If you ask Peter Lutz what he’s doing this weekend, the Toronto publishing executive will happily tell you that he’s going to be spending time at his sprawling cottage in Ontario’s gorgeous and ultra-expensive Muskoka region. Then his smile will widen as he explains to you how he bought the cottage last winter for a half-million dollars under the original price of $1.49 million. “My wife and I were sitting on the dock of a friend’s cottage last summer, discussing the economy,” says Lutz, 51 (whose name we’ve changed). “It was obvious the real estate market was starting to turn. We decided it was the perfect time to be looking for bargains in vacation homes. And that’s what we did.”
The couple spent weeks this past summer visiting million-dollar-plus cottages that had been listed for sale. In early fall, they compiled a list of 10 properties they loved that were still on the market. In November the couple instructed their real estate agent to start placing “stink” bids that were at least 33% below asking prices. Their plan was to begin with their top-ranked cottage, then move down the list until they found a cottage owner willing to take their lowball offer.
To their surprise, their first offer was accepted. “The cottage had been on the market for $1.49 million all summer,” says Lutz. “It was re-listed in October for $1.29 million. Our offer was $950,000 and after a bit of negotiating, we got the place for $1 million even. It was a cold day in December and the owners of the cottage hadn’t used it for months. They were ready to move on and we benefited.”
If you, too, are in the market for vacation property, take a page from the Lutzes’ book. Thanks to the recession, buyers of recreational properties can now drive a hard bargain.
And that’s only fair since sellers have had things all their way for the past several years. Average prices for cottages in the Lutzes’ area almost tripled from $440,000 in 1999 to $1.2 million in 2007.
Since then, though, prices have nosedived by 15% to 20% in Muskoka and in most other prime vacation areas. “My feeling is that prices are still too high,” says Tim Harris, owner of Tradewinds Realty Inc. of Chester, N.S., which specializes in carriage-trade properties along Nova Scotia’s south shore. “We’re in a tough market and sellers have to adjust prices accordingly.”
Keep these tips in mind to find your own bargain.
The best time to start looking is at the height of summer. Spend time on the Internet researching prices. Drive out to see properties that interest you. Follow the progress of those properties for a few weeks so you can see how long it takes for a listing to sell. “We spent every weekend last year during the summer and the fall meeting with real estate agents and inspecting properties,” says Lutz. “It was exhausting but believe me, all that legwork paid off.”
Many agents don’t want to put in stink bids because of the low probability the offers will be accepted. One of your first jobs is to find at least one agent who sees the merit of your strategy and is willing to work with you. Don’t be afraid to use several agents, so long as you make it clear to each agent that you’ll be using each of them only for the listings in a specific area. “Real estate agents are pack animals,” says Lutz. “If the wrong coyote shows up in their neighborhood, they bark him out. Make sure you use the right agent for the right territory.”
There’s no point in trying to get a deal on a property that has just been listed. The seller is still hoping to get his or her asking price. “Wait three months, or until the listing has expired and been put back on the market at a lower list price, before you put in a stink bid,” says Paolo Visentin, a real estate agent with Country Living Realty Ltd., in Rosemont, Ont. “If a place has been listed for only three or four weeks, the seller still believes a better offer lies in the wings.”
Wait some more
For country properties, the best time to buy is in the dead of winter. For cottages, it’s late fall. “There’s less competition when the weather gets cool,” says John Aben, the sales rep in Muskoka Lake of Bays who sold the Lutzes their cottage. “And sellers don’t want the cost of carrying the cottage through the winter. They’re very motivated.”
Make it clean
Ensure your offer contains no complicated conditions. You want to make it as easy as possible for the seller to sign on the dotted line. “Make sure you have the money in hand, can get a quick closing and don’t raise too much fuss over the small stuff,” says Lutz. “The only condition we had was a home inspection — that was it.”
If you fall in love with a place to the point where you tell yourself that you must have it at any price, then you’ve already lost your edge in the bidding wars. To preserve a detached attitude, keep looking until you have a list of at least a half-dozen properties on the market that you would be happy to own. Keep reminding yourself that you would be content in any of them. Then start bidding. If the owner of your top-ranked property won’t meet your price, shrug and move on. “It’s just a transaction” says Lutz. “In this market, some sellers are sure to capitulate. When they do, you’ll come out a winner.”