first few weeks of listing. These will also be sent to all brokerage offices in the immediate area.

Many Sellers believe that Open Houses for Brokers and prospective buyers will sell their house more quickly, but statistics do not support this. Open Houses are a great way for brokers to find buyer clients, but rarely do they sell a house.

In the case of the 4400sf house that I mentioned in yesterday's blog, I would NOT do an Open House.

Why not? Because an Open House, where many people converge on a property within a short time period, will only emphasize some of the deficiencies of this house: Not enough level parking, impossibly steep driveway, narrow dead end street with limited parking and difficulty turning around. So I would skip the Open House. It is unnecessary, and likely detrimental to a sale.

Of course, there will be signage in the most visible location(s) on the property, which lists multiple ways to contact the listing broker. This includes a number to an automated hotline for more information. If there is any flyer whatsoever, it is permanently affixed to the sign, to minimize indiscriminate curiosity and litter.

Does the listing broker have to be a specialist within the neighborhood, within this price range, or within the property type in order to sell this house? Not in today's world with internet sources being the top search method by prospective buyers, and not if the broker has done a thoughtful job with her marketing.

Monday's blog will identify another big marketing tool for a property like this, that most traditional real estate agents miss. Stay tuned!

All this marketing is designed to hit the market as soon as the listing goes live on the NWMLS. With this much effort and thought put into marketing in advance, the property ought to sell for maximum market value quickly. And that's how you sell a multi-million dollar waterfront house!

Happy Investing!

Pricing Waterfront

One aspect of pricing waterfront properties has to do with the direction the house and views face. Let's compare the sales prices for waterfront homes on the east and west sides of Lake Sammamish in King County, for example.

Waterfront homes on the west side of Lake Sammamish face views to the east, and the rising sun. Some people love to wake up to sunrise and early morning light to take the chill off the night. On the southern end of Lake Sammamish, residents have close proximity to Timberlake park and to Lake Sammamish State Park. On the north, is Marymoor Regional Park.

The median sales price for the six home sales on the west side of Lake Sammamish (facing east) was $2.3M ($650.64/sf), but took 81 days to sell.

The median sales price for homes on the east side of Lake Sammamish (facing west) was $1,919,000 ($531.58/sf). These sold in just 61 days.

Because of the low numbers, it is difficult to draw any solid conclusions. Do people like sunrises, better than sunsets? Or are there several other factors, such as the location on the lake, slope of the lot, linear feet of waterfront, and age of the house that should be taken into consideration here?

Using the stats from my previous blog, how would we price a 4400 sf home with 67' of waterfront on the southwest side of Lake Sammamish?

Using the $511/sf median of sold comps for all of Lake Sammamish, this house should sell for around $2,252,580. But let's add in some mitigating factors for a very steep lot, and an awkward interior lay-out, which will tend to discount the price.

The Realist program of the NWMLS, which many brokers use as a guide, give the estimated value of this house as compared to other houses with similar features, at $2,352,000 - similar to the calculation I did above. It does not take into account the slope of the lot, nor the design of the house, nor the linear feet of waterfront.

Zillow, which many buyers will consult, lists the Zestimate value of this house at $2,575,000. I would definitely promote this valuation in my marketing materials for this house, although I certainly would not list it at this high a price.

So I think we have defined the top of the range, and in making the pricing decision, it would be wise to build in discounts for the slope and interior lay-out of the house. Since the three closest comps all sold within 18 days, I would expect to receive an offer on this house within fourteen days, if it was listed at the right price.

For a complete list of waterfront homes with amazing sunrise or sunset views, please email me at HomeLandInvestment@gmail.com or leave a message at 888-621-4999.

Happy Investing!

Lake Sammamish Waterfront

With its proximity to Microsoft, Lake Sammamish is a popular waterfront community for affluent homeowners in King County.

One year ago, of the 34 waterfront homes for sale on or near Lake Sammamish, the median 4-bedroom, 3.5-bath house with over 4000sf of living space was listed for $2.2million ($541/sf). These homes had been on the market an average of 80 days.

Of the 50 Lake Sammamish waterfront homes that sold in the previous six months, the median home sale was for a smaller 3-bedroom, 2.75-bath house with less than 3000sf of living space for a price of $999,375 ($333.13/sf). These home sales were on the market just 77 days.

How have home prices on Lake Sammamish changed in the last year?

Lake Sammamish is the second largest lake in King County, encompassing zip codes 98008, 98027, 98029, 98052, 98074, and 98075 which border the lake. Using all of these zipcodes, we come up with the following waterfront statistics:

There are only six active listings on Lake Sammamish waterfront right now, a significant reduction in inventory from the previous year. Of these six, the median house has almost 5000sf, 4 bedrooms, and 3.75 baths. It is listed for a median price of $2,661,500 ($532.41/sf) and has been on the market for 73 days.

Here is what has sold on Lake Sammamish in the past six months: Only 12 waterfront homes sold on Lake Sammamish in the previous six months, again a significant reduction in inventory. Of these, the median home was a 4-bedroom, 2.75-bath with 3765 sf that sold in 39 days for  $1,927,500 ($511.95/sf). With shrinking inventory, we can see that the days on market have decreased significantly as well, assuming the property is priced correctly.

It would appear that the active listings, which have been on the market twice as long, are priced at least 4% too high.

That said, pricing waterfront properties is exceptionally difficult, given the custom nature of the homes, the waterfront, and the views. For a complete list of waterfront properties available for sale on Lake Sammamish, or in King County, please email HomeLandInvestment@gmail.com or leave a private message at 888-621-4999.

Happy Investing!

Lake Sammamish Waterfront

The median list price of the 34 waterfront homes for sale on or near Lake Sammamish right now is a 4-bedroom, 3.5-bath house with over 4000sf of living space, listed for $2.2million ($541/sf). This active listing has been on the market an average of 80 days.

Yet of the 50 Lake Sammamish waterfront homes that sold in the last six months, the median home sale was for a smaller 3-bedroom, 2.75-bath house with less than 3000sf of living space for a price of $999,375. These home sales were on the market just 77 days.

There are 13 listings on the market right now at a sales price under $1million for waterfront on or near Lake Sammamish. Other nearby lakes include Echo Lake, Allen Lake, and Pine Lake. The proximity to Microsoft’s main campus is one reason that these lakes are so attractive to buyers in this area.

For a complete list of available waterfront properties on or near Lake Sammamish, please email me at HomeLandInvestment@gmail.com or call 425.270.7292. For serious buyers of waterfront property, we set up a free email update of homes that match your buying criteria, just as soon as they hit the market.