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. Please submit follow-up questions in the comments section or via email.

Question: I’m planning to purchase a home in Arlington this spring and have heard stories about how crazy the market is getting. I’ve read about people waiving their appraisal contingency in markets like this. Can you explain how that works?

It’s important to first understand why someone would consider this strategy… residential appraisers primarily employ the sales comparison approach to determining a home’s value. This method is heavily reliant on past comparable sales. In situations where a home may sell for more than the recent sales prices of comparable homes (i.e. due to competition from multiple offers), the property may appraise for less than the agreed upon sales price.

If an appraisal comes in low, we usually use it as leverage to try and negotiate a lower sales price. It isn’t exactly fair to the seller because they agreed to a higher price at the onset, but sometimes it is necessary for a buyer to be able to continue with the purchase. Therefore, you can see how waiving the appraisal contingency up front would strengthen an offer by relieving the seller of having to worry about whether a contract they are considering will appraise for the agreed upon purchase price or not.

From a purchaser’s perspective, waiving the appraisal contingency could result in a situation that requires more funds than initially expected, change the loan terms (i.e. monthly payments could be more expensive) or even cause the contract to be in default if the purchaser is unable to proceed with the purchase.

Based on the loan program you use, the lender will require a minimum amount of equity on your part. In turn, they are only willing to finance the balance of that equity. For instance, if your loan requires a minimum of 20% owner equity, it will lend up to 80% of the lower between purchase price or appraisal value. If you are stretching financially to meet the minimum requirement of your loan program then waiving the appraisal contingency is not an option for you.

If you are putting down a lot more money than is required by your loan program, then waiving all or a portion of the appraisal, contingency may be an option, one you could consider very carefully. In this situation it might affect your down-payment or monthly payments. However, it eliminates your leverage to try and negotiate a lower purchase price if the appraisal comes in low.

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This periodic 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. Please submit follow-up questions in the comments section or via email.

Question: I keep hearing how much the Arlington real estate market has recovered, but our house has been sitting on the market for several months and we still don’t have any offers. Any advice you can provide is appreciated.

We’ve already hit a seller’s market surge in 2013 and it is barely February.  Almost every offer I have written in the last two months has been against competing contracts.  Yet, certain homes sit there collecting days-on-market.  You really can’t blame the market anymore.  It’s time to look at the items you have control over.

Price – Zillow, tax assessed values and comparable sales (“comps”) do not determine market value.  Comps play a big role in determining appraisal value and are often used when trying to predict market value, but the open market is what determines market value.  In case it needs to be said… what you owe, paid or would like to make on your home, does not influence market value either.

If people are not coming to see your home then it is usually a good indication that you priced your home higher than what the market is willing to consider.  In Arlington you should expect at least one showing per day on average.  That number should be substantially higher for homes along the Orange Line.

Waiting is not going to help.  If you have over-priced your home, address the issue as early as possible.

Days-On-Market (DOM) – The higher your DOM, the lower the perceived value will be of your home.  Potential buyers begin to wonder what’s wrong with the home.  They wonder why everyone else has passed it by.  They also begin wondering how low they can get you to come down on price.  This is why it is important to put your best foot forward as early in the listing process as possible.

If the damage has already been done and you have already racked up a large number of DOM then you need to implement a new strategy.  Your strategy should take into consideration the feedback you have received from potential buyers and showing agents.  You may also want to interview other agents to gain a fresh perspective of how someone else would help you sell your home.

Another option is to take the home off the market for 90 days to reset your DOM in the MLS.  I can’t say I recommend this during the current market.

How it Shows — If your home is vacant and less than beautiful on its own, you may want to have it staged.  A good stager is synonymous with a miracle worker.  It will help divert attention away from every imperfection.  It also goes a long way towards helping the potential buyers envision how they would live there.

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This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: Are you seeing any bargains on the market still? My preference is not to deal with a fixer upper.

The usual knee jerk reaction is to hunt for the elusive foreclosure deal. At the time I’m writing this, there are seven foreclosure listings in Arlington. I used to sell foreclosures for the big banks, and I can tell you firsthand that they are not always the great values that consumers perceive them to be, especially when they turn into bidding wars. You should also take into consideration that many have not been maintained very well.

From my vantage point, homeowners who purchased new construction in 2012 saw very lucrative gains. Two new townhome neighborhoods that come to mind: Mosaic in Merrifield and MetroWest near Vienna metro station.

In an inclining market, the key is getting in early. The developers have a lot of homes to sell in these neighborhoods and they start off their sales, priced to be very competitive with resale inventory. Then they often begin steadily increasing prices throughout the remainder of their sales cycle. I have clients who purchased early in the two neighborhoods I mentioned, who saw nearly double digit percentage appreciation last year. I’m basing this off of the difference between what they purchased their homes for and what they are selling / appraising for today.

This an Arlington based website so I won’t go into much detail about these communities, which are located in Fairfax County. I do however, expect even greater demand (and appreciation) when similar neighborhoods become available in Arlington County this next year.

There is a construction site that recently broke ground in Ballston that looks interesting. It is a townhome development by local builder, Madison Homes.  It will consist of 28 new homes and will be called Ballston Park. If they deliver a good value and have initial housing options in the $600-$800k range, I expect that they will do very well.

I’m also keeping an eye out for the 44 townhome development that will occupy a portion of the 5-acres that was formerly a Rosenthal Jeep dealership at 3400 Columbia Pike. I hope to see these initially priced in the $500-700k range.

It would be nice to see some of the rental buildings that were originally slated to be condos, convert back to condos. Two prospects that would not surprise me at all are The Joule in Ballston and Zoso Flats in Clarendon. There is a huge shortage of newer condos along the Orange Line and I would expect to see people line up for either of these buildings, if priced well.

There is also a chance that JBG will decide to sell Sedona or Slate as a condo. They are 12 and 14 story residential buildings being constructed three blocks from Rosslyn metro station with 12,000 square feet of retail on the ground floors. As of right now the word on the street is that they will both be rentals, but I am sure they are exploring the possibility of going condo with one of them. JBG is planning to sell 25 townhomes as part of this development, which I am guessing will be offered in the luxury price range.

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This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: A certain politician has been using $250,000 in income as the benchmark for rich families in America.  In an expensive area like Arlington, I’m wondering how much home an income like this can afford you? 

That’s an interesting question. I don’t want to touch the political aspect of it with a 10 foot pole, but I’ll do my best to describe what a typical family could purchase with that income.

It is a good idea to start with a debt-to-income ratio. In an area like Arlington where the cost of living is nearly 50% higher than the national average, I think we should use a conservative debt-to-income ratio of 28%. Meaning that your total debt will not exceed 28% of your gross income.

(In this case, “debt” refers to obligations including mortgage, car loans, child support and alimony, credit card bills, student loans and association fees.)

In order to calculate how much house they can afford, we need to make some assumptions:

• They have $1,750 a month in car loans, credit card bills and student loans.
• They want a house and many houses in Arlington are not part of a home owners association (HOA). It is safe to assume they will not have any HOA fees.
• They have saved up enough money for a 20% down-payment so we don’t need to worry about private mortgage insurance (PMI).
• Their interest rate is 4% on a 30 year fixed rate mortgage.

According to the online calculator I used, they will qualify for a mortgage of $705,258. If they are putting 20% down, they should be able to purchase a home up to $846,310.

At the time I am writing this, there are 15 houses available in Arlington with at least 3 bedrooms and 2 baths, within the $750,000 to $850,000 price range.

Again, this is a conservative example for a fictitious loan program. There are financing alternatives that offer different interest rates, terms and down payment options that could allow such a family to purchase a more expensive home. If you have questions about what you could qualify for, it’s best to discuss your specific situation and preferences with someone who can address your individual situation.

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