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August 17, 2024 started a new chapter in the Real Estate industry. A plaintiff’s attorney convinced a jury that it was wrong that a seller pays the buyers agent’s commissions on the sale of their property and that the buyer should be paying these commissions. This does not prevent the seller from paying the buyer’s agents commission, it simply states that they can no longer be required to. In my opinion, the seller is not going to make any more as they simply will be lowering the price so why even bother? Anyway, not my battle to fight…I just have to learn how to operate under the new rules.

What I am seeing on the lake is that listing agents are still convincing sellers that it is to their advantage to include money in the deal for the buyer’s agent. If/when sellers stop doing this, the buyers agent commission will be another point of negotiation in a deal.

The worst part of this new rule is that buyers now have to sign a buyers agent agreement BEFORE an agent is allowed to show a house. This is uncomfortable for new buyers in the marketplace as it feels like you are locking into an agent before you know who you are dealing with. What most agents are doing in this case is to sign an agreement that expires and the end of the showing or showing. So the agreement may be just for the one house someone is wanting to see or for the day and will cover all houses seen that day. Once a prospective buyer gets comfortable with the agent, they may sign something that extends until the buyer finds a house. And the agreement, it will define services the agent offers and what is charged for the services. It can get weird here as this agreement can look like a buyer will have to pay commissions (eg 3%) out of pocket, on top of the down payment paid on the house. In reality what typically happens is the buyer’s agent commissions are being paid by: 1) the seller through the listing agreement or concessions or 2) negotiated as part of the final price. I have not yet seen a buyer have to come out of pocket to pay their agent.

We have not seen the end of this and I think it will take some time (and a couple of lawsuits) to smooth out the process that becomes the standard operating procedure.

Please reach out to me if you have more questions about this topic or property on Smith Lake. I can be reached at 205.492.3211 or Jeff@SmithLakeRentals.com.

The market is changing here at Smith Lake. This post is for those of you that have been thinking about looking for a place on Smith Lake but are unsure when you should start the process because of the questions in the marketplace: Are prices dropping? Are there deals out there? Do I still have to compete for houses?

Are prices dropping? Prices are dropping but not dramatically. I am still seeing good/great houses hold the higher values as a cool house will sell, the seller just has to be patient. If a seller is not patient, price is their obvious lever to use in attracting more attention. The houses that are marginal or have issues have to be priced more aggressively as buyers are getting more picky, because they can be, and more patient as inventories are rising. So…patience for the buyer and seller can benefit them. I am recommending to my buyers right now to be as picky as you want to be as long as they can be patient.

Are there deals out there? The majority of the houses are still be priced aggressively for the first 30 days or so. That time period will tell a seller pretty quickly if they have an attractive property or if it is priced right. Again, if a buyer can be patient and only look at houses 30+, or even better 60+ days, on the market…you might just get a discount. The DEALS I see are typically when a seller is wanting to move the house quickly (i.e., they are not patient). This might be the result of the seller wanting to purchase another house, it might be a badly performing Short Term Rental (see more below on STRs). BTW, the number of buyers looking for deals in the less than $1 million price range is the most crowded. So…be prepared and ready to pounce on these. You need to be highly educated on the market or be using an agent who knows a deal when they see one.

Do I still have to compete for houses? The days of multiple offers, escalation clauses and over asking offers are far a few between….thank goodness! You do still have to compete but it is more about speed than price. If a property that is a deal hits the market, you should be looking at it within 24 hours of it hitting the market and that may be too late as many times by the time a property hits MLS/Zillow it has been on the market for a week or so waiting on pictures or a repair or some other reason. The house is getting shown during this interim time by agents in the know.

Short term rentals. (STRs) With the ballooning of the STR inventory from ~125 properties pre-pandemic to over 400 in 2024, the occupancy rates and profits in this segment has plummeted. (Ex. I own a house that brought in 78-80k pre-pandemic and now brings in ~50k). Many owners that purchased needing the rentals to help pay for the house are getting hurt and working to move those properties. There are a number of properties on the market in this category.

Recommendation to buyers Now more than ever is the time to make sure you have a solid agent that specializes in Smith Lake and is connected to the major listing agents on the lake. This knowledge and these connections is the difference in either getting a great deal or knowing which houses require a sense of urgency to act on.

One other point, many buyers are always wanting to get a deal regardless of whether the house is already a deal or not. Be careful here as this is how you lose the perfect house. If a house is perfect for you then be prepared to pay full price or close to it. When you find the perfect house for you, it is not the time to negotiate….it is time to get what you want…which is the house. $10k, 20k, 30k will not matter 10 years from now near as much as the enjoyment you will get for the right house.

If I can answer any questions about Smith Lake, feel free reach out to me at 205.492.3211 or Jeff@SmithLakeRentals.com. Thanks for reading!

You may have read the news that says real estate listings will no longer include a set commission for the Buyer’s Agent (BA). The seller can still put something in the listing for the BA but they do not have to which means, if a buyer wants a BA, the Buyer has to negotiate with the BA on what the BA will do and what they will be paid OR the buyer will simply call the name on the listing/sign….and using the Listing agent has never been recommended as they represent the SELLER’s interest.

My advice: if you have not purchased a lake home on Smith before then pay the BA. Buying on Smith (or any lake) is not the same as buying in a neighborhood. There are so many other considerations that if you get them wrong any one can affect your enjoyment for years to come.

A for instance, I am working with a long time customer who is looking for their second home. They started looking at lots. They found one they liked which I liked as well. My experience on that part of the lake (close to my cabin) led me to tell them that the only consideration that is challenging is the area of the lake, and more specifically the short stretch where the lot is located, is extremely rough as waves bounce back and forth off both sides of the channel. This is not something the Listing agent would ever have told them and they would have purchased a very expensive lot only to have dock and wave issues for years to come.

It is going to be an interesting time for the next couple of years in this business!!

I am getting a lot of calls these days from buyers asking about how rentals work, best houses for rental, how much they can make, etc. I do not want to be a Debbie-downer but I do want to be real.

Callers fall into a couple of categories: 1) those who want to purchase a home on Smith Lake and pay for it with rental income, 2) those that want to INVEST in a rental property on Smith Lake (“we will only use it when it is not rented”), or 3) those that bought a lake house a few years ago and realize they are not here a lot of the time and want to monetize that time. I will address each of these later but first a status on the rental market. I will say this…the best scenario is when someone wants to own a home on Smith Lake as their primary motivation and rentals help offset the cost of that ownership.

Supply and demand are out of whack. This is across the country, not just at the lake. The difference is that industry wide the increase in supply is about 20%, on Smith we are at 100%+. The lake has gone from ~125 rentals pre pandemic to over 250 now. Guests numbers are up but they did not double so occupancy per property is impacted. I used to recommend using 80-100 nights of occupancy but now its 60-80 nights. As an FYI…this is about 1/2 of what the beach and mountains get as the lake goes dead in the offseason with no snowbirds. One other note….rental rates have not increased at the same pace as property prices so the ROI has basically been cut in half. I used to say 6-8% (not taking appreciation into account) but now I use half of that.

Category 1: Those who want to purchase a home on Smith Lake and pay for it with rental income. My response to that is if that was possible I would own a lot of lake homes! You can knock a dent in it but you will come out of pocket.

Category 2: Those that want to INVEST in a rental property on Smith Lake (“we will only use it when it is not rented”) Sounds good in theory. To my comment above, only really works if you DESIRE to own a lake home.

Category 3: Those that bought a lake house a few years ago and realize they are not here a lot of the time and want to monetize that time or you just want to buy a lake house for your family’s enjoyment and use rentals to offset the expenses. Now we are talking. This is the best strategy for you and me. Neither of us wants to depend on rentals but they sure are nice when it is free money.

One thing we did not address…APPRECIATION!! Prepandemic I used to model in the normal 3%. In 2020-2022, properties appreciated 50-100%+….crazy right!! It happened everywhere and has affected returns across the industry. I do not recommend putting appreciation in your model until things settle out. I think the “AIRBNBust” (google it) will affect those in Category #1 and #2 above as they come out of pocket or don’t get the returns they desire (especially with a recovering stock market as competition). I think these properties will hit the market in the next 1-2 years as they try to take advantage of the higher property prices. Don’t know that prices will drop but I also don’t think they will go up…just one man’s opinion.

In conclusion…if you want to own a lake property to make memories with your family and want to offset the costs then come on!! Otherwise, if you are looking for a great investment…buy Amazon or Apple or Google 🙂

If you have questions about this or anything else on the lake…feel free to call me at 205.492.3211. I love talking about this stuff.