Vail Valley’s deed-restricted home sales slumping
EAGLE COUNTY, Colorado – For almost two years now, buyers have held the upper hand in the local housing market. That’s true, too, with the valley’s “affordable” housing units.
For decades, units that had contractual restrictions on how much they could appreciate – called “deed restrictions” – were a good way into home ownership. The price was lower – often much lower – than free-market units.
The catch, of course, that owners couldn’t ride the rocket-ship of appreciation, instead having to settle for appreciation of somewhere between 3 and 6 percent per year.
Then home prices dropped – a lot. People in deed-restricted homes haven’t taken the hit many of the rest of us have, but many have taken a hit.
At Miller Ranch in Edwards, the waiting list of buyers often ran 40 people deep a few years ago. Sellers got every penny of the maximum price allowed, and if one person couldn’t figure out financing, another 10 could.
Today, the waiting lists have just a handful of names.
The problem for buyers is financing. Tori Franks of the Valley Home Store, the county-sponsored office that coordinates affordable housing programs through the county and every town but Vail, said Federal Housing Administration rules have essentially eliminated mortgages for deed-restricted homes. Buyers who do qualify need to have sterling credit and a down payment of at least 20 percent – that’s $40,000 on a $200,000 home.
Chris Neuswanger of Macro Financial Group in Avon said mortgage money is available for some buyers – but they they better have good credit scores and patience.
Neuswanger said there are some programs that will get buyers into a home with 5 percent down or less. But some lenders will do those loans and others won’t.
“Some loans are coming in with very tight restrictions on condos,” Neuswanger said.
Complicating things further for people selling deed-restricted units is the new, low prices on other units.
“If somebody is qualified, they’re often shopping the free market,” Franks said. And, she added, the number of units on the market gives qualified buyers a lot of options.
That means sellers at Miller Ranch aren’t getting their maximum allowed prices these days. Instead, sales prices have usually been 5 to 10 percent less than the maximum, she said.
“And people have to really sell those units,” Franks said. That means spending money for paint, carpet and other spruce-up jobs.
“It’s a mentality change that’s been really difficult for some people,” Franks said.
Franks said most buyers at Miller Ranch are still in pretty good shape financially. Not many owe more than their homes are worth.
That’s not the case elsewhere.
Franks manages the affordable housing programs in the town of Eagle and at Eagle Ranch. And it’s Eagle Ranch where owners are having the most trouble.
“Eagle Ranch wasn’t as aggressively priced as other units,” Franks said. “In retrospect, they were priced too high. There are some people there who are in serious trouble.”
The biggest problem is for sellers who owe more than their homes are worth – a situation called “under water” in the real estate business.
“If you’re under water and you’re trying to sell, you’re in real trouble,” Franks said. “That’s when people learn that the down-payment assistance they received was a loan, not a grant.”
Joy Ortiz is a broker with Prudential Colorado Properties’ Gypsum office. Many of the sales she and her colleagues are putting together these days are from bank-owned properties or “short sales,” deals put together with a lender’s participation that sell properties for less than the amount owed.
She said the rapid fall in prices for free-market units has put a real brake on deed-restricted property.
“The deed-restricted units just aren’t selling,” Ortiz said. “There’s just so much on the market today.”
Just a few years ago, deed-restricted homes sold because they were comparatively great deals.
“Now it’s not a screaming deal,” Ortiz said.
While sellers of just about any real estate aren’t faring well today, the current market is good for buyers who can get financed. Interest rates are just about historically low, and prices have come way, way, down.
And, Neuswanger said, there are mortgages available, albeit in limited supply.
“In spite of it all we’re getting loans closed every week,” Neuswanger said. “I would never discourage people from applying (for a loan). But you have to be realistic and open-minded, and ready to hang on for the ride.”
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