Whether you own or rent your current abode, purchasing a vacation home sounds exhilarating. Just imagine having your own private getaway. But before kicking off your house shopping journey, there are plenty of essential things to know that will help you avoid a mean case of buyer's remorse. That is why we have your back. We reached out to several experts to put together these helpful tips for buying a vacation home.
Do you Need an Agent, Broker, or Realtor?
Working with a professional sales person will help you find the best vacation home for your lifestyle and budget. But you may not know that in all 50 states to sell real estate other than your own property, a license is a must. Three different types of real estate professionals can sell houses. Understanding what makes each job title unique can help you determine if you want to work with an agent, broker, or realtor.
Licensed real estate agent: Simply put, anyone with this title must meet specific requirements including passing a test to sell real estate in a particular state.
Realtor: Only a licensed real estate agent who is also a member of the National Association of Realtors can use this job title. Realtors have a higher ethical standard compared to other sales agents because they must adhere to a strict code of ethics. You can learn more here.
Broker: While the terms broker and agent seem interchangeable, you may be surprised to learn they are not. Brokers are real estate agents who meet several additional requirements that vary by state including supplementary certification or education.
Tip: It is not uncommon these days for homeowners to sell their own properties, which can be especially tricky for vacation home buyers who also decide to skip the services of a licensed salesperson. Local real estate professionals have the inside skinny on properties in their area. Their insider knowledge can be tremendously helpful for homebuyers particularly when it comes to negotiating better prices.
What Should You Keep in Mind When Picking a Location?
There are many different factors to consider when buying a vacation home, says New York City architect, John Mochelle.
"Finding that perfect location is at the top of most prospective buyers' decision lists. And while your heart may be set on owning a home near the closest ski resort or river town, it pays to do some in-depth financial research even if the house seems reasonably affordable."
Mochelle adds, "Unexpected expenses or possible weather risks can turn a vacation home into a money pit."
For example, property taxes and other tax implications based on your income can drive up the cost of homeownership. Extreme weather like hurricanes or flooding will drive up both insurance and home maintenance expenses.
Another critical financial factor to consider is the liquidity of the property.
"Buying vacation homes in rural areas where real estate prices have flatlined is a significant trend among second homebuyers in major cities. Sure, there might be plenty of real estate bargains within a two-hour drive of your home. But some of these places may not be easy to sell later without taking a financial hit. It is particularly important to keep in mind if you are planning to buy a fixer-upper. While remodeling will undoubtedly make a vacation home more enjoyable, you may not be able to recover your remodeling costs later when it is time to sell."
Why You May Need a Good Property Manager
"Once you found your dream vacation home, I think the most important advice I could give to first-time vacation homebuyers is to choose a great property management company," says Eric Sztanyo REALTOR® at Keller Williams in Cincinnati, Ohio, and founder of We Buy NKY.
A good property manager can do to two things: First, keep an eye on your vacation home when it is empty.
"It's vitally important to remember that if your primary residence is not very close to your vacation home, you simply cannot pop over with something goes wrong," adds Sztanyo.
That is when a property manager comes into place. They can deal with maintenance issues and fix them quickly.
Second, a property manager can also rent out your vacation abode when you are not using it, so you can earn a second income that helps pay off your mortgage quicker.
"Vacation rental sites like Airbnb and VRBO have spawned a new cottage industry of property management companies that specialize in short-term rentals," says Mochelle. "Companies like these are usually hyperlocal — meaning they will only manage properties in a specific city, town, or county. To find the best one for your needs start with a Google search and before establishing a working relationship ask for references from existing clients."
How to Save Bundle on Renovating Your Vacation Home
Whether you plan to renovate your vacation home for your enhanced enjoyment or to make your property more desirable on Airbnb, how can you get the job done without imploding your savings? John Linden, the lead designer at MirrorCoop, has a smart suggestion.
"I've seen a lot of people let someone live in their vacation home for a few weeks or months for free in exchange for their carpentry or other home improvement skills. You will have to pay for all of the building materials, obviously, but it is an ingenious way to save money on labor costs."
One important thing to keep in mind a carpenter or handyman should never make specific home improvements. "Installing new wall tile or wood flooring can be done by a jack of all trades," says Mochelle. "However plumbing, electrical, or significant structural work on your home must be done by an insured and licensed professional. It is the only way a homeowner can protect themselves from shoddy work or worse, serious financial loss."
How to Buy a Vacation Home in a Different Country
Buying a vacation home in a different country could be an excellent investment especially in an area where short-term rentals are popular, according to Joel Bennett from Tokeet, a vacation rental management software platform. But he suggests keeping your eyes peeled for fake brokers.
"I have heard of some people who lost $60,000 to a fake broker because they made a cash deal. To avoid the same fate, you should get yourself a local bank account in the area you are looking to buy. Some overseas banks cater to foreign citizens seeking to make large transfers to purchase homes in vacation spots. Have a bank as a middleman can help you avoid being scammed.