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Ask Adam: Buying a Flip Versus Renovation

by ARLnow.com | July 22, 2014 at 2:15 pm | 851 views | No Comments

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. My husband and I are soon going to be in the market for a single family home in Arlington, and we were wondering if you can advise on the pros and cons of buying a flip versus buying a smaller, cheaper home and commissioning the renovations ourselves. I imagine there are differences between the risk you take on, the financing options, as well as the equity you end up with when all is said and done. Can you walk through those and any other considerations?

A. In most cases you are going to get more for your money by purchasing a smaller, cheaper home and commissioning the renovations. If someone is going renovate a home to be move in ready, they are usually going to build in a premium on the sale. This is especially true with homes that are being “flipped.”

If you make tasteful choices and manage your costs carefully, you could create some nice equity for yourself by the time you are done renovating. Another benefit of commissioning the renovations yourself is that you get to choose the options and build the home around your needs. This can be fun and rewarding. The most prideful homeowners I can think of are the ones that renovated their own homes.

I’m only aware of one mainstream loan program that allows you to finance the home and the renovations. It’s a form of FHA called the 203k. It allows you to purchase with a low down-payment and finance your renovations. You’ll want to speak to a lender for more details, but I’ve heard it can be used for just about any home renovations besides a hot tub or firepit.

If the 203k loan does not meet your needs, then you will most likely need to save the money required for your renovations or tap into an alternative line of credit. This will be in addition to the down-payment and closing costs you will need to budget for with your purchase.

The other major consideration is the time and stress involved in renovating your home. It can be fun, but it can also put a lot of stress on your life and relationships. Even a simple bathroom or kitchen renovation should be entered into with caution. Invest ample time up front asking friends for referrals and interviewing contractors. In my experience, working with the right contractors can make a world of difference in how your project turns out and how enjoyable or painful the experience is.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

Ask Adam: Tear Down or Rent Out?

by ARLnow.com | July 15, 2014 at 2:30 pm | 1,386 views | No Comments

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. Our house in 22207 would be considered a teardown. We may move in a year or so when my husband retires. Our question is: would it be better to do some remodeling and then rent it out for a few years to benefit from possible future appreciation, or better to take advantage of the current developer demand and sell? Of course it will depend on specific details of the house, the neighborhood, and other family considerations, but do you have a general suggestion?

A. Cash in or let it ride… This is the classic question of gamblers and investment owners. In this case I’m inclined to advise you to cash in. Here are three reasons why:

  1. Alhough I have confidence in the direction of our real estate market, there is no guarantee that the current level of demand for tear down properties will continue. In the current market, you may be able to orchestrate a bidding war that will outperform what your property will return during more conservative times. Many builders are buying with their own cash and they have been burned by past markets. I imagine that the slightest hint of slowdown in the luxury market will directly affect the demand for teardown properties.
  2. You have mentioned remodeling the home before renting it out. This is going to require investment in the home that is not going to provide any value to the person or developer looking for a tear down. Your investment will become a sunk cost that eats into the additional profit you hope to gain by holding onto the property longer.
  3. You’ll want to carefully explore the tax implications of holding the property. For example, renting the property out for too long can create substantial costs in the form of your capital gains tax.

If you were my client, I would provide you with an estimated sales price and strategy for the current market. I would also do my best to project the appreciation or depreciation you may experience by holding onto the property. This exercise would help you make a decision based on the unique value and estimated performance of your home. You can compare these numbers to the estimated costs of holding on to the property as a rental.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

Ask Adam: Luxury Market Status

by ARLnow.com | July 8, 2014 at 3:00 pm | 797 views | No Comments

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. I have to admit that my question is more based on curiosity than desire to sell or purchase anytime soon. Can you tell me if the luxury housing market is on the incline or decline in North Arlington?

A. To help me answer your question, I’m going to use statistics for the 22207 and 22201 zip codes. That is where the bulk of luxury, single family home sales take place in North Arlington, and it will reduce the variables in my analysis.

I’ll compare January through June in 2013 to the same time span in 2014. The price range I am looking at is $1 million and greater. I realize an argument could be made for whether $1 million will buy you a “luxury” house these days, but I think it is a fair cutoff.

In 2013 the market experienced the following sales activity:

  • Average sales price: $1,402,099
  • Sales price compared to original list price: 95.5 percent
  • Average days on market: 64
  • Number of homes sold: 85

In 2014 the market experienced the following sales activity:

  • Average sales price: $1,396,940
  • Sales price compared to original list price: 97.2 percent
  • Average days on market: 63
  • Number of homes sold: 106

You can see some improvement in the sales price compared to original list price, which is a good sign that sellers are getting closer to their asking price in 2014. There is also a 21-unit increase in the number of homes sold in 2014. I think this can be partially attributed to an increase in the number of new homes available, which is helping inventory catch up with demand.

There has been a 33 percent increase in the number of new homes sold so far in 2014. The increase in new home inventory is good news for homebuyers, but the cost of teardowns is rising sharply, which is causing the price of new homes to increase accordingly. With more new homes pushing the $1.8 million and greater price range, we have to be getting close to a tipping point where the pool of buyers able afford these homes dwindles. When that happens, the amount of days homes spend on the market should start trending higher.

Average sales price doesn’t really tell the story, but from what I am seeing, the average price you would pay for a luxury home in 2014 is higher than what you would have paid for the same home in 2013. I would personally categorize the luxury market as an inclining, though it is a gradual incline.

You can follow this link to view the current luxury market listings in Arlington.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

Ask Adam: Radon Testing

by ARLnow.com | July 1, 2014 at 2:30 pm | 654 views | No Comments

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. We’re preparing to buy a house and are doing some preliminary research. One thing I came across is the idea of radon testing. This is something I have not heard of before and am wondering if you can help me understand how it relates to buying a home? 

A. According to the EPA, “exposure to radon is the second leading cause of lung cancer after smoking. Radon is an odorless, tasteless and invisible gas produced by the decay of naturally occurring uranium in soil and water. For most Americans, their greatest exposure to radon is in their homes; especially in rooms that are below grade (e.g., basements), rooms that are in contact with the ground and those rooms immediately above them.”

According to the EPA map, Arlington falls within an orange zone, which is defined as having a predicted average indoor radon screening level between 2 and 4 pCi/L. The EPA recommends remediation for any home that has a concentration of 4 pCi/L or higher.

Keep in mind that these levels will vary from one home to the next within Arlington depending on the location and composition of the home. For example, as homes are being built tighter to make them more energy efficient, they can also trap greater concentrations of radon inside the home.

If you would like to include radon testing as part of your real estate transaction, you will use the same addendum as the home inspection contingency. In fact, the structure of the two contingencies are very similar. You will designate a certain number of days for the contingency, which will allow the testing and lab work to take place. You will also designate how many days each party will have to respond to a negotiation in a case where the buyer would like the seller to remediate unsafe levels of radon. You also reserve the right to void the contract based on the results.

In my experience, sellers are less apprehensive about radon testing than they are about a standard home inspection. If radon is something that concerns you, then I highly recommend testing for it. The cost of a professional radon test, usually ranges from $150 to $200. You can also buy your own test kit on Amazon.com for $11.99, but this will not meet the standards required for a radon contingency in a real estate transaction. The radon contingency requires a radon professional certified by the National Radon Safety Board, or the National Radon Proficiency Program using EPA approved testing methods.

When I bought my house I decided not to include radon testing as part of the transaction. I purchased a kit at Home Depot shortly after closing to test it on my own. I knew that radon remediation is not terribly expensive in most cases so I was willing to take on that risk.  We were well within the safe range and I was able to save the money I would have spent on a professional test. I also had one less item getting in the way of me negotiating the price I wanted. That said, I’m a little less averse to risk than I encourage my clients to be.

I didn’t even scratch the surface of information available about radon that is available on the EPA website. If you have additional questions about what it is and the risks it poses, I highly recommend spending some time on their website.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

Ask Adam: Months of Inventory

by ARLnow.com | June 24, 2014 at 1:20 pm | 951 views | No Comments

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. Despite positive reports about the local real estate market, I would like to find out how my neighborhood and zip code are selling. I’ve heard that finding out the rate of sales compared to the amount of inventory is a valuable analysis. Can you tell me where this information is located on the internet?

A. What you are referring to is often called the absorption rate. Absorption rate calculates how approximately how many months it will take to sell the current inventory of active real estate listings, based on the most recent sales volume.

  • More than six months of inventory on the market is generally considered a buyer’s market.
  • Less than six months of inventory on the market is generally considered a seller’s market.
  • Six months of inventory on the market is generally considered a balanced market.

It will be easier to understand if I take you through an example. Let’s analyze the absorption rate for the 22207 zip code:

  • Within the last 90 days, 159 properties have gone under contract.
  • That’s an average of 53 properties per month.
  • Currently there are 113 properties actively on the market.
  • At the current rate of 53 properties being sold per month, we have a little over two months of inventory on the market.

If you agree with the assumption that under six months of inventory is a seller’s market, then this analysis would indicate that 22207 is currently experiencing a strong seller’s market.

I think it is smart that you want to analyze your neighborhood as well as your zip code. We often find that neighborhoods and condo buildings within a given zip code can perform quite differently.

I don’t know of a website that provides this type of analysis, but your Realtor should be able to create a custom absorption rate chart with data from the multiple listing service (MLS). If you don’t have a Realtor yet then let me know and we can help you out with this information.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

Ask Adam: Looking for a D.C. View

by ARLnow.com | June 17, 2014 at 2:30 pm | 1,290 views | No Comments

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

(Updated at 4:05 p.m.Q. We are moving to the Arlington area this summer and would like to find a condo or townhouse with a view of D.C. Can you tell me where to look and how much we should expect to pay?

A. That’s one of the nice things about Arlington… we have the best views of D.C. Below is a list of the condos and townhomes I would put at the top of my list when it comes to view. I highly recommend experiencing the view in person to make sure it meets your standards as they vary significantly. You may also want to visit in the evening as some evening views can be quite spectacular. After all, you need to make sure it is worth the premium you are going to be paying.

Photo of D.C. view from Rosslyn (photo by Adam Gallegos)Waterview — I’ve been in a lot of homes in the D.C. area and I have not experienced anyplace with a view of D.C. that is this stunning. Some of these homes include panoramic views of the Potomac, Georgetown and the D.C. monuments. Because of the waterfront location, you truly get a front row view of DC. Recent home sales with a D.C. view range from about $775,000 to over $3,500,000.

Memorial Overlook – This building is located just south of Arlington Boulevard near Iwo Jima. These luxuriously appointed homes boast views of the Lincoln Memorial, Washington Monument and the Capitol. Recent homes sales with a D.C. view range from about $1,400,000 to over $2,000,000.

Odyssey — Even though the Odyssey is located in Courthouse, it sits high enough that many of the eastern facing units have unobstructed views of D.C. The floor to ceiling windows lend themselves well to you experiencing the view. If you don’t want to pay the premium for a home with a view, you can still enjoy the best views in the building from the rooftop terrace, which is available to all residents. I’m not aware of any one-bedroom units with a D.C. view at Odyssey. The two-bedrooms with a D.C. view have been ranging from $675,000 to over $1,300,000.

Residences at Liberty Center — You may also be surprised by the views that Liberty Center has from Ballston. The rooftop terrace and the upper level, eastern facing units actually have very impressive views of DC. You are just a little farther away than some of the other options on this list. Expect to pay between $500,000 to $800,000+ for a home with a D.C. view.

Monument Place – These impressive five-level townhomes have gorgeous D.C. views from the private rooftop terraces, which you can access with your own elevator. The most recent sale was for $1,775,000 and there is a home currently available for $1,950,000.

Here are some additional condo building where you can occasionally find units with a view: Turnberry Towers, Atrium, Alta Vista, Belvedere, Clarendon 1021, Station Square, Prospect House, Eclipse and Woodbury Heights. I’m sure the commenters will help me out if I forgot any others.

Please keep me in mind for your Fourth of July party…

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

Ask Adam: The Future of East Falls Church

by Ethan Rothstein | June 10, 2014 at 2:30 pm | 1,893 views | No Comments

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. I own a condo unit (Falls Station in Arlington), not far from the East Falls Church Metro.  Condo values in Arlington have risen from their low point, but they certainly haven’t rebounded.  With the completion of the Tysons-Reston phase of the new Silver Line metro, and work continuing on to Washington Dulles Airport, could we see a corresponding increase in condo values in the EFC area?

For those who are not familiar, the East Falls Church (EFC) Metro station is located in Arlington on the border of Falls Church. It currently serves the Orange Line, but it is scheduled to begin servicing the Silver Line as well. Phase One of the Silver Line will run through McLean, Tysons Corner, Greensboro, Spring Hill and Wiehle-Reston East. Phase two of the project will extend the Silver Line through Herndon, Washington Dulles International Airport and points in Loudoun County.

In addition to the new Silver Line, there are also several mixed use development projects nearby in Falls Church City that will make the area more fun and convenient to live in. Many bicyclists and runners have already found how nice it is living directly on the W&OD trail.

Home buyers that don’t need to be within the Rosslyn to Ballston corridor will find that they can get a little bit more home for their money in the EFC area.

Below are some of the more popular nearby condos:

* Westlee (built in 2006 — recent prices ranging from $370k to $565k)

* Falls Station (built in 1994 — recent prices ranging from $368k to $468k)

* Washington Courts (built in 1979 — no recent sales)

The benefit of the Silver Line to the area is that it opens up Arlington to an additional pool of possible homeowners. There are a lot of jobs in Tysons, Reston and Herndon. There are also a good number of people who have to fly out of Dulles on a frequent basis. Some people are willing to drive back and forth every day, but traffic stinks even if you’re traveling against the grain. Being able to walk to the Metro station and jump on the Silver Line will make living in Arlington a lot more attractive for these commuters.

Will this potential increase in demand result in appreciation around the EFC Metro station?  It’s hard to say for sure, but I think it is certainly possible. We should check back in the fall to see how things are going.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

Ask Adam: Should I Buy a Second Parking Space?

by ARLnow.com | June 3, 2014 at 2:30 pm | 1,176 views | No Comments

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. I own a two-bedroom, two-bathroom condo in Clarendon that I rent out. The unit only has a single parking space. Does it make sense to purchase a second parking space if I find one for sale?

A. If you were living in the condo and personally needed a second parking space then the decision making would be a little different. You would need to factor in how much it costs you each month not to own a parking space for your second car. You would also likely consider how much the convenience would be worth to you.

Because you are renting the property out, you need to look at it as an investment. In Clarendon, condo parking spaces typically sell for $15,000 to $25,000.  Your agent should be able to help you figure out what the market rate is in your building. If you don’t have an agent relationship, then check the Arlington County tax records. Although I would not count on seeing much appreciation from a parking space, you may be able to find a situation where you can purchase it for below market value and later sell it at or above market value.

The next step is to determine how much extra the parking space will be able to help you earn each month with your rental. Compare this to how much your money could be making you if you invested it elsewhere. For example, if it is returning an average of $100 per month in a current investment, but you could be earning an extra $200 per month in rental income with two parking spaces, then it would make good sense to purchase the second parking space.

Some two-bedroom condo owners fear that they will have trouble selling their homes without a second parking space. That is not the case along the Ballston to Rosslyn corridor. Seventy-one percent of the two-bedroom condos sold along the R-B corridor in the last 12 months did not have a second garage space and their average days on market were only 25. The days on market actually increased for two-bedroom condos with a second parking space. That’s probably because of the higher price point for those units. 

Note: Before making a final decision on your purchase, check with the condominium association to be sure you are aware of any rules and fees that may affect your ownership of a second parking space.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

Ask Adam: Do We Need a Tub?

by ARLnow.com | May 27, 2014 at 2:00 pm | 1,516 views | No Comments

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. We own a 1,000 sq. ft., 2 bedroom, 1 bath townhouse in 22204. We’re planning to remodel the small bathroom later this year and as part of the remodel we’ll need to remove or replace the bathtub because of rust and a poorly done refinish (by the previous owner). We are not bathers — at all — and I would like to have a nice walk-in shower rather than a bathtub. Please correct me if I’m mistaken but I suspect that the tub/shower debate is purely subjective and either choice will attract and/or deter certain buyers. My primary concern is how will removing the tub impact property value?

A. I remember first considering this question when the Wooster & Mercer Lofts were selling million dollar condos without tubs. To be accurate, some of them have tubs, but most do not. Having brought dozens of home buyers to see these homes, I witnessed a decent sample size of reactions.

As you mentioned, it is purely subjective. The demographic that Wooster & Mercer primarily appealed to, loved the idea of a large walk-in shower over the “wasted space” of a tub. I’ve heard many stories of the fancy whirlpool tubs that clients had in previous homes, which were never used. These people tend to have a particular distaste for tubs, especially large ones that take up valuable space.

On the other hand, when I’m working with families who have children, a tub in at least one of the bathrooms is often on their must-have list. And then of course there are people who just prefer to take baths.

My advice is to consider who is likely to make up the target market for your home when it comes time to sell. If you expect they are going to be people much like yourselves, then go for it. Get rid of the tub. From what you have told me, I think it will end up adding value to your home.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

Ask Adam: Appreciation Along Columbia Pike

by ARLnow.com | May 20, 2014 at 2:30 pm | 1,775 views | No Comments

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. I own a townhouse on Columbia Pike in Arlington Village. Let’s say it’s worth $290K right now, and the streetcar is completed in 2022. Considering general market increase, and a boost from having a streetcar, what can I expect it to be worth in 2022?

I expect it to be worth $400,627 in 2022.

If I had the ability to make predictions like this I would be living in Las Vegas rather than Arlington, and making a lot more money. As long as you don’t take my response too seriously, I’m happy to play along with the question.

Though many economists argue that year-over-year appreciation averages out to between 3 and 5 percent, there is no way to predict what the next eight years will bring us. The economy could boom, bust or both.

To come up with the number I provided above, I guessed the rate of appreciation for each of the years leading up to 2022. Below are the guesstimates I made:

  • 2014 – 5 percent
  • 2015 – 4 percent
  • 2016 – 3 percent
  • 2017 – 3 percent
  • 2018 – 4 percent
  • 2019 – 4 percent
  • 2020 – 5 percent
  • 2021 – 5 percent

My expectation is that you will see the greatest level of appreciation after the Columbia Pike streetcar is complete (after 2022). In my experience, the mere promise of improved infrastructure is not as strong of a catalyst as the completed project. The completed streetcar will attract the new business and the level of interest you are hoping for as a homeowner along the Columbia Pike corridor.

Let’s touch base in eight years to see how close I am on my prediction.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

Ask Adam: Should We Stage Our House?

by ARLnow.com | May 13, 2014 at 2:30 pm | 879 views | No Comments

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. We’ve been looking at homes for sale in the area and have noticed a pretty big range from the homes that show well to the ones that do not. It’s obvious that the nicer looking homes have been staged. We’re going to be selling our house soon and are wondering if staging is worth the investment? 

A. If your house already looks like a model home then you may not need to stage. If your home is more suited for function than fashion, I recommend staging in one of the following formats.

Consultation — A professional design consultant will provide you with a custom plan for arranging the furniture you currently have and improving your home as needed. They can provide paint, lighting and upgrade recommendations. They pay close attention to how the home will look in marketing photos and how it will showcase the space when potential buyers visit in person. At Arbour Realty, we pay for this consultation as part of our list of services.

Vacant Property Staging — The other popular option is to have the staging company furnish your home with their furniture and decorations. This is usually the optimal strategy, but it requires the highest investment. I’ve seen this method completely transform the way a home looks. It shows buyers the full potential of each room and demonstrates how the home can be lived in.

Hybrid — Some homeowners go with a hybrid of the two described above.  Maybe you just need to furnish a room or two. Maybe you just need decor to compliment your current furniture.

Is it worth the investment? Absolutely. More so than selling a house, you are selling a lifestyle. Showing buyers how the home matches the lifestyle they are imagining is vital to maximizing the return on your home sale.

It is certainly going to be much more attractive than the vacant house down the street. When buyers walk through the vacant house they look out the windows at the power lines and traffic. They look for what they can find wrong with the home and are quickly ready to see the next home on their list.

When they walk into a staged home they are more instantly comfortable. They spend more time in each room. They notice and talk about things they like. They begin to make an emotional connection to the property. The difference is amazing. It’s one of the secrets to why our listings outperform our competition.

According to StagedHomes.com:

  • The average sales price of a staged property is 6.9 percent higher than a non-staged property
  • Staged homes typically sell 50 percent faster than non-staged homes.

I’ve never had a seller regret staging. Actually, they often comment that they should have done it earlier while they could have enjoyed it.

Additional Tip: Staging is especially important in odd shaped or smaller spaces where potential buyers may not be able to easily visualize a good use for the room.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

Ask Adam: How to Buy and Sell at the Same Time

by ARLnow.com | May 6, 2014 at 2:30 pm | 826 views | No Comments

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. We own a townhouse in Arlington and will be in the market for a house soon. The townhouse is located in Clarendon. We are looking to purchase in Arlington or Falls Church. Maybe McLean. How should we coordinate our sale and purchase so we don’t get stuck with two homes or end up homeless?

A. This can be a tricky situation. The best strategy for you is going to vary depending on the market and the options you have available.

I recommend that you start by looking at some homes for sale. Not necessarily to buy right away, but more as an exercise to confirm that you are going to be able to find what you are looking for. In others words, make sure that your budget aligns with your expectations about what is available on the market before moving forward with the sale of your current home.

In the markets you mentioned, it is going to be very difficult to be competitive as a buyer if you plan to make an offer with a Home Sale Contingency. You will have better luck selling first and negotiating a rent-back while you find and purchase your new home.

Below are some suggestions when it comes to pricing your current home and negotiating offers:

  • Determine a price that will keep you from leaving money on the table, but also puts you in a position to attract multiple offers. This is where it really helps to have an agent who is extremely familiar with your local real estate market.
  • Have your agent make it known to potential buyers that you will require a rent-back period. I suggest trying for up to 60 days. This is the maximum amount of time allowed by some lenders and it will provide you with about three months to find and settle on a home (assuming a 30-day closing).
  • Try to negotiate an offer without contingencies or at least very short contingency periods. You’ll feel a lot more confident moving forward on your purchase once the contingencies are out of the way on your sale.
  • Try to obtain a backup offer. Just as it sounds, this will provide you with a backup contract if the primary contract falls through.

Once you have a contract in place on your current residence, it is time to become very active in your search for a new home. Based on how clean the contract is for your Clarendon townhouse, you’ll have a much better idea how you should structure your offer on the purchase. You and your agent should determine if it makes sense to include a Settlement of Purchaser’s Property Contingency. This contingency is not as frowned upon by sellers as a Home Sale Contingency and it will provide you with protections from the contract if your current home does not close for some reason.

Figure out ahead of time what your plan B and C are if you aren’t able to find a new home.  Do you have someone you can stay with temporarily? If not, you may want to look into temporary housing solutions like aka.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

Ask Adam: Negotiating Multiple Offers

by ARLnow.com | April 29, 2014 at 3:00 pm | 618 views | No Comments

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. I don’t want to get ahead of myself too much, but we are putting our house on the market next weekend. It’s in great shape and we think it is priced well. If we are lucky enough to find ourselves with multiple offers, what is the best way to handle that situation?  

A. There are a number of ways I have seen multiple offer situations handled. I think the best strategy is to set a deadline by which all offers must be in. I prefer to go live on the market Wednesday or Thursday with a Monday evening deadline for offers. This gives buyers plenty of time to see the home and gives agents plenty of time to thoughtfully construct their offers. I’ve found that waiting any longer than can lead to drop off in interest.

You’ll need to make it clear to agents that they should present their client’s best offer. Otherwise you will have some buyers that are expecting back and forth negotiation.

I highly recommend allowing escalation clauses. In my experience, buyers are much more willing to reach on price if they feel it is justified by what other buyers are also willing to pay. I’ve come across listings recently that didn’t allow escalation clauses and for the life of me, I can’t figure out the justification for such a rule. It almost guarantees that buyers will take a more conservative position when it comes to deciding what terms to offer.

I have a spreadsheet template I created to keep track of the offers. It makes it easier to compare the merits of each offer, like: price, escalated value, contingencies, EMD, closing date, seller concessions, rent-back offered, etc.

Once you have chosen the contract you would like to work with, you still have the ability to counter certain items that you would like the buyer to improve. For example: you may like everything about one of the offers, but want to request a rent-back period.

If you are already getting above asking price, then I don’t recommend countering price unless it is somehow justified. For example:  You really like everything about offer “A” but it is a few thousand dollars less than one or two of the other offers. You might decide to reach out to offer “A” and let them know you are willing to go with their offer if they can adjust their price to match offer “D.” Some buyers may tell you to take a hike, while other buyers will be relieved that you gave them the opportunity.

I also recommend asking for backup offers. It tends to keep your primary buyer much more motivated and provides you as the seller with a clear backup plan. This is especially important if you are in the process of buying a new home for yourself.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

Ask Adam: Will Interest Rates Stay Low?

by ARLnow.com | April 22, 2014 at 2:30 pm | 1,241 views | No Comments

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. We are looking at homes that will require us to obtain a jumbo loan. We’ve been pleasantly surprised by how low interest rates still are. Do you expect that to continue through the summer and possibly the rest of this year?

A. The short answer to your question, and good news,  is “yes” — rates are expected to remain low through the summer and perhaps even into parts of 2015. This is true for FHA, V.A., Conventional, as well as Jumbo loans.

To get to the “why” that these rates are expected to remain low, let me digress to a bit of recent history and then come back to expectations for the future. Months ago, rates were extremely low because the Federal Reserve was directly subsidizing interest rates (i.e. keeping them lower than rates would have been without the subsidy). Over the past months, the Fed has begun to eliminate this subsidy program, and rates were expected to rise to 5 percent or higher once this occurred. However, over the past few months, when the subsidy phase out actually did begin to occur, rates remained relatively constant, and even decreased a small bit. Experts scratched their heads.

While the Fed did phase out it’s direct subsidy of interest rates, the Fed also decided to keep what is called “short term borrowing” rates very low. Keeping short term rates low is a traditional manner that the Fed has used throughout history to keep overall borrowing rates low, and the Fed does this when they feel an overall lower cost of borrowing is the best way to assist a fragile economy to continue to recover.

Interestingly enough, the elimination of the rate subsidy by the Fed was not an indication that the Fed thought the economy was strong and that rates should increase. The Fed still believes that low rates are needed to help economic recovery, but they felt that the rate subsidy program was no longer necessary to achieve this goal. Most thought the subsidy would be eliminated because the Fed was OK with higher interest rates, but in reality, the Fed still believes and wants to maintain lower interest rates, but is doing this in a manner now where the rate subsidy is no longer necessary.

It is expected that the economy will not significantly recover at least until early 2015, and since the Fed has stated that they prefer lower interest rates until there are signs of economic recovery, the most likely expectation is that rates will remain low through that period, which is very good news for homebuyers this summer.  (more…)

Ask Adam: Top 7 Ways to Win a Bidding War

by ARLnow.com | April 15, 2014 at 2:30 pm | 1,391 views | No Comments

Ask Adam header

This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.

Q. My wife and I are in the North Arlington market for a single family home and have dealt with the frustrations of losing out on competitive situations. We have lost a few homes recently while bidding 3-4 percent above ask, waiving all contingencies, writing a heartfelt letter, putting down a large EMD along with 20 percent down payment, yet we were still not even the top three contenders with our offer.

Have you noticed an uptick in demand this spring market compared to the last spring market? I know it really depends on what the seller is looking for, but it is not often realistic (nor possible) for us to offer 10 percent above ask on every offer to get our home. Do you have any suggestions for a winning strategy while still exercising at least one contingency to protect us? Additionally, could you rank the contingencies from best to worst in terms of making a competitive offer? Thank you.

A. It sounds like you are competing in a market segment that is in very high demand, which can be highly frustrating. There are certain segments of the Arlington market where demand seems to continuously outpace supply, creating the type of bidding wars you are experiencing.  That said, I have not noticed an uptick in demand this spring over last.

I wrote an article last year that provides a points-based list of strategies that you can use to strengthen your offer. It’s still highly relevant, but I like your idea of putting these strategies in order. In my professional opinion, these are the top seven ways you can become more competitive.

  1. Price. Assuming that you feel the current market value of this home is higher than the asking price and you expect competition — I recommend offering the full list price.
  2. Escalation. 
    1. Decide what the highest price is that you feel comfortable paying for this home. Said differently, if someone is willing to pay $1 more than this price, are you OK with them getting the home?
    2. Most buyers are going to escalate in increments of $1,000. I recommend picking a more aggressive number — perhaps $5,000 or $10,000. This will help make up for any deficiencies in your offer.
  3. Appraisal. If you can afford to do so, waive the appraisal contingency. Putting yourself in the seller’s shoes — it’s great to have a high contract price, but if they are running the risk of it not appraising, they could find themselves re-negotiating the price after the appraisal. Many sellers will put a lot of value in being able to avoid this situation.
  4. Home Inspection. Home inspectors are paid to find problems in a home. Even for the most well maintained homes, they are going to find something. Sellers would prefer to avoid the possibility of the home inspection turning into additional expenses for themselves. If you are not comfortable waiving the right to a home inspection, you may want to consider waiving your ability to request repairs. Done properly, you can maintain the ability to cancel the contract if something is found that you are not comfortable with.
  5. Closing Date. Find out when the seller would like to close and match this closing date in your contract. If they are in the process of buying another home, they may also prefer a rent back. You can win some major points by offering a free rent-back for the sellers.
  6. Financial Contingency. This is the hardest contingency to exercise so sellers are not typically as worried about the financial contingency. The listing agent can usually determine by the strength of your pre-approval letter and a conversation with the lender, how big of a risk you pose of being turned down for financing at a later point. We work with some lenders that can fully approve you prior to writing a contract, which make the financial contingency unnecessary.
  7. Earnest Money Deposit (EMD). Assuming you don’t default on your obligations, this a free way to strengthen your contract. The minimum EMD amount we usually see is 1 percent of the purchase price. I recommend an EMD of 3 to 5 percent in a competitive situation.

Please consult with your Realtor about how each of these strategies can affect your level of risk before moving forward. Best of luck out there!

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

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