Sun and surf. Mountain vistas. Great golf. You could have it all and make a living, too. While the resort market is hot, should you pack up and move your business to a resort town?

According to the Residential Sales Council, resort/second home purchases have doubled in the last ten years to eight percent of the 3.8 million homes sold each year by 1995. By 1999, 13 percent of home sales were second home purchases.

Resort sales may be on the upswing, but what is business really like? Is it as easy as it looks?

The resort market

People buy second homes because they want to be near the resources where they can enjoy their favorite pastimes - away from their normal routines. Sports and hobbies such as biking, hiking, snow or water skiing, or golf require unique settings which afford second homeowners views of mountain ranges, waterfronts or forest preserves, says the RS Council. Many join family and friends who live nearby or who also own properties in the same resort area.

Second home buyers are less motivated by investment than they are the recreational value of the home, investing more emotion in the purchase than perhaps the primary residence. Since the buyer is looking for the home to enhance the recreational experience, they tend to purchase when they find the right home, and not before.

Because they are by nature discretionary, resort homes are also much more adversely affected by downturns in the economy or an atmospheric event. When the economy sours or when tax laws are unfavorable, second home purchases slow accordingly. When a hurricane hits, prices tend to plummet in coastal towns. Eventually the towns are rebuilt, memories fade and prices start to rise again.

On the other hand, the customers who can afford second homes tend to be well-heeled. Dennis Hanlon, president of the Rocky Mountain Resort Alliance, an organization of resort Realtors, reports that 38 percent of second home sales were paid for in cash in 1999 - three times the cash rate for residential real estate in the state of Colorado.

"In Hawaii, where great golf courses proliferate and warm beaches seduce, second home buyers pretty much follow the national resort profile," explains Karen Jeffery of Pacific Island Investments. "They're well-qualified cash buyers and coming to get away from the snow."

Resort properties have unique dynamics

Resort properties are more than the sum of their higher prices and access to views and sports; they can pose some unique problems to buyers and their agents.

"Most clients live out of state or out of area. It's not traditional real estate where you can knock on doors and leave pumpkins at Halloween," says Hanlon. "We do a lot of Internet marketing, advertising in visitor publications, and long distance telephoning to major metropolitan areas. We're all tourist towns, and we have to capture the visitor when they are here in town."

With the recent snowfall, Hanlon says the mountains will see a predictable upsurge in business. "We do local ads that visitors will pick up," he speculates. "Someone may want to take a day off from skiing, and you have to be prepared to show them homes at a moment's notice."

Growth Potential

Resort communities deal with issues that are different from cities. A developed space such as a golf course may be defined by the taxing authority differently than in the city. Some cities would call golf courses or parks open spaces, while it's just the opposite in the mountain resorts. That means less building sites in what is already a finite space. "When developers come in and they want to build a golf course and the codes says you have to have X percent of land as open space, there is plenty of disagreement as to what is and isn't open space," says Hanlon.

About 97% of Jackson Hole's land is federally-owned and can't be developed, he points out. Many of the resorts are in the National Forest. "It makes it interesting to develop when the mountains themselves dictate where you can build and how much can be built and whether it is too pricey," says Hanlon.

Development also impacts the growth of the community, causing some towns to close ranks so that they can grow more slowly in order to preserve the lifestyle they came for in the first place. This keeps building slow and prices on existing properties higher.

Doing business

Some transplants are disappointed with what they find once they move in. What seemed like a romantic idea at the time quickly changes as residents find that they give up a lot of conveniences afforded in larger communities. That can mean missing everything from lighted sidewalks to T-1 lines, which many communities can't support.

"Someone from Orange County might want lit sidewalks," says Hanlon, "but the mountains don't lend themselves to that except in town. So the new residents find things are different in an unexpected way than what they left."

Jeffery adds, "Actually one of the pitfalls of buying resort condominiums in Hawaii is that so many buyers end up placing their second home in a rental pool for vacationers that the percentage requirements for home ownership are insufficient for many lenders. Hence, that is why we have cash buyers, many of whom simply mortgage properties back home."

Some customers also expect big city real estate services, believing that a resort town should be able to afford top technology. To meet demand, the small boards have banded together to negotiate MLS services and other technologies, and to network among themselves. "We are a very small boards of Realtors; the largest board of our membership, Vail, is only 500 members. Competition is keen. "We have 420 in Park City and a city population of about 7,000," says Hanlon. "That's one Realtor for every 16 people. The numbers wouldn't work except we have thousands of owners who don't live here. The majority of business is not from locals."

Hanlon sums up the resort Realtor day-in-the-life: "If you are a Realtor moving to a resort, you don't just walk in and start cold-calling or knocking on doors because the owners aren't home. Remember, nobody has to have a second home, so we are very dependent on the economy. Long distance relationships are not uncommon. It's also not uncommon to sell a property to a buyer we have never met or sell a home for a seller we have never met. Internet readiness is extremely important, we simply have to be more computer literate."

Also See:

Published: February 23, 2000

Use of this article without permission is a violation of federal copyright laws.