Lake Martin Voice Realty
Archive for February, 2009
Who Owns My Dirt? A Word On Easements And Setbacks
A reader in the Lake Martin dot com forum posed this question:
Is there a shoreline zone owned by Alabama Power from the 491 level of Lake Martin to the start of private ownership? This is the case with some reservoirs. If so, what is the distance?
There were some good answers in the thread, and I thought I would throw in a word or two here. A copy of my answer is below, I thought Lake Martin Voice blog readers might be interested:
Watch your real estate definitions.
Easement – a granted right of one party to another, different from ownership. Like if you owned a 100 acre plot of land that has a power line going through it, you own the dirt, but the power company has been granted an easement to put a power line across it. A Lake Martin example would be where Alabama Power owns the dirt of the floor of the lake, but they give you an easement to build a dock over it, subject to their restrictions.
Setback – a rule that says even though you own the dirt, you can’t build / alter it in a specified zone. The 30 foot rule on most of Lake Martin’s shoreline is a setback. Alabama Power (in a deeded lot, more than likely) doesn’t own the dirt, they just tell you (via deed restrictions) that you can’t build NEW CONSTRUCTION in this zone. Same deal with lot lines with your neighbor, perhaps enforced by the county or your subdivision. Again, you own the dirt, but are deed restricted (via the deed, set forth in conditions that you agreed to when you bought it) by this.
Shoreline – just because the water on Lake Martin is there doesn’t mean you necessarily own up to it. I have seen all sorts of things here. Sometimes you are in a subdivision that describes the lot as “lot x in the recorded plat of Y neighborhood” which means you then go to the plat at the courthouse (Tallapoosa, Elmore, or Coosa) to figure it out. Also I have seen “metes and bounds” descriptions where someone has gotten a surveyor to plot the shoreline, foot by foot, turn by turn. Also I have seen really old ones that just describe the shoreline side of the lot in such juicily ambiguous terms as the “shore of Lake Martin.”
The key here is that every lot on Lake Martin COULD be different. I have also seen lots that are so old or oddly recorded that the above easement and setback rules don’t apply.
Bottom line – ALWAYS get a professional (lawyer or closing agent) to do a very thorough deed / title search to know EXACTLY what you are getting when you buy. Get a survey, too. Before you build or alter anything, this will give you a good understanding of what the deal is. On Lake Martin the dirt is the most expensive thing, usually, so it pays to be sure about the dirt and the associated easements, setbacks, and other restrictions.
Low CPI Is Good News For Leased Lot Homeowners On Lake Martin
Every cloud has a ray of sunshine, to mix cliches. The latest news from Washington means more money in the pocket of people who own leased lot homes from Alabama Power on Lake Martin.
According to this article in the Wall Street Journal, Consumer Price Index, or CPI, has hit a 53 year low.
This is significant to leased lot homeowners because in the lot leases with Alabama Power, the yearly change in the lease amount is tied to CPI. Every lease is different, of course, so consult a lawyer to look over the fine print. But speaking generally, every waterfront lot lease on Lake Martin that I have ever seen has a clause that addresses lease increases and decreases. Every year the lease amount changes by the CPI. According to the WSJ, core CPI last year was up 1.7%. Many people don’t realize that. They think that Alabama Power locks you into a lease and then can “raise the lease to whatever they want.”
Untrue. Even in real estate boom years like 2005, the lease increase is capped by CPI. In slower years, they still can’t go up willy nilly.
That’s how a weak CPI is good for leased lot homeowners on Lake Martin!
Curious about leased lot homes on Lake Martin? They are an extremely affordable way to own a home on the lake. I have three for sale starting at $274,900 and about $355 a month lease. Your total payments would be less than owning a condo, plus you would have the privacy of a home. Check out the homes of 19 Longleaf, 26 Claytons Lane, and 145 Captains Road. I think you will be pleased.
Related Articles:
Mythbuster: Alabama Power Leased Lot Homes On Lake Martin
5 Questions and Answers – Leased Lot Homes On Lake Martin
Reasons Why Banks Will Struggle To Sell Lake Martin Foreclosures
There are now many bank owned foreclosures or REO properties on the market at Lake Martin. We are no different from anywhere else in the country in that respect.
What is different about Lake Martin foreclosures is the curious choice that some banks or mortgage companies make when selecting a broker or real estate company. I have talked to quite a few lately, and have compiled a few quick reasons why banks will struggle to unload their REO inventory at Lake Martin:
1. Your agent is not a member of the Lake Martin MLS - don’t get me wrong – many foreclosures are listed by LMAAR members. And I am not saying every LMAAR member is a superhero. But if you are a bank, and yours is not listed in our area, how smart is that? Like 95% of Lake Martin homes are sold by members of the LMAAR. If I can’t get into your lockbox, how can I sell your home?
2. Your agent does not know anything about the home, or even Lake Martin in general. I have called agents who tell me “I don’t know much about that one. I think the price is $XXX,XXX. Where is it again?” Please. I am sure they are very nice agents, maybe even experts in their own local area, but that area is far away from Lake Martin.
3. Just because your agent’s office is an hour or so away, doesn’t make them a Lake Martin expert. Hey, I live about an hour and a half from Dothan, AL. Legally, I can list I home there. Would I? Heck no! I couldn’t look someone straight in the eye and tell them I am the best guy for the job. I would refer to a Dothan real estate expert.
4. Just because your agent is handling 4 other homes for you in East Gotham, don’t make the mistake to let her handle Lake Martin like an afterthought. Remember all that preaching you did to your customer (before you foreclosed) about choosing a high octane agent, marketing, and pricing? WHY DON’T YOU FOLLOW YOUR OWN ADVICE?
This isn’t sour grapes against “interloper” agents from the big city. More power to them. I am a huge proponent of wall-less MLS areas. The above points come from talking with foreclosure agents THIS WEEK. As a bank stockholder, and as a taxpayer that is bailing out banks, it worries me. If they’re this slack about their lake homes, what is going on in the rest of the country?!? Goodness!! Give me a call, and I can help you go local and get effective immediately!
Related articles:
Lake Martin Sellers: Don’t Pick This Realtor
Lake Martin Seller Tips
Lake Martin Real Estate Sales – 2008 Year In Review
The waterfront property sales in the Lake Martin MLS* ended the year by tying 2007′s December sales of 4.
When we looked at November 2008 sales for Lake Martin, we saw that 2008 monthly sales were starting to beat 2007. How did we finish the year?
On a whole, 2008 proved unable to beat the infamous drought year of 2007. In total, 137 waterfront homes were sold through the MLS on 2008, which was about 12% less than 2007′s number of 156.
Check out the graph of cumulative sales:
To put this decrease into perspective, see the below chart. It shows by month, sales of waterfront Lake Martin residences in the MLS. You can see the decrease of number of sales from 2007 to 2008 of 12%. Also consider that this is the third year in a row of consecutive decreases.
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What did prices do on Lake Martin in 2008?
Another natural question is to look for evidence of falling prices in such a strong buyer’s market. If you compare 2007 to 2008, it is interesting to note that at the low end and the high end, 2008 actually had more sales. As always, there are some sales that report “0″ as the sales price. If you take these sales out, it looks like:
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Looking at the sales, I think this was due to many sales of leased lot mobile homes on the low end, and spec homes on the high end. Of the 24 homes sold at or above $1 million, about 14 were in the Ridge.
But this still does not give us any real feeling of a basic question that I get asked all of the time: Are Lake Martin sellers finally dropping prices?
I have said this many times before, but I will repeat – the Lake Martin area real estate market, especially waterfront property – is a relatively small pool of sales statistics from which to draw. Sure, the lake itself is huge, but in terms of number of sales, we are small even by Alabama standards. When you try to draw too many broad conclusions from a small set of data, you get weird results. Nevertheless, I thought I could see some interesting trends if I looked at statistics like Total Sales Volume, Days On Market, and Average Price. Check out these factoids covering 2005 – 2008:
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Most of these factoids seem pretty logical and follow the pattern that we by hindsight know – that 2005 was the peak of an extreme seller’s market, and 2006 saw a transition to a buyer’s – and by 2008 we are at the other end of the spectrum, and extreme buyer’s market. The Sold Price as a % of List Price decreases. OK, check. I get that. Average Days on Market for sold listings dramatically increase, OK. Active Listings balloon, almost doubling. Right.
But wait – Lake Martin Average Price INCREASES? Sure it came down a little in 08 but did it almost DOUBLE from 05 to 07? That is counter intuitive. My gut tells me no. My gut tells me that the average is badly skewed by a few high sales prices, and since 2008 sold less than 50% of homes than 2005, it affects the average a lot more.
So is my gut correct? Only one way to find out.
Searching For A Bell Curve
What will Lake Martin sales look like if I break them up into price categories and then divide by total sales? For example, in 2005, there were 77 homes sold in the $200k – $299k price range, and 284 total that year. 77 divided by 284 is about 27%. That’s what gives you the peak in 2005′s line below. It removes influence of the amount of each sale, and merely looks at each price category as it relates to the whole. Then we can see how much each particular year is influenced by low or high end sales. Here it is:
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If you care to view the numbers behind the chart, click here.
I believe that this graph clearly shows that the average reported waterfront sales prices of residences on Lake Martin in 2008 was definitely skewed by an unusually large percentage of high end sales. The aqua line represents 2008. Fully 18% of 2008 sales were above $1 million – while only 2% were in 2005. 18 divided by 2 is 9 – 9 times more greatly influenced by the high end. That’s NINE TIMES, Ferris. Nine times.
Well, this is because things got more expensive, you might say. No, I disagree. If all prices increased, we would see more of a shift of the entire curve - as we saw from 2005 to 2006. You can see that the peaks of 2006 and 2007 are definitely ahead of 2005 – to me a clear sign of overall price increases. But check out what happens to the peak in 2008 – it drops back!
On all but the top 20% of sales on Lake Martin, 2008 was a year of decrease prices! How much I am not willing to say. Remember, we’re dealing with small samples. For example, to look at this graph and say, since the peak in 2006 and 2007 was in the 400s, and it dropped back to the 300s in 2008 – it would be incorrect to think that the whole market decreased 25%. But I do think it is OK to say we experienced a downward trend.
SO WHAT MATH NERD??!? WHO CARES? HOW DOES THIS HELP ME?!?
I can think of several applications for 2009:
BUYERS:
1. Anyone that has been waiting until prices come down can quit waiting. It is happening.
2. Observe that for sellers, their sweet spot came in 2006, when prices were still rising even though more and more homes were flooding onto the market. It took them a while to catch on that the end was coming. HOW LONG WILL YOU WAIT TO BUY?
3. This cycle WILL swing back. Will you be burned like some sellers were in 2006, gambling that prices would rise again in 2007, only to be hit with the drought then the bank meltdown? When else in history have buyers had this perfect storm on their side?
SELLERS:
1. This should show you that now, more than in the last 4 years, buyers are extremely price sensitive. They are reacting to aggressively priced homes, not homes with crazy list prices.
2. There are TONS of other homes on Lake Martin for sale. The buyer can pick among several good candidates. You are not as special as you were in 2005.
3. Know your competition – look at your home and decide, what price point would I be in? What would be my competition? Regardless of the price, be competitive within that category. Also, choose a price that justifies not stepping up or stepping down.
In Summary
Sorry for the long post, but I just couldn’t break this info up and it make any sort of sense.
Please note that I am not trying to break the news that it’s a buyer’s market and prices are dropping. That’s obvious. Similarly I realize I am not the first to discover the bell curve. But – I do think it is tremendously exciting to finally have a mechanism to observe pricing trends that isn’t too mangled by our small sample size.
Call me a dork, but I love it. I love Lake Martin real estate, so to me this is big. Indulge me, OK?
(*)Disclaimers: All of the above info was taken from the Lake Martin Area Association of Realtors Multiple Listing Service. Accuracy is not guaranteed but deemed reliable. The above does not include sales by FSBOs or developers that sell privately and not through the MLS. But, I do think that the above represents a very large majority of all sales on Lake Martin.
Related Posts:
Lake Martin Market Statistics Category
Why Lake Martin Real Estate Buyers Can’t Time The Bottom
Contrary to the doom and gloom peddlers, there ARE people out there looking to buy real estate right now, even in a second home, waterfront, luxury market like Lake Martin, Alabama.
If a buyer is hesitant, a common objection I hear is they say “I don’t think the Lake Martin real estate market is at the bottom yet” or an even more abstract “I think prices are going to come down.” This is usually followed by the inevitable “I’m going to wait and buy at the bottom.”
OK.
Good luck.
Maybe you can do it, but I give you about a 1% chance of success.
Why not? Here are 3 quick reasons why Lake Martin buyers will miss the bottom:
1. If Lake Martin sellers missed “the top” in 2006, what makes you think you can pick the bottom? Lately I have been meeting with a lot of potential sellers. Almost every one of them lamented that they should have sold in 2006. What’s ironic is that many of the sellers whom I met with in 2006 declined to sell, saying that they wanted to wait one more year to get some appreciation. They didn’t see the 2007 drought or the 2008 national real estate meltdown coming. Neither did I. The seller’s market did not last forever, and neither will this buyer’s market. Newsflash – supply and demand always prevails.
2. When / if the market hits the bottom, how will you know? If you ask, what day saw the lowest value (relative to GDP) for one share of IBM stock in the last 20 years, I have a definite answer. But if you ask the same question about Joe Smith’s home on 123 Lake street, it’s impossible to know. Each share of IBM stock is the same. But not every Lake Martin home is the same. One might smell like cat pee. The other might be near where you learned to ski. Both of these things tangibly contribute to the calculation of value to a buyer and seller. Try to graph that one.
3. Timing “the market” is almost impossible in ANY market – because we are all humans and therefore imperfect. Picking a perfect bottom or top is almost impossible in any market, be it for ligers or lake homes. I am not talking about saying “I knew that lake homes prices were getting too high” – I am talking about telling me the EXACT day and the EXACT price at which to sell. Don’t tell me “I knew Google would be a winner” – show me your receipts from the IPO when everyone was laughing at the geeks and suckers paying $85 / share.
Here are some quotes from a few of the many people who are smarter and more experienced than I am:
“Ignore market timers, Wall Street strategists, technical analysts, and bozo journalists who make market predictions…Admit to your therapist that you can’t beat the market. Investors would also benefit by remembering this simple phrase: trading is hazardous to your wealth.”
- Jonathan Clements, Columnist, Wall Street Journal
“I am fearful when others are greedy, and greedy when others are fearful.”
- Warren Buffet, A Guy Who Is Way Richer Than You
“After nearly fifty years in this business, I do not know of anybody who has done it [market timing] successfully, and consistently. I don’t even know anybody who knows anybody who has done it successfully and consistently. Legendary investor Bernard Baruch said it best: “Only liars manage to always be out during bad times and in during good times.”
- John C. Bogle, Sr., Former Chairman & Founder, The Vanguard Group
SO WHAT?
Am I recommending throwing out all logic and making real estate decisions with the heart?
Of course not.
I am merely saying that if you wait until every talking head in America says it’s OK to buy real estate again, it will be too late. At that point, we will be on the verge of another bubble bursting. If now is not a good time for you to buy on Lake Martin, OK. No problem. Just don’t let Matt Lauer be the one to make your decision for you.
Agree? Disagree? Leave a reply and let me hear about it. Click on the Comments link and let’s talk.
