Idaho Real Estate

What's in Idaho?

If you are like many people then the first thing that comes to mind when you hear "Idaho" is "potatoes" but there is more to Idaho than potatoes - much more! If you are contemplating relocating or purchasing Idaho real estate then you will be pleasantly surprised to learn a few amazing facts about the great state of Idaho:

1. Idaho is not a small state. In fact, with over 83,000 square miles, Idaho is the 13th largest state in the nation. Unlike other large states, Idaho still has plenty of space for a population of just under 1.5 million.

2. Rivers Galore. With over 3,100 miles of river; Idaho is number one in the nation for rivers (and potatoes).

3. Number One. Speaking of number one, Idaho ranks first in the nation for several other items (in addition to potatoes and rivers) including trout, lentils and Austrian Winter Peas. Mmmm, sounds like a healthy, nutritious meal!

4. Natural Wonders. From the deepest gorge (Hell's Canyon) to the largest man-made geyser in the world (Soda Springs), Idaho is a nature lover’s paradise.

5. Gem of a State! Idaho produces over seventy types of precious and semi-precious stones; many of which are found nowhere else in the world. No wonder Idaho is called "The Gem State".

Take time to discover everything Idaho has to offer when deciding where to purchase your next "gem" of a property!

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Why should I care about the real estate bubble?

The media is full of news, predictions and warnings about the real estate bubble so should you be concerned? One look at Idaho homes for sale clearly shows a change from the height of the market in 2006 when Boise, Idaho real estate was positioned to be the number one market for appreciation in the nation to today when the market is decidedly more favorable to buyers. Does that mean the game is over for home buyers and investors or is now a golden buying opportunity? To make sense of the real estate bubble it is helpful to keep a few things in mind:

1. Real estate is local while trends are national.

2. Individuals have made (and lost) money in real estate during good times and bad. Your individual buying and financial situation mean more than national trends.

Let's examine each of the above statements a little more carefully. Assume you purchased a lovely piece of Idaho Falls real estate with a typical down payment, 30 year fixed interest rate and monthly payments you could afford. Does the real estate bubble affect your investment?

Yes and No.

Yes – because what happens to the local market may impact your property values. Examples include:

Large Number of Foreclosures: People who put little to no money down, took out Low/No doc "liar’s loans" or otherwise purchased homes they really could not afford are at greater than average risk of foreclosure. The more foreclosures in a given area the less incentive to purchase Idaho real estate at "full price".

Inflated Appraisals: People who purchased more house than they could afford with little to no down payment were often less likely to question an inflated appraisal or selling price. Since existing sales data is one of the primary methods of computing "value" on a property, the inflated appraisals and sales prices not only resulted in increased property taxes but now need to reverse to more realistic "values".

In a nutshell, your real estate investment may experience stagnation, or even decrease, in value until the market stabilizes. This will primarily impact homeowners that need to sell in the immediate future or who had intended to use the equity in their home.

On the Other Hand, No, the real estate bubble may not impact your investment especially if you intend to hold an average of five to seven years and don't intend to use the equity in your home right now. Here is why...

Affordable, Fixed Payments: That fixed interest rate and affordable payment have now become your best friend especially as inflationary pressures continue to escalate. The cost of labor, supplies and transportation are increasing which will eventually create upward pressure on the cost of replacing a home. Depending upon your interest rate, you may be paying only slightly more than the current rate of inflation – essentially meaning you are paying almost nothing for the loan!

Historical Averages: In all other cases of a real estate bubble (and most other types of bubbles) it takes five to seven years for things to return to "normal". Fortunately, most people remain in their homes for an average of five to seven years so there is a strong likelihood that the market will have fully recuperated by the time you need to sell.

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What do I need to know about real estate development?

If you are contemplating the purchase of Idaho new homes then it is essential to understand a few things about real estate development.

You may have heard it said that you don't buy a house but rather than land under it; indeed, there is some truth to that statement. According to the government, a house depreciates or looses value over time. It makes sense; the normal wear and tear that takes place tends to cause deterioration as do changes in style, material obsolescence and other factors.

Land doesn't deteriorate and actually appreciates or increases in value over time due to scarcity, supply and demand as well as other factors. This is one reason it becomes more cost effective to "tear down" an existing building than renovate – the land below is where the "real" value resides.

Unfortunately, land alone doesn't do most people any good without access to water, electricity, roads and services. This is where a developer comes in. Developers purchase large blocks of land then "improve" it. Common improvements include:

• Roads, right of ways, drainage and other access areas.
• Deed restrictions, covenants and entitlements.
• Utilities including water, electricity and other services.
• Homes/Subdivisions.

This is where diligent real estate buyers should exercise caution when deciding to purchase a new Idaho home from a developer. It is important to make sure the developer has the financial wherewithal to finish the project. Throughout the nation there are numerous examples of developers who were not able to complete the project and filed for bankruptcy or went out of business. Buyers are then the not-so-proud owners of a new home in a subdivision lacking basic amenities or worse - infrastructure.

Take time to perform "due diligence" before buying into any development, or work closely with a knowledgeable real estate professional who is familiar with the area. Remember, an unfinished development might be a great way to get in on the ground floor—or a disaster in the making should the development fail to finalize.

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What major real estate law items should I be familiar with?

Confused by real estate law? It's easy to understand why! Legal jargon is complex, technical and rarely written in a consumer friendly fashion. So, how can you protect yourself when buying or selling Idaho real estate if the contracts and other information are barely understandable? Here are a few tips to point you in the right direction with what to watch out for, when to seek professional guidance and how to navigate the perplexing venues of real estate negotiations.

1. Jurisdictions: Real estate transactions are governed by Federal, State and local laws and statutes which can vary widely. Learn all you can about the specifics for your area.

2. The First Call: One of the first real estate laws that will directly impact all future transactions, negotiation and strategy involves the relationship between the real estate agent and yourself. It is important to understand if the agent will represent the buyer, seller or both. The real estate agent will provide written information regarding the nature of the relationship.

3. Agreement to Sell: The next bit of real estate law to become familiar with is the "listing agreement" which stipulates the relationship between the broker and seller. Common types of listing agreements include "Open Agreements" and "Exclusive Agreements".

4. Buyers Contract: Contractual law is a big area and not for the novice. Each state is governed by unique statutes but in general, contracts for real property must be in writing and conform to certain standards. Pay special attention to dates, times, specific criteria and other information. Always insist a verbal exchange be reflected in the written contract since that takes precedent over all else.

5. Title: The final bit of real estate law that you will encounter will be the title. This is the legal conveyance of ownership, rights and responsibilities conveyed with the property.

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What are some common real estate myths?

When it comes to buying or selling Idaho real estate most people have a lot to learn. Here to help distinguish facts from fiction are a few top real estate marketing myths and the reality behind each.

Myth: For Sale by Owner is always a better buy since the seller doesn't have to pay a real estate commission.

Fact: While it may be true that some FSBO properties pass the savings to the buyers, it also might indicate the owner is "upside down" on the property and owes more than it is worth. Basically they can't afford to cover the cost of the mortgage, closing costs and commission so they are attempting to cut their losses. Another common scenario is that the seller actually does or will pay a commission to an agent that brings a qualified buyer.

Bottom Line: Do your homework to make sure the numbers fit and work with a qualified buyer’s agent who will represent your needs and interests. A qualified buyer’s agent is also able to show you FSBO properties that meet your criteria and assist in the negotiation process. FSBO properties can be a good investment but don't automatically assume you will save money.

Myth: Foreclosures are always bargains.

Fact: Foreclosures can be major money pits if you aren't careful. The original buyer may have spent more on the house than it is worth; adding in the cost of legal fees, taxes and other unpaid loans or liens the total amount of indebture on an existing property can easily far exceed the value of the property. Needed repairs, deferred maintenance and other factors can quickly spiral out of control leaving the new owner broke and unable to sell.

Bottom Line: While the house may sell for less than the original mortgage or purchase price, it is necessary to tally up the total cost of buying, repairing and then selling in order to determine if the property is actually priced right.

Myth: When it comes to agents, "The More the Merrier."

Fact: More isn't necessarily better. Whether you are buying or selling, quality is better than quantity. Sellers don't want to spend additional time showing the home to unqualified prospects and buyers don't want to spend time seeing properties that don't meet their financial or other criteria.

Bottom Line: Reduce the stress and obtain better results by finding a qualified agent that will work closely with you.

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Is housing out of reach?

Before getting too caught up in the gloom and doom surrounding the real estate bubble it is a good idea to put things into perspective. Here to help is a quick review of popular real estate bubble myths followed by some cold hard facts.

Myth: The cost of homeownership is out of reach.

Fact: While the cost of buying a new home has increased in recent years, the Housing Affordability Index was just below 114 for ARM and 112 for Fixed. A rating of 100 means the average household has exactly the income required to purchase an average home.

Bottom Line: The average household has more than sufficient income to purchase the median priced home.

Myth: The rising cost of real estate has locked younger people out of the market.

Fact: The Department of Housing and Urban Development has tracked the demographics of home ownership carefully since 1982. Current research indicates over 25 percent of persons less than 25 years of age own their own home; one of the highest percentages ever recorded! Compare that to the late eighties and early nineties, when only 14-18 percent of persons under 25 years of age owned a home.

Homeownership rates for those 25 to 29 years of age are also the highest in history with over 40 percent of people in that group owning their own homes.

Bottom Line: Contrary to popular media hype, homeownership among younger persons is actually the highest on record.

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