Kevin Swan wasn't shocked when he received three offers immediately after listing a lake home near Park Rapids, Minn., this spring for $1.4 million.
What surprised the sales agent is how much the buyers were willing to pay. The three-bedroom log home fetched a half-million dollars more than the asking price.
"It potentially could have sold for even more," he said, noting that the seller decided not to proceed to a final bidding process because he personally liked the eventual buyer.
While that one-of-a-kind property fetched an astounding premium, bidding wars aren't uncommon in some of the state's smallest towns, where lake homes are selling quickly and often for more than sellers are asking. And that's leaving those still dreaming of a place at the lake with far fewer options — and higher prices — than last year.
"It used to be, you could expect around a 10% discount on the list price, on average," said Dave Gooden, co-founder of a brokerage that caters to lakeshore buyers. "We are currently seeing unbelievable prices."
Non-metro lakeshore sales are up 15% in Minnesota and western Wisconsin so far this year, according to data from NorthstarMLS, and those properties are selling swiftly. The median market time for those lakeshore properties was just a shade over two weeks, compared with nearly four months last year.
Those gains come at a time when second-home sales across the country are on the rise, despite an economic recession that typically stifles such discretionary purchases. Swan, an agent who specializes in luxury home sales in the Twin Cities and northern Minnesota, said the pandemic has only heightened a sense of urgency for people with the desire — and cash — to buy a getaway place.
The Park Rapids house that sold for $500,000 over the asking price is on a highly coveted lake with few options for luxury home buyers.
Like many lake-home buyers in Minnesota today, the bidder who prevailed was from out of state but was well-acquainted with the lake.
"This was an incredibly unique property," Swan said of the cabin, which has an abundance of custom touches including 15 chandeliers made of antlers, custom-built by an artist in Montana. "If you've got that kind of money and you're looking for your dream place that you'll have for generations, there just aren't than many options that are going to come on the market."
There are, however, plenty of buyers in search of the getaway of their dreams. Nationwide, the number of buyers who locked in mortgage rates for second homes during April soared 178% over last year, more than twice the increase for primary homes, according to a recent analysis by Redfin, a national online real estate website, of rate lock data from real estate analytics firm Optimal Blue.
In Minnesota and western Wisconsin, second-home buyers typically favor destinations that are within a couple hours' drive from the Twin Cities metro area. Not this year. Cameron Henkel, co-founder of LakePlace.com, said nearly every community that's served by the online listing site is reporting low inventory, rising prices and multiple offers.
Upper-bracket lakeshore properties have been especially popular. This year has seen a 40% increase in sales of lakeshore properties priced at $500,000 or more, according to data from NorthstarMLS. And on average, during the first four months of the year buyers paid 99% of the list price, according to LakePlace.com.
Lisa Janisch, a broker with an office in Tower, Minn., who works with buyers and sellers throughout the Arrowhead region, said the pandemic has had a discernible impact on the market. She said the first half of 2020 was relatively slow, with an abundance of listings.
"But by the end of May we suddenly had a lot of buyers," she said.
Even properties that had been on the market for months, or years, have suddenly found buyers. Earlier this month she got an offer on one of the most expensive listings on the North Shore of Lake Superior: a 4,877-square-foot house in Hovland, Minn., which is just 22 miles from the Canadian border. Though that property has been on the market for some time and the price had been reduced to $1.45 million, she recently received an all-cash offer from a buyer who toured the house online and made the offer sight unseen. The sale closed last week for $1.5 million.
"It's not unusual for us to get offers without buyers seeing the property," she said.
In the Ely area, she recently sold a log cabin that was listed for $798,500. The out-of-state sellers received multiple offers on the property and it sold for $855,000 in cash.
Diane Pogatchnik, managing broker of a real estate office in Crosslake, Minn., was recently involved in the sale of a $800,000 listing that received eight offers and sold for $1.1 million. About 90% of the 50 agents she manages say they've been involved in a multiple-offer situation.
The influx of buyers is already having an impact on small communities that normally spring to life on summer weekends.
"There are now more people here during the week," Pogatchnik said. "Even people who like all that city shopping can shop remotely. They say, 'Now you can have anything delivered at your door.'"
Samantha Koivunen, an agent in Virginia, Minn., said even in-town properties are becoming more desirable. She recently sold a house in just two days for $12,000 more than the list price.
"It used to be very rare to get multiple offers in our market on the Iron Range," she said.
Koivunen has been working with Paul and Elizabeth Pluskwik, who own a home in Virginia, for about a year. For many years they've been saving to buy a retirement house on a nearby lake. They've already been outbid a handful of times despite offering tens of thousands more than the sellers were asking.
"We're trying not to settle," said Elizabeth Pluskwik, a business professor at the local college. "We're willing to wait a couple years and hope the prices come down a little."
Even though they're willing to spend $400,000 to $500,000, many of the properties they're seeing were once seasonal properties that have structural defects or don't have a garage or an updated well and septic system. And some appear to have not been well-maintained and to have been hastily put on the market to take advantage of the lack of listings.
"Emotionally it's been very frustrating," said Paul Pluskwik, a licensed social worker. "Buildings are in poor shape, and people are asking sky-high prices. There's starting to be greed in the market."
The year's robust appetite for second homes may have lingering implications for the Minnesota dream of buying an affordable getaway place, industry veterans say.
"I think we're beyond the turning point for lakeshore," said Chris Galler, chief executive of the Minnesota Realtors trade group, who has worked in real estate since 1985. "It's much harder for people to acquire a lake home at this point and probably will be for a number of years."