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Do Your Research Before Buying a Second Home By Diane Cole, AAR Communications Director as seen in the Arizona Republic, October 2002 |
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Enjoying a peaceful vacation in a mountain cabin, lounging in your lakeside condo,
relaxing over margaritas on the patio of your resort getaway. As you
think about this perfect lifestyle, the thought suddenly occurs: Why
don't we buy a second home here? More and more people are taking the plunge and buying a second house as a vacation getaway, a retirement home, an inheritance for the kids, or even a status symbol. The NATIONAL ASSOCIATION OF REALTORS®' biennial survey, Profile of Home Buyers and Sellers, reports 5.5 percent of all homes sold in 2001 were second homes, half for recreational use and half as rental investment property. Arizona is one of the top states for second home sales. In the Valley alone, housing experts estimate 25 percent of homes sold in 2001 were vacation homes. NAR's report shows the median age of second-home buyers in 2001 was 46, and the median income was $77,700. A second home can be a house, condo, mobile home, RV, even a boat with sleeping, cooking, and toilet facilities. Is a second home in your future? Take the time to answer the following questions before making the commitment. Why do I want a second home? Vacation, retirement, recreation, investment. Determining your main reason for buying a second home is the first step in evaluating the purchase. You won't be as concerned about the proximity of health care facilities to a vacation home, but it may be one of your main considerations if this will be your retirement home. Buying a home for an investment means evaluating property values and resale potential, less important when looking for a second home for recreation. How often will I use a second home? The more frequently you can use it, the more you'll enjoy it. But if your idyllic hideaway takes more than three to four hours to reach, you may find it's not convenient to make the trip as often. If you will only have time to visit it a few weeks a year, a timeshare or rental may be more cost-effective. Where do I want to spend my time away from home? Ask yourself if you want to spend every vacation and holiday in the same place, or if you can see yourself living the rest of your life here. Research thoroughly the areas you are interested in. Talk to other property owners, visit at different times of the year, check out resale values. Get to know the neighbors and the neighborhood. Once you have narrowed your search, pay close scrutiny to security, municipal and property taxes, access to health care and home/auto services, noise and parking problems during the tourist season, and the availability of recreational/cultural facilities, restaurants, and shopping. Experts suggest renting before buying in an unfamiliar area to help you determine if this is the place for you. What amenities are you looking for? If you want a secluded hideaway, just basic electricity and running water may be all you need. Keep in mind, however, that secluded areas can mean poor road conditions, do-it-yourself repairs, and longer travel times just to get groceries and basic supplies. If you prefer to spend vacation time relaxing and having fun, a resort property may be just what you want. Nancy Sertich, a REALTOR® at the golf course community Desert Highlands in Scottsdale, noted that people buy resort homes because the homes will be maintained and ready at any time for them to visit. "Resort home buyers consider second homes more of a playground to get away from daily life, have fun, and be able to do what you want to do without worrying about home problems." How will I finance the purchase? To be considered a second home as opposed to a rental property, "the second home has to be in another area, away from your primary residence, so it makes sense geographically to be considered a second home," explained Pat Lynn, Senior Loan Officer with Western Pacific Mortgage, Tempe. After verifying the income to qualify for two mortgage payments, Pat explained that financing options are very similar to first homes. If you plan to rent out the home more than 14 days per year, the property will be considered an investment and financing options become much more restricted. You can rent it tax-free for less than 14 days per year. Are there any "hidden" costs associated with second homes? You'll need to budget for homeowner's insurance that costs more than your primary home insurance, taxes, maintenance costs, security to protect the home while you're gone, and travel expenses to get there. And just like your primary residence, you'll pay for services such as sewer, water, electricity/gas, and phone. You may also need to consider unusual costs, such as winterizing a cabin in the mountains. Where can I get more information about second homes? Work with a local agent who can provide answers to your questions about real estate in the area. Talk to lenders with local branches who know the community and can price competitively. The Internet has a wealth of information. You can find all the Arizona REALTORS® in the area you're considering online at www.aaronline.com; click on Find-a-REALTOR®. Search for "second home" and you'll find thousands of sites. If you're just starting your research, try www.EscapeHomes.com, www.realtor.com, and www.SmartMoney.com. A second home can be a wonderful reward for years of hard work. Do your research and be as prepared as possible so your purchase will bring you happiness, not hardship. Diane Cole is Communications Director at the Arizona Association of REALTORS® ("AAR"). AAR is a professional association for real estate brokers, agents and other individuals involved in the real estate industry. For more information, visit the AAR website at www.aaronline.com or if you have questions that you would like addressed in future columns contact us at questions@aaronline.com. Remember, always consult your legal or tax advisor before making decisions with legal or tax consequences. |
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