By: Mike Kennedy March 28th, 2008 Category: Deep Creek Lake Buyer Info, Deep Creek Lake Market Update, Deep Creek Lake Real Estate

An article about buying a vacation home recently appeared on the CNN/Money.com website. It’s a pretty good article - and is basically about how right now is a good time to buy a vacation or second home. The author also does a good job of giving tips on how to buy a second home - from identifying the primary reasons you may want to buy a second home to suggesting that you first rent in a resort area to see how well you like it before taking the plunge and buying. 

We certainly agree with the main aspect of the article - that it is a great time to buy property at Deep Creek Lake and in Garrett County - interest rates are down and demand certainly isn’t as high as we had previously seen during our boom years just a few years earlier. These two factors can certainly help the chances of a prospective buyer getting better terms. In fact at the end of last week one of our clients locked in an interest rate of 5.625% on a conforming loan that they will be using to purchase their lake view vacation home.

However, there are a few things to point out in this article that just don’t relate to the Deep Creek Lake real estate market.

First, the author tries to generalize that all second home markets are “soft” right now. While demand is down slightly from our boom years - “soft” is hardly the case here now. Just in the last three weeks we have closed on a lakefront house at Sandy Beach for $1,379,000 (that had competing offers), a timber frame home atop Wisp Ski Resort for $1,250,000, a lakefront house on Marsh Hill Road for $880,000, and two other lakefront homes for $865,000 and $750,000 respectively. And just today one lakefront house in our market had 3 competing offers! I would hardly classify this type of activity as being “soft”.

Another thing the author tries to generalize is that the appreciation rates in all resort/second homes markets declined in 2007 - or are expected to decline in the near future. Once again, that’s not accurate for the Deep Creek Lake market. In 2007, the average sold price for a residential property in the Deep Creek Lake area was up approximately 4% over the average sold price in 2006 - from $537,498 to $559,168 - a modest gain - but at least a gain unlike other second home markets.  It is accurate to say that the value of a piece of property at Deep Creek Lake has held up much better than a property in other resort markets - such as Las Vegas, the Atlantic Coastal beach areas, and Florida just to name a few. This fact is just another reason to buy here at Deep Creek Lake - where historically the appreciation rates have done much better and should continue to do better than other resort areas. The main reason being that the lake is almost fully developed now - there just a few smaller tracts of land that have frontage on Deep Creek Lake or have access that can ever be developed in the future. Low inventory and continued demand should continue to fuel appreciation for lakefront and lake access homes in our market.

By: Mike Kennedy March 26th, 2008 Category: Deep Creek Lake Market Update

We would like to take this opportunity to give our opinion and clear up a few misconceptions and misinformation about the condition of the real estate market in Garrett County.  The old adage “if it seems too good to be true, it probably is” used in the article of March 6, 2008 in The Republican may be applicable in certain situations. (Unfortunately this article is not online and can not be linked to.) The old adage “don’t believe everything you read” may also be applicable.  Contrary to the opinions of some, the real estate market in Garrett County is alive and well and quite frankly improving each and every day. 

There is no doubt that 2007 was a year for Garrett County real estate companies, as well as buyers and sellers of Garrett County properties, to re-evaluate strategies, do some belt tightening, and find innovative ways to market their properties.  The real estate market in Garrett County over the past 20 or so years has been nothing short of amazing.  National publications have called the Deep Creek Lake real estate market one of the hottest in the east. The last several years have continued that trend and we have been in a boom market since the early 1990’s.  Any downturn at all from those highs was bound to be a shock to buyers, sellers, real estate agents, and real estate companies.  While the number of transactions in Garrett County were down in 2007 from 2006, it would have been very difficult, in any market, to sustain those levels generated over the past three or four years.  Even though the total number of sales was down, listed below are some facts that we would like to share with you.

• According to our MLS, the Metropolitan Regional Information System, the average marketing time for properties in 2007 was roughly the same as the previous five years in both the Deep Creek Lake and the Garrett County residential markets.
• The average sales price for a residential property in Garrett County actually increased in 2007 over 2006 - and so far in 2008 has increased again, roughly 21% over the previous year.
• The average sales price for a residential property in the Deep Creek Lake area also increased in 2007 over 2006 - and so far in 2008 has increased again, roughly 19% over the previous year.

What does all this information tell us? It tells us that the market isn’t as bad as the “doom and gloom” people would have you believe.  There are hundreds of ways to look at statistics and manipulate them into what you want to believe.  At Railey Realty, we choose to believe that Garrett County and Deep Creek Lake real estate is still one of the best investments a person can make, no matter how hard the national news networks are trying to convince us otherwise.

In our opinion, 2008 is looking to be a great year for real estate sales in Garrett County.  Because there are so many “spin off” businesses that rely on the real estate industry, we hope and believe they will also have a banner year.  If the last couple of months turn out to be a good barometer of what will happen in 2008, everyone in the county should benefit from the increase in real estate activity.  Our agents have been very busy recently showing properties to prospective buyers.  They have been busy listing new properties.  They have been busy writing offers and contracts.  As an owner and the Broker of Railey Realty, I am extremely excited about what lies ahead in 2008.  We look forward to continuing our efforts to help hundreds of families each year realize the “American Dream” of home ownership.

Sincerely,

Kevin D. Liller

Railey Realty

By: Mike Kennedy March 6th, 2008 Category: Deep Creek Lake Real Estate

Attention all you investor type buyers. This real estate listing just went back on the market  - it’s located at 79 Cedar Shores and is being offered for $1,345,000. It’s a vacation rental home and is professionally managed by Railey Mountain Lake Vacations. The rental name is Cedar Chateau.

It has 8 bedrooms (6 of them being Master Suites), a 27 foot indoor pool, 10 flat screen TV’s, and is fully furnished. The property does have access to Deep Creek Lake but does not come with a deeded boat slip. You have views of the lake and Wisp Ski Resort and the house is complimented with interior finished hardwoods, cathedral ceilings, and 2 native stone fireplaces.

For all you investor types out there - this house generated a little over $107,000 in gross rents for all of 2007. The main reason it did such high rents is (1) because it has an indoor pool and (2) the newer construction/quality of the home’s interior. A good rental house does not have to directly located on Deep Creek Lake. The rental houses with indoor pools can command premium rents and renters will pay extra to have nicer amenities. We Realtors like to refer to these types of houses as the “Pool Houses” - and since their are only a handful in our entire market they usually attract a great deal of attention from our investor type buyers.

Give us a call or shoot us an e-mail - any of our sales agents would be more than happy to explain how the vacation rental program works and the associated costs and expenses of owning a investment property like this.

By: Mike Kennedy February 27th, 2008 Category: Deep Creek Lake Buyer Info, Deep Creek Lake Real Estate

If you are thinking about purchasing a lakefront home for sale or real estate at Deep Creek Lake there are some very important things to pay attention to during the buying process.

The Setting and Lake Frontage

First and foremost, it’s important to understand that not all lakefront lots and parcels at Deep Creek Lake were created equally - some are level, some are flat - some have lots of trees that block the view from the house, some have wide open expansive views of the lake - some are very private, some the neighbor’s house is very close - some have good water depth most of the year, some are tucked back at the end of cove and have no water depth after Labor Day each year - some have 100 feet of frontage which is the norm, some have between 50 and 100 feet of frontage, and some have 200 feet or more of frontage.

Obviously the homes and lots that are mostly flat, have wide open lake views, have more than 100 feet of frontage, and are private will cost you more. But the good news is that the ones with the premium settings have shown a tendency in the past to appreciate better in the long run. 

Everyone’s preference to setting is different -and there will probably be trade-offs that you need to be make along the way - but when you are looking at a lakefront house just keep one little thought in the back of your mind - you can always change the house but you can’t change the setting.

Boat Dock Type

Most lakefront home and properties around Deep Creek Lake have a Type A Dock. What in the heck is a Type A dock you ask? Well, it’s simply the designation placed on the dock structure and permit provided by the Maryland DNR. A Type A dock is allowed to have 2 power boats and 1 non-power boat moored at it.

The lakefront homes and lots that don’t qualify for Type A docks will usually have access to a deeded boat slip in a Common Boat Dock somewhere in the neighborhood. You will usually see these advertised as having a Single Slip. These common docks are not private though - meaning you are usually sharing it with a few neighbors and the prices for these types of properties are usually a little less overall than those with a private dock.

Believe it or not there are actually a few lakefront homes and lots around the lake that don’t qualify for either a Type A dock or have a deeded boat slip - but these are few and far between.

Buy-Down Parcel

Take note of whether the property you are looking at has acquired the Buy-Down parcel from the state of Maryland or not. We covered some of the basics of the Buy Down in this post. You can’t do much with the Buy-Down other than say you own a little more property - but there a few benefits to owning it - 1. You can get what they call “relaxed” standards if applying for a zoning variance and 2. if you are on a septic field and it fails, you can apply to the state to get permission to extend your drain field in to this parcel. So overall there is some benefit and value to owning the Buy Down parcel.

By: Mike Kennedy February 22nd, 2008 Category: Deep Creek Lake Real Estate

It’s no secret that many vacation and second home owners here at Deep Creek Lake greatly enjoy the peace and relaxation that comes along with owning real estate in Garrett County - but there are other benefits to owning a second home that sometimes go unnoticed - most notably the various tax breaks allowed by the IRS.

The Rules 

In simplistic terms, the IRS allows most second homes to be treated in one of the  following three ways - depending mostly on how much you use or plan on using the property;

1. for personal use
2. as a rental property
3. or a combination of the two

Personal Use

If you truly use your Deep Creek Lake property as a vacation home for personal use as defined by the IRS there are a couple of tax breaks you may be able to receive. The IRS stipulates that a property is considered one for personal use if during the tax year the owners occupied it more than the greater of 14 days or 10% of the total days it was rented to others at a fair rental price.

• If your vacation home is classified by the IRS as one that is used for personal use - you can actually rent it out for 14 days or less each tax year and NOT have to report any rental income  - this is essentially tax free income - but conversely in this scenario you wouldn’t be able to deduct any rental expenses incurred during the days rented either.
• Also, if you fall into this personal use category, all property taxes and mortgage interest on your second home can be deducted if the total amount of mortgages against your primary residence and second home is $1 million or less.

Renting Your Property Out

Their are certain tax breaks as well for those owners who decide to rent out their vacation homes and personally use it less than 10% of the rental each year. If you fall into this rental classification by the IRS you must report all rental income - however, the good news is that the IRS allows you to deduct all legitimate property expenses associated with owning the home - like taxes, utilities, homeowners insurance, HOA dues, maintenance, and depreciation. Some vacation home owners can legally show a deductible tax loss which could ultimately reduce the total amount of taxes owed to the IRS.

Combination of Personal Use and Renting It Out

If you combine personal and rental use - you can deduct the appropriate percentages of expenses based on the amount use. For example, if you use your second home 40% of the time for personal use - you can deduct 60% of the expenses if it is truly rented out that percentage of the year. Important point here though - remember if you rent it out more than 14 days you must report ALL rental income.

The $500,000 Capital Gain Exclusion

If you know you are going to sell your vacation home at some point in the future and will probably have some type of sizable gain you may be able to qualify to exclude up to $500,000 in capital gains on your second home sale. This is accomplished by turning your second home into your primary residence. How do you do that? Well, the only way to do this and stay within the IRS rules is to make your second home your primary residence for two of the five years prior to the sale. Obviously, this takes some long-term planning and foresight to accomplish but it could mean a tremendous tax savings in the long run.

Disclaimer! Please note this post in no way is meant to give out tax advice. It is strictly to provide some basic (and we stress the word “basic”) ground work about second home ownership and how it relates to income taxes. Everyone’s tax situation is different. You must consult your CPA, tax planner, or attorney to make sure you are properly following the IRS rules as they pertain to second home ownership before proceeding.

By: Mike Kennedy February 19th, 2008 Category: Deep Creek Lake Real Estate, Fractional Ownership

One of the newer trends in our real estate market here at Deep Creek Lake has been the introduction of fractional ownership. The first fractional offering was developed by a company called Second Homes at DCL. This concept has been a little slow to catch on in this market  - there have only been a handful of fractional sales in the past year or so. But fractionals are huge in other resort markets - like Park City Utah, Steamboat Colorado, and Vail to name just a few. It’s only a matter of time until the fractional concept catches on here at Deep Creek Lake and Garrett County. 

What is fractional ownership? In a nutshell, it’s owning a fee simple ownership percentage in a property - the most common in our market being a 1/6th ownership. For your share you get the ability to use that property 1/6th of the year - or in other words 8 weeks out of the year - (52 week less 4 weeks reserved for maintenance divided by 6 fractions). And then the 8 weeks you can use it usually get broken down by the season - you can use the house for 2 weeks in the summer, 2 weeks in the fall, 2 weeks in the winter, and 2 weeks in the spring.

Pros & Cons - It’s important to note these are NOT Timeshares or Residence Clubs. These properties are fully furnished, fully decorated and ready to go when you arrive at it - all the way down to having a full roll of toilet paper hanging in the bathrooms. Other than buying groceries you will spend no time maintaining the property….no cutting grass, no changing light bulbs, painting, etc. 

While this fractional concept isn’t for everyone looking to buy a vacation or second home - it does open up a unique opportunity for those looking to purchase something they may have not had the means to do on their own. Basically, it makes these types of properties more affordable. For a little over $329,000 you can buy part of and enjoy all the benefits of a lakefront home that would normally cost well over $1,000,000 by itself. And you can split the ongoing costs and maintenance expenses - like real estate taxes, HOA dues, and utilities - six different ways now. On the flip side though, you do only get to use the property 8 weeks out of the year…..but most survey’s show that vacation home owners only use their properties 8-10 weeks each year anyways. And if you decide your deeded interest can be sold, willed, or gifted at a later date.

Current Offerings - If you are still interested please contact us about the current fractional ownership opportunities in this market. We are the only real estate company in the area right now offering fractionals. Below are some of our offerings - it’s a nice mix of the different types of properties you can find at Deep Creek Lake;

• 1/6th of a lakefront home in Waterfront Green for sale for $329,000
• 1/6th of a lakefront townhome at the brand new Creekside condominiums for $259,900
• 1/6th of a lake view townhome at Overlook Villas for $259,900
• 1/6th of a lake access home with indoor pool at Cedar Shores for $299,000
• 1/6th of a lake area duplex style townhome at Northlake Village for $119,900

In future posts about this topic, we’ll work through some of the math and show you how all the numbers work - and we’ll also try to better explain how the usage rotation works as well - but until then please use this post as a starting point to better understand this unique concept in property ownership.

By: Mike Kennedy February 16th, 2008 Category: Deep Creek Lake Real Estate, Interest Rates and Loans

In order to stimulate the economy and the national housing market, President Bush recently signed House Bill HR 5140 - which may raise the conforming loan limit to as high as $729,750. This new bill could quite possibly have an impact in our local real estate market here at Deep Creek Lake in the near future.

 The current conforming loan limit is $417,000 - if you borrow over that amount you the wind up in what lenders will usually call a Jumbo Loan - and to balance out risk for these lenders - Jumbo Loans usually have interest rates 0.50% to 0.75% higher than conforming loans.

This stimulus package gives HUD the ability to raise the conforming loan amount within the next 30 days to as high as $729,750….and the ability to implement the new limit in certain markets - the big questions yet to be answered are “how much” and “where”. 

Hopefully these higher loan limits will be enacted here in the Garrett County and the Deep Creek Lake areas. If so interest rates will drastically improve for those financing vacation and second homes in our market. Most of our lake access homes right now are priced between $500,000 and $1,000,000 - and most of our lake front homes are priced over $1,000,000.  These higher loan limits will surely give those shopping for vacation homes in our market better financing options than what they had before - better financing options will more than likely spur on a few more potential buyers who may have been sitting on the fence - more potential buyers will surely stimulate our number of vacation home sales this year.

According to the article there is still a lot of grey area to be worked out - hopefully it works in the favor of those thinking about buying a vacation or second home this year.

By: Mike Kennedy February 14th, 2008 Category: Deep Creek Lake Market Update, Deep Creek Lake Real Estate

Like most other resort markets around the country the Deep Creek Lake and Garrett County Maryland real estate market for the year ending in 2007 can be summed up in the following sentence…..Total Number of Sales Down, Average Sold Price Up.

So the question then becomes - Was Deep Creek Lake a good real estate market in 2007 or not? The answer really depends on who you ask - if you already own property here your value went up again in 2007 so their answer would be that it’s still a very good market…if you ask someone who tried to sell their property last year you would probably get a mixed reaction - most still ended up selling for what they wanted but it certainly took a little longer to get there….if you ask any local Realtor they would probably tell you the market stinks - of course they would be saying that because less sales equaled less money in their pockets last year - or in simple terms, bad for us - not so bad for our current clients, still good for past clients.

Below is a snapshot of what occurred in our market in 2007;

                                     No. of Homes Sold          Avg. Sold Price

                                   2006               2007         2006              2007

Deep Creek Lake        308                 215        $537,498      $559,168

All of Garrett County   510                 374        $396,499      $400,460

(Includes DCL)

It’s important to note that the Deep Creek Lake numbers above include everything residential in nature - homes, town homes, condos, and a few fractional ownership sales we had. It also includes a wide variety of different locations and settings within the lake market - lakefront properties, lake access properties, lake view properties, Wisp Ski Resort properties, and properties that have no access to the lake but are just in the general vicinity. Those different types of properties can vary greatly in value.

The big question we get asked now - Is it a good time to buy at Deep Creek Lake?

For those of you thinking about buying we truly believe now is probably as good of a time as there is to seriously consider buying in this area. The fundamentals are still very much in place for future appreciation - but we probably won’t see the extremely high appreciation rates we saw earlier this decade. That’s for sure.

Why is it still a good time to buy? The main factor is inventory - if our inventory of lakefront and lake access homes remains low into the future - which it should because the entire lake is almost fully developed now - prices should continue up. There is no reason to believe our inventory will ever get that high on and around the lake - there are only a few parcels left that could possibly be developed. If you talk to anyone who has been around this market their entire life they would probably concur that prices have always gone up at Deep Creek Lake - ever since it’s inception in 1925. It’s very hard to go back in history and find a time that real estate values ever went down at Deep Creek Lake.

When will the number of sales start to go back up again? It’s hard to say really - the experts predict we won’t see a positive trend in the number sales until 2009 at the earliest. From what we’ve seen so far, 2008 is starting off a lot like 2007 did. We have our normal amount of potential buyers who want to buy a vacation home for personal use and have the means to do it - it seems we lost that group of people who were buying for speculation, quick flipping, and who might have been stretching themselves financially to make it happen. Those people seemed to have disappeared over the last year or so. The national media has made a lot people think that buying real estate is a bad thing to do right now - this situation won’t change until the perception shifts back to real estate being the “cool” or “in” thing to do again. But the smart buyers are the ones buying now - before things heat back up.

Some other interesting real estate happenings that occurred in our market in 2007 -

• A new record sold price for a lakefront home was set in 2007 - a new construction spec house in The Reserve at Holy Cross sold for $2,830,000.
• Two homes sold for over $2 Million in 2007 - in 2006 only one home sold for over $2 Million in this market.
• In 2007 there were 22 homes that sold for $1 Million or more - in 2006 there were 30 homes that sold for over $1 Million.

By: Mike Kennedy February 4th, 2008 Category: Deep Creek Lake Real Estate

Cathy Mateer, who works for the Maryland Department of General Services, has notified us that the State of Maryland is essentially shutting off the Deep Creek Lake Buy-Down Project in June of 2008.

What is the Buy-Down Project you ask?  In a nutshell - when the state of Maryland bought Deep Creek Lake in 1998 they basically bought the real estate and land that makes up the bed of the lake and a buffer strip of land of at least 25 feet in width around the entire perimeter of the lake. The state paid $9.8 million to purchase this land back in 98. In order to recoup some of this $9.8 million the state has offered adjacent landowners the opportunity to”buy-down” or purchase some of this buffer strip from the state.

The good news is that if you are a lakefront property owner the state has sold or will sell you a portion of their buffer strip for $0.39 a sq foot - which is a pretty cheap price for land. The bad news is that a conservation easement is placed on this parcel of land when you buy it. This easement basically prohibits you from cutting any vegetation (trees) or building any permanent structures on this parcel - or in other words you can’t really do anything with the land eventhough you own it! You won’t be able to cut trees so you can get a better view of the water.

From what we know about 80% of the lakefront property owners around Deep Creek Lake took the state up on this offer over the past 7 or 8 years since this project has been in existence. That’s not really surprising considering the average “buy-down” parcel cost somewhere in the neighborhood of $5,000. Since the amount of land you could buy is based on elevations - the steeper properties offered less land and hence less of a price tag - and the flatter properties around the lake were a little more expensive.

Over the past several years a lot of our past customers whom we have sold lakefront property to will  ask us - “Why should I spend money on property I can’t do anything with?? Do I really need to do this?”

Our answer back is usually along these lines - “No, you really don’t need to do this - you obviously can’t do anything with this land - however, this will be probably your one chance to buy down closer to the water at a pretty cheap price. And if you ever had to re-sell your property this buy-down parcel is just one more positive thing or amenity you can offer.”

Relating this back to real estate, overall we have witnessed that doing the “buy-down” has turned out to somewhat of a good thing for those that have sold their lakefront properties since this project has been around. For those that did it, most got all their money back out at the time they transferred their property to the new buyers - kind along the same lines of a kitchen remodel or other renovation. By having the buy-down to offer it’s just one less question mark a potential buyer will have to deal with.

If you haven’t done the buy-down yet or are still considering doing it you may have some time left. You can contact Cathy Mateer at (410) 767-5764 or e-mail her at catherine.mateer@dgs.state.md.us for more information. From what we know they are trying to finalize any existing contract by June 2008. After June 2008, you will no longer have the ability to purchase this land.