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Ask Eli: Most Important Attribute for a Realtor?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

I’m flipping the Q&A format this week and asking you a question!

Most people agree that the most important quality to look for when selecting a real estate agent is somebody who writes a weekly real estate column for ARLnow, but after that, what is the most important quality you look for when selecting a real estate agent? Please respond in the poll below:

I have found that most people look for somebody they can trust first and vary on the next 3-5 most important qualities. Trust is always my leading qualifier when I’m searching for a provider inside or outside of real estate.

Thanks for participating!

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: What’s Driving Arlington’s 2018 Condo Growth?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: Are there specific buildings or sub-markets in Arlington that were responsible for the jump in condo values in the first half of 2018?

Answer: The most interesting data point that came from last week’s mid-year real estate review was that, for the first time in years, condo prices appreciated significantly from the first half of 2017 (9.1% growth).

I received a number of emails from readers asking if this growth occurred across the entire condo market or in specific locations or buildings so this week’s column takes a deeper dive into the 2018 mid-year data for condos in Arlington.

Growth and Demand Increase Across the Market

The good news for condo owners in Arlington is that appreciation and demand increased across all markets in the first half of 2018. In fact, 63 of the 79 measures for appreciation and demand improved (if you’re a homeowner/seller).

To test the market, I looked at average price and three demand indicators (days on market, purchase price to asking price ratio, and number of sales) broken out by zip code, building age and price range.

The data compares pricing and demand trends in the first half of each year for all condos sold in Arlington. Cells highlighted in green indicate improvement (for homeowners/sellers) in that category for 2018.

All Eight Zip Codes Appreciated

Demand indicators supported the price growth, with most zip codes seeing a faster pace of sale and buyers negotiate less off original asking prices.

For those tracking new construction in Arlington, only 11 of the 98 sales in 22209 were in Key & Nash and it’s important to note that builders do not enter all of their sales into the MLS, so a large percentage of those sales are missing from the data. Note that 22205 is not included because of the lack of volume.

Older Properties Surged

Many older buildings in Northern VA are struggling to recover from their peak pricing from 2005-2007, which has left many owners in a difficult financial position.

The strong appreciation seen in condos built before the 1970s will be a much-needed relief for many and proves that Arlingtonians and investors are seeing value in older, less expensive condos compared to their newer, amenity-rich neighbors built in the last 20 years. Check out the huge drop in average days on market for condos built in the 1950s or earlier!

Higher Demand at Every Price Point

Demand picked up the most for less expensive condos, but every price range saw at least two demand indicators increase in the first half of 2018.

If you own a condo in Arlington and would like to take advantage of the recent appreciation of your property, feel free to email me at [email protected] to schedule some time to talk about your options.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: 2018 Mid-Year Real Estate Review

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: How is Arlington real estate performing halfway through 2018?

Answer: If you’ve followed the news lately, it’s hard to miss reports that housing inventory is dangerously low and prices are quickly increasing across the country. While Arlington is experiencing the same issues with low inventory, we’re seeing some interesting behavior in prices.

If you simply look at average price change across Arlington, values actually dropped since last year’s strong appreciation. However, if you take a deeper look (see table below), you’ll find that condos actually jumped 9.1%, single family homes crossed the $1M mark by increasing 2.5%, and only the townhouse market lost ground.

So how did average prices in Arlington dropped when the two highest-volume housing types increased in value? There was a dramatic shift in volume from more expensive single-family and townhouse purchases (-14.8% and 18%, respectively) to less expensive condos (12.4%). Who said Millennials don’t buy homes? Hint: media outlets looking for clicks who ignored the fact that as of 2015 more than half of Millennials were still 25 or younger!

Comparison of First-Half Performance

Below is a chart comparing real estate sale statistics for the first six months over each of the last five years. I removed distressed sales, Cooperatives and age-restricted housing. The Townhouse category also includes duplexes, semi-detached and other similar homes. The Net Sold Price is the purchase price less any seller credits to buyer closing costs. Some highlights below:

  • Finally, real appreciation in the condo market, driven by a remarkable increase in purchase volume
  • Demand indicators moved in favor of sellers across the board, with decreased days on market (faster sale cycles) and purchase prices being negotiated closer to the original asking price (less buyer leverage)
  • Notable increases in the purchase volume of condos and decreased volume of townhouses and single-family sales. Does this indicate a youth movement in Arlington homeownership and families choosing to buy outside of Arlington where the dollar goes further? Or is it simply due to buyer frustration at the lack of choices in the higher priced townhouse and single-family market keeping eager buyers on the sideline?

The decrease in average Arlington home price is misleading and a great example of why macro-level real estate data is often ineffective and purchase/sale decisions should be made using micro-level data personalized to your sub-market.

The Never-Ending Story of Low Inventory

The inventory problem in Arlington is where things get interesting and confusing.

Basic economic principle would suggest that prices would be even higher due to such low supply, but what we’re seeing is that eager buyers are becoming frustrated with the lack of choices and either looking to other markets or simply foregoing a purchase, thus changing the demand curve and limiting price appreciation (I’m sure there’s an Economics 101 theory for this that I’ve read and forgotten).

The charts below highlight the following:

1. The number of homes for sale in Arlington dropped year-over-year for each of the first six months of 2018, including drops of 10% or more in each of the first four months.

2. The months of supply (existing inventory against demand) has decreased year-over-year five of the first six months of the year, with only a .2% increase in June, but two decreases of more than 20% earlier this year.

3. Overall, the number of homes going under contract each month is modestly closer to what it was last year, although it’s still down in 2018. Based on what I’m seeing with clients, this is not due to a lack of buyer interest, but the lack of choices for eager buyers. I think an increase in inventory would result in an equal increase in purchase activity.

If you have any questions about this data, would like to discuss how this data impacts your purchase/sale, or would like to see more personalized data sets specific to your purchase/sale feel free to send me an email at [email protected] and let me know how I can help!

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: What Type of Home Appreciates Faster?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: I have heard mixed opinions on whether single-family homes appreciate faster than townhouses and condos. Do you have any data that addresses this?

Answer: On an aggregate level in Arlington, single-family detached homes appreciate faster than townhouses, which appreciate faster than condos.

Over the last ten years the median single-family home has increased from a median purchase price of $630,000 to $850,000 (35% increase), the median price of a townhouse has increased from $542,000 to $696,500 (28.5% increase) and, condos have increased from $350,000 to $392,000 (12% increase).

Below is the chart for median purchase price, broken out by housing type, in Arlington over the last ten years:

Key Takeaways

  • One may assume that the appreciation of single-family homes over the last five years is mostly attributed to so many old, less expensive homes being replaced by expensive new homes. However, by using median price instead of averages, we know that the appreciation exists across the entire single-family market. In fact, the appreciation in average price is less than the median suggesting there’s stronger appreciation in the middle of the market than at the top or bottom.
  • As with any asset class, growth is directly correlated to risk and the historical appreciation of each housing type is reflective of the risk of ownership. Condo owners benefit from much more predictable and relatively low repair/replacement costs (mostly bundled into condo fees) than single-family owners who are responsible for anything that happens on their property (e.g. basement springs a leak and water line breaks in 6 months, you’re on the hook for tens of thousands without notice). You also tend to find condos centered around metros and dense office/retail centers which stabilizes market value during down years.
  • Scarcity also plays a role in the higher appreciation of single-family homes in that it is much easier to introduce a new supply of hundreds or thousands of condos (and rental apartments) into Arlington than it is new single-family homes or townhouses.
  • The above chart aggregates all homes in Arlington within each housing type, but it’s not hard to find sub-markets within each housing type that offer better or worse historical appreciation. For example, In December 2017 I ran an analysis on appreciation of condos built from 2000-2008 and found growth of 13% and 20% for one and two bedroom units, respectively, from 2010-2017. The conclusion? There are good deals and bad deals all over the market, so don’t rely on a single chart or data point.

I hope everybody had a great Fourth of July!

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

 Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Where You Could Be Watching Fireworks This Year

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: Where are the best private views of 4th of July fireworks in Arlington?

Answer: Pointing out July 4th firework views during showings is a habit of mine that out-of-towners always find amusing until they’ve lived here for a year or two and realize how obsessive we get about our neighborhood/building views come 9 p.m. July 4th.

As a long-term Rosslyn resident without a private view, I’ve always enjoyed them with the crowds by the Iwo Jima Memorial, but this year with a 7-month old at home, I’ll be watching (possibly re-runs) on TV.

If only I could be home with my son AND watch the fireworks from the comfort of my balcony or rooftop (hint: see below)!

I would love if readers shared in the comments section some of their favorite public places to take in the show! Especially neighborhood spots that don’t require fighting traffic and arriving hours early.

For the true National Mall July 4th firework lover, I put together a list of homes currently for sale with the closest, most direct views of fireworks (you’ll have to compromise for simply great views the other 364 days of the year).

The Best Private Firework Views

The best available private views go to The Weslie and Prospect House, perched above the Iwo Jima Memorial and Netherlands Carillion, all with balconies large enough for a party that offer you a front-row seat to see and hear the fireworks.

With one unit on the market at the Weslie (picture to the right) and eight at Prospect House ranging from $599,000 to $1,325,000, there’s something for every firework lover… as long as you can stomach the high condo fees.

Crystal City also jumps into the mix with a few buildings along Crystal Dr. with large balconies, many facing the National Mall.

However, you’ll be a bit further away which may favor those who like to see, not hear, the fireworks.

The two units currently on market are modestly priced at $535,000 and $779,00, each with two bedrooms.

It wouldn’t be right to finish this section without acknowledging the best-in-class private views available at the magnificent Monument Place townhouses across the street from the Iwo Jima Memorial.

These large, luxury townhouses each have massive rooftops with views into DC that will never be obstructed.

Outside of the being President or owning a select few Georgetown/Foggy Bottom residences, I’m not sure you’ll find anything that rivals this amount of private space with front-row views of the National Mall. Personally, I think this is some of the most undervalued property in the DC area.

Unfortunately, there is nothing actively for sale right now, but 1400 Meade St. N. is presumably still for sale although technically withdrawn from the market as of May 2018.

The owner combined two homes into one massive 6,000+ sq. ft. masterpiece. Four-car garage? Check! Staff quarters? Check! Home theater? Check! Spa? Check! Although measurements are available, I believe the total rooftop space is around 1,500-2,000 sq. ft..

With a $900,000 price reduction, you’ll pay $3,595,000 for the right to host the most sought-after Fourth of July party in D.C.! I’m anxiously awaiting my 2019 invitation…

The Best Semi-Private Firework Views

If you don’t have your own balcony or rooftop to watch the fireworks from in Arlington, you can share the experience with a few neighbors from two of the best rooftops in Arlington for firework viewing at The Odyssey and Waterview condos in Rosslyn/Courthouse.

These two high-end condo buildings offer some of my favorite rooftop views and currently have six units for sale ranging from $460,000 to $1,200,000.

You’ll have plenty of viewing locations inside and outside at The Odyssey, but you will have to arrive early for a good spot at the Waterview.

I hope everybody has a relaxing and safe July 4th holiday! If any of the homes linked above are of interest to you or you’d like information about other on or off market properties, feel free to email me at [email protected] for a quick response!

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Best Time To Sell a House

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: When is the best time of year to sell a house?

Answer: Statistically, the best time to put a home on the market in Arlington is in March, with February and April a close second. August and September seem to be the worst statistical months to put a home up for sale, with December a runner-up.

However, this is simply based on historical averages and doesn’t mean you are guaranteed success in March and can’t have a wildly successful sale in August.

Remember, all it takes is one person to buy your home, so don’t let the data get in the way of the timing that makes the most sense for you.

The Data

I broke down past sales in Arlington from 2015-2017, broken out by single-family homes, townhouses and apartments (condos) based on the month they were put on the market for sale.

Cells highlighted in green historically perform better than the market in that category for the month listed. Average Negotiated Discount is the amount buyers are able to negotiate off of the original asking price.

I debated including Purchase Price because the data is a bit misleading.

For example, the average purchase price for a single-family home listed in March is about $100,000 more than the average purchase price of a single-family home listed just two months later in June, but that doesn’t mean that if you list your single-family home in March vs June, you can expect to sell it for $100,000 more.

I think the first three columns are the most important because they highlight the amount of bargaining power you command or lose (Negotiated Discount), how time of year impacts expected time to sell (Days on Market), and how much new competition you’re likely to face (New Listings).

One of the big advantages of listing in an unfavorable time of year, when buyers bargain more and sellers have longer sales cycles, is that you face less competition, which if you take the right home sale approach, may actually work in your favor.

The Data

Conclusion

The conclusion I want you to take away from this column is that if you have the luxury of choosing when you go to market, you should take advantage of historical trends to give yourself the best chance of maximizing your home sale.

However, most people don’t have the luxury of picking exactly when they put their home on the market, so it is more important to do what makes sense for you than to follow the averages because it only takes one buyer, not one hundred, for you to have a successful sale.

If you are planning to sell your home and would like more customized data specific to your home, feel free to reach out to me at [email protected]

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: How to Spot a Bad Flip

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: I don’t have the time to do a full-scale remodel on a fixer-upper so have found myself favoring renovated homes, many investor-owned. I’m afraid of buying a bad flip and wondering if you have any tips for spotting them during showings.

Answer: Whether or not a home has been recently renovated for sale by an investor or homeowner, it’s important for you to do as much digging and inspecting as possible to verify the quality of the work and materials.

For starters, never assume that because a home has been professionally remodeled and looks new that you do not need to perform an inspection. In fact, I think a home inspection is most valuable when buying a flipped property because you’re paying a premium for it being/appearing new.

However, inspections take place after entering into a purchase agreement and cost money, so I’ll highlight some things you can look for before making an offer that will give you an idea of the quality of the work.

Exterior

  • Driveway: Repaving a driveway is expensive and often ignored in cheap flips. Look for cracks or other damage in the driveway. If the driveway has been redone, that’s a good sign.
  • Roof: You don’t need to be a roofing expert to know whether a roof looks to be old and damaged or in new or good condition.
  • Downspouts: You want to see water runoff extending away from the home by 8-10ft, not being dropped right next to it, which is often overlooked by inexperienced or cheap investors.
  • Lawn: Grass takes time and money to look good so if the lawn is in good condition, that’s a great sign.
  • Windows: Windows are very expensive and you can tell a lot about an investor by the windows they install. Are they good quality? Did they replace none, some, or all of them? Did they install new windows or refurbished windows?

Interior

  • Floorplan/Design: Did the investor make decisions that leave you scratching your head like a shortage of kitchen cabinets, awkward toilet placement or tiny clothes closets? It’s not easy to redesign a floorplan and novice remodelers almost always make mistakes.
  • Dishwasher/Stove: Give them a pull and see if they’ve been secured. If they are, the investor likely paid attention to other more important details.
  • Water Heater: Is there a drip pan around the base and is it tied into a floor drain?
  • Electrical: Look at the inside of the panel door to see if it’s been labeled and if there is a signed/finalized permit sticker.
  • Furnace: Does the exhaust pipe have a constant positive pitch leaving the unit until it reaches the exterior (note: this should also be the case on a gas water heater)?
  • Door Frames/Shoe Molding: Are the frames around the doors and shoe molding along the floor new or painted over? New frames/molding looks clean and smooth while originals with paint over top look clumpy and damaged. If it’s original frames/molding, you might be looking at a quick, cheap flip.

Other

  • Permits: https://permits.arlingtonva.us/ allows you to search the full permit history of any home in Arlington so make sure you check whether permits were issued and whether permits were finalized.
  • Receipts: Try to confirm who did the work. Are they licensed, bonded and insured or were they a friend who loves DIY projects? Don’t be afraid to talk to the contractor(s) who did the work and see how much they’re willing to share about the materials and crew they used.
  • Days Since Last Sale: Look up how much time has lapsed between the investor’s purchase of the property and the completion of the remodel. The timing of the work should align with what the seller is claiming to have done. You can’t do a full remodel, with proper permitting, in a month.
  • Overall Care: Care and attention to detail outside of the walls tends to show up in the quality of work behind the walls (where you or your inspector can’t see), so if you notice mistakes you can see, be wary of what mistakes you can’t see.

Other common items to observe are the quality of cabinets, appliances and fixtures but most of that is dependent on price point and expectations should be managed accordingly.

Also, do not shy away from electrical, plumbing, HVAC, roof and/or structural inspections if you have concerns over the quality of the work after doing your general inspection. They cost about $150-$300 each, but that’s a lot less expensive than buying a home with hidden issues, even if you end up spending the money just to realize you need to walk away from the deal.

The term “flip” carries a negative connotation, but regardless of what you call a house that has been remodeled/updated for purposes of resale, it can be a great opportunity to get many of the benefits of a new home, without the price tag of new construction or burden of doing the work yourself.

However, you must approach the purchase with caution and a careful eye for quality of workmanship to avoid your dream home turning into a money pit.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: What is the Average Length of Home Ownership?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: How long do most people in Arlington live in their home before selling?

Answer: Arlington’s transient nature leads to a much shorter length of home ownership than the rest of the US.

The average homeowner lives in his or her house/apartment for an average of 9.4 years (median 7.2 years) while the national long-run average is 13.3 years, according to this study from the National Association of Home Builders.

I was curious if certain factors like condo vs. single-family or number of bedrooms has an impact on the average length of home ownership in Arlington. Below I pulled over 3,200 recent homes sales, excluding investment properties, in Arlington and looked at the impact different factors have on average length of ownership.

Key Takeaways

  • Property type, number of bedrooms, purchase price and location have surprisingly little influence on the length of home ownership
  • Property age has the biggest impact on length of ownership. Owners of homes built before 1990 stayed for 10.4 years while owners of homes built since 1990 average just 6.8 years.
  • One may draw the conclusion that homeowners living in the 22205 zip code are the happiest with their neighborhood and neighbors, staying put an average of 2.4 years longer than the rest of Arlington homeowners (Kautter would agree)
  • Of all 3,200+ data points, the longest length of home ownership was 55.8 years in… you guessed it… 22205! There were eight owners who lived in the same home for over 50 years (four of them in 22205!). 10% of the owners lived in their home for 20+ years.

People paying over $1.5M for their home stay an average of 2.4 years less than those buying homes under $1.5M

The County-wide averages were about what I expected, but I assumed single-family home ownership would be substantially greater than two years longer than condo ownership, and there were a couple of other averages that surprised me as well. I hope you found the data as interesting as I did!

As a reminder to all current and future home-buyers, taking the time to think about how long you’re likely to live in your next home if a critical, often overlooked, decision in forming a good home-buying strategy.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Does Down Payment Amount Impact Negotiations?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: Does the amount of money I put down have an impact on how much I can negotiate the purchase price?

Answer: In a multiple offer situation, the amount of your down payment may be the difference in whether or not your offer is accepted, but in non-competitive negotiations, the data shows that it only really matters if you’re putting 0% down or paying 100% cash.

From 1% down to 99% down, there isn’t a strong correlation between the amount of a down payment and a buyer’s bargaining power.

Data Set

Below is a data table of 3,192 home sales in Arlington since 2017, inclusive of any closing cost credit paid by the seller, excluding new construction and any sales with a purchase price above the list price.

Note: loan data is manually entered into the MLS by the seller’s agent and is not quality checked so there is some level of human error, but with nearly 3,200 data points the sample size mostly off-sets incorrect entries. I also cleaned up a handful of data points that were clearly wrong.

Key Findings & Notes

  • Buyers putting 0% down are clearly at a disadvantage in negotiations and buyers paying all cash (thus no financing or appraisal contingencies) negotiate nearly 1% more off the list price (avg 2.89% off) than all other buyers (avg 1.96% off)
  • The most surprising data point is that buyers putting 1-4% down negotiate more off the list price than every other range except all-cash. I believe this is due these buyers also putting a high priority on negotiating seller-paid closing costs in the deal, thus many buyers will only purchase homes that sellers are willing to negotiate on. Only 20% of these buyers paid full price.
  • The second most surprising data point is that 25% of Arlington buyers paid all-cash. Reader and frequent ARLnow commenter, Dave Schutz, noted this from the numbers in last week’s column on VA loans. Cash buyers tend to purchase less expensive homes, with the majority of cash purchases being condos, below the average market price (likely many investors). Also, many of the single-family homes purchases for cash are developers.
  • 0% down loans are almost exclusively VA (Veteran Affairs) loans and 100% down refers to all-cash purchases

Why Put More Down?

If you don’t gain any leverage negotiating your purchase price by putting more money down, why should you?

Mortgage insurance is a big reason, which can add hundreds of dollars per month to loans with less than 20% down.

This is where having a great financial team can be helpful. Not only does that mean a lender who will take the time to advise you on your loan options, but I also suggest involving your financial advisor and/or accountant in this decision to determine the impact of different loan structures on your personal finances.

Bottom Line

It may come as a surprise to many that buyers with less money to put down (seemingly less qualified) have similar bargaining power as buyers putting 50% or more down, but the bottom line is that sellers are focused on the probability that a buyer will be able to close the deal they’re offering on time.

A buyer putting 3% down with a strong pre-approval from a reputable lender has a higher probability to close, and close on-time, than somebody putting 50% down with a weak pre-approval from a big bank or online lender.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Department of Veterans Affairs (VA) Loans

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: Are Funding Fees on VA loans eligible for seller credits?

Answer: Loans guaranteed by the Department of Veterans Affairs are known as VA Loans and provide current and former Service-members with an opportunity to purchase a home with as little as 0% down.

In addition to the normal closing costs (title fees, transfer taxes, etc), a Funding Fee is charged at settlement, which is equal to anywhere from 1.25-3.3% of the loan amount, depending on size of down payment, type of service and whether or not it’s the borrower’s first time using the VA loan program.

It’s a fee paid to the VA on every loan to offset the cost of loans that default (similar to Mortgage Insurance on non-VA loans). Disabled veterans are eligible to have the entire fee waived.

In a previous column, I explained how buyers can negotiate for seller credits to reduce or eliminate the out-of-pocket expense of closing costs at settlement. Fortunately, the Funding Fee falls into this category, along with the rest of the standard closing costs associated with a VA loan, and buyers are eligible to have all of these costs covered by the seller.

In theory, if a buyer is able to negotiate 100% of closing costs paid by the seller and chooses a 0% down payment loan, a home can be purchased cash-free.

If you’re unable to negotiate seller credits to cover the Funding Fee and are concerned about having the cash to pay for closing costs, you’re also allowed to roll the Funding Fee into your mortgage so that it becomes part of your monthly payment.

Arlington Veterans Affairs (VA) loans by the numbers:

  • In 2017, 261 of 3,130 buyers (8.3%) used a VA loan. By comparison, 2,173 used a Conventional loan (69.4%).
  • The average purchase price for homes purchased using a VA loan was just over $615,751.
  • 38% of VA loans were used to purchase a condo, 29% to purchase a townhouse, and 33% to purchase a single-family home.
  • On average, buyers using a VA loan negotiated 2.3% off the original asking price. By comparison, buyers using a Conventional loan negotiated 2.2% off the original asking price and cash buyers negotiated 4% off the original asking price.

I hope the veterans and active duty military readers had a great Memorial Day Weekend. Thank you for your service!

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Who Pays Closing Costs When Selling a Home?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: We purchased our home a long time ago and cannot remember how closing costs are distributed between buyers and sellers. Can you explain who pays closing costs in a home sale and which terms are negotiable?

Answer: Certain fees and taxes vary by state and locality, but it is customary in Virginia, D.C., and Maryland for each side to cover the taxes and fees associated with their portion of the transaction and the seller to pay the commission to both the broker/agent representing them and the broker/agent representing the buyer.

Sellers pay about .25% of purchase price, plus whatever commission they’ve agreed to, in closing costs. Buyers pay about 2.5-3% of purchase price in closing costs. I’ll detail the standard closing costs on each side of a home sale for transactions in Arlington VA:

Sellers

All of the fees/taxes listed below are automatically deducted from the buyer’s payment so you do not pay any of these out-of-pocket, except for the resale package if your home is part of an HOA or condo building.

  • Commission: Sellers traditionally cover the commission for their representing broker/agent and offer a commission to the buyer’s representing broker/agent. As with every industry, rates vary by provider and type of service.
  • Title Fees: This covers the legal review and preparation of the sale documents and usually runs about $500-$1,000.
  • Transaction Taxes: Arlington charges sellers a Grantor’s Tax and Congestion Relief Tax totaling .25% of purchase price.
  • Prorations: You may owe or be credited property taxes or HOA/Condo fees, based on the status of your tax payment.
  • Resale Package: If your home is in an HOA or condo building you are required to provide the buyer with a resale package including by-laws, reserve balance, Association inspection, etc.. This fee varies by community but is usually $100-$250.

Buyers

All of the fees/taxes listed below are included in your costs due at closing (day of purchase), except the appraisal, inspection costs and in some cases a condo questionnaire, which are all paid out-of-pocket while you’re under contract.

  • Lender Fees: This includes the cost of underwriting/processing your loan, any points paid to reduce your interest rate, appraisal cost and any other lender-related costs. These costs often total at least $1,000-$2,000+, plus any points purchased to bring down your rate, usually coming in at .5-1% of the loan amount, if purchased.
  • Title Fees: These charges include lender-required title insurance, optional buyer’s title insurance, deed preparation, title abstract search, land survey and other general processing fees to prepare the legal and administrative side of your purchase. These costs usually cost $500-$1,500, plus the cost of title insurance (if required and/or opted for), which is usually about .25-.75% of purchase price.
  • Transaction Taxes: You’re responsible for a handful of state and local taxes, some fee-based like the deed recordation fee and others are a percentage of the purchase price like the state and county transfer tax. Expect to pay roughly .5-.75% of purchase price in Government fees and taxes.
  • Pre-Paid Fees/Taxes: Most lenders require buyers to pre-pay property tax and homeowner’s insurance which they hold in escrow to ensure payment. These charges usually end up being about .5% of the sale price.
  • HOA/Condo Fees: If you’re buying into an HOA or condo you may be responsible for advanced payment of Association fees, capital contribution to the reserve account (usually 2x your recurring payment), move-in fees or other administrative fees. The cost varies widely based on the Association.
  • Prorations: You may owe or be credited prorated portions of the property tax or HOA/Condo fees based on the status of the sellers paid or unpaid bills

Are Closing Costs Negotiable?

Buyers may negotiate to have sellers pay up to 100% of closing costs (roughly 2.5-3% of purchase price), also known as seller credits.

This can be negotiated on the front-end of the deal, during negotiations prior to being under contract or while under contract (e.g. after the home inspection) to off-set any negative factors that are found or occur while under contract.

For sellers, there is little difference to their bottom line whether they agree to cover $10,000 in closing costs or agree to reduce the purchase price by $10,000 (minor differences show up in fees charged as a % of purchase price like taxes and commission).

For buyers, the decision to ask for closing cost assistance vs. reduced purchased price often comes down to cash-on-hand and personal finance decisions. Taking a seller credit reduces the amount of cash required to close but is effectively financing those costs by rolling them into the loan.

Projecting Your Closing Costs

Prior to entering into a deal, or even beginning the sale or purchase process, it may be helpful to estimate your closing costs (buyer) or net proceeds (seller) based on estimated sold/purchase prices. The best place to get this information is through a lender (buyer) or title company (seller).

If you’re interested in gathering this information at any stage of your purchase or sale, I’m happy to assist; just send me an email at [email protected].

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529. 

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: What to Know Before Buying a House

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: We are planning to buy a home in the DC area sometime in the next 12-24 months and want to make sure we take that time to prepare. What should we know before buying a house that we can get started with now?

Answer: Whether you’re a first-time buyer, experienced buyer relocating from out-of-state, or moving locally here’s a list of things I review and plan out with clients before getting into the full swing of house hunting:

Local Customs, Requirements, Timelines and Contracts

The home-buying process varies greatly across and within states. I think the most important thing you can do as a buyer is take an hour at the beginning of your buying process to become educated on the process, timelines and key contractual terms/obligations in the area(s) you plan to search.

This is also a good way to meet and vet different real estate agents early on to get a feel for who is willing to spend time with you up-front on education and planning vs pushing immediately for a sale.

Choose the Right Financing, Get Pre-Approved

Not all lenders offer the same loan products so it’s important to identify a lender who not only provides high quality service, but also has access to loan products that fit your profile (down payment, credit score, job industry, etc). Real estate agents, friends, and co-workers are all great sources of recommendations.

You’ll also want to get a pre-approval from at least one lender, one that actually reviews and verifies your financial documents, income and employment instead of just running credit and reviewing an information sheet.

This will decrease the chances of you being rejected from a loan, allow the lender to provide the most accurate recommendation, increase your leverage in contract negotiations and reduce the amount of work required of you once you’re under contract.

Don’t Forget A Monthly Budget

I find that most people qualify for more than they actually want to spend, especially dual-income buyers, so budgeting is important.

The biggest mistake most buyers make is budgeting strictly around the sale price, which is often driven by the amount you have for a down payment. It’s just as important to set a monthly budget for total housing expenses including mortgage, taxes, insurance and if applicable Association fees and/or mortgage insurance.

Your lender can help you project monthly expenses at different price points based on different down payment amounts.

Do You Want Representation?

Determine if you want to have a real estate agent representing you in the transaction (breaking news… I highly recommend it) and, if so, what level of service you’re looking for.

In most cases, the seller pays commission to their representing broker and the buyer’s broker, so representation often comes at little or no cost to buyers.

Push Yourself on Your Criteria

It’s very easy to come up with your top 3-5 criteria for a home and rare for most couples to disagree on the short list, but push yourself/yourselves to rank your top 10-12 criteria. This list can and will change as you search for homes, but it pushes you to think about more than bedroom count, schools, commute, and an open kitchen.

This is especially valuable for couples. Just because you have the same taste in music, food and TV shows that brought you together, doesn’t mean you’re on the same page about housing criteria.

Cash Needs + Savings

You need cash savings to pay for your down payment + closing costs of 2.5-3% of the sale price (in the DMV). Within a few days of your offer being accepted, you’ll have to transfer 1-5% (negotiable) of the sale price into an escrow account as deposit to secure the sale.

You’ll spend about $1,000 out-of-pocket between contract and closing on inspections and the appraisal. Don’t forget how expensive moving is either, so keep enough savings for incidental moving expenses, new furniture, painting, etc. You should aim to have 3-6 months of emergency savings tucked away after everything is paid for.

Other Key Providers

Most buyers are familiar with the role real estate agents and lenders play in the transaction, but don’t forget about the importance of working with a quality title attorney and home inspector. Your agent should be able to make a great recommendation.

How Long Will You Live There?

This is probably the most underrated conversation for buyers to have when they’re setting a budget and determining criteria. Your home-buying strategy should look very different if you’re planning to own for 3-5 years vs 10-12 years so give it serious thought and be realistic.

Deadlines and Lease Terms

Figure out if you have any strict deadlines for the move and if there are direct or indirect costs of buying before or after that deadline.

It can be difficult in a low-inventory market to time a purchase, so make sure you’re aware of the pros and cons of purchasing before or after your deadline. If you’re renting, make sure you find out the cost of early termination or if month-to-month leasing is an option.

Reason for Your Purchase

I still haven’t met somebody who asks for a bad investment when they buy a house, everybody wants their home purchase to be a great investment, but you have to define what a great investment means to you.

Does it mean your home appreciates in value well above the market over a certain period of time? If so, you’ll likely be in under-developed areas or in a house nobody else wants. Does a great investment mean you wake up every morning so happy with your home and neighborhood that the money is a secondary concern?

I often remind clients that sometimes the best investment is buying a house that allows you to live there longer and eliminates one or more real estate transactions in your lifetime. In other words, the value you get out of being in a home for 10 years vs 3 years far surpasses a small increase in your budget.

I hope this list is helpful not just for local DC Metro readers, but for anybody getting started with their home search and wondering what you should know before buying a house. These are the conversations and steps I take with my clients every day to make sure they’re prepared, educated and have the right strategy in place before we even step foot in a house together.

I’m sure I left a few things off this list, but this should get you 95% of the way there. Feel free to give me a call or send me an email at [email protected] for the 5% I missed ☺.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: How Many Days To Close On A Home?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: How long does it usually take to close on a home purchase/sale after an offer has been accepted?

Answer: If a loan is being used to purchase the home, expect the time from offer acceptance (ratification) to closing (purchase/sale) to take 30-45 days and a week or less if it is a cash purchase.

The average closing period in Arlington from 2010-2017 was 42 days and the median closing period was 36 days. Keep in mind that includes sales with a seller rent-back period which can extend closing for months.

As a general rule of thumb, a quick close is anything under 30 days, with some lenders able to close in as little as two weeks, and anything over 40 days is generally considered a delayed closing around here. With the majority of sellers preferring to sell as quickly as possible, quick closings are a great way to help your offer stand out.

Below are the three elements of most real estate transactions that determine how quickly a home can be sold after an offer is accepted:

Financing (14-45+ days)

One of the biggest differences between financing through large national banks and a local lender tends to be the speed they can close a deal.

Most of the big banks I’ve worked with struggle to close in less than 35-40 days, often asking for 45 days, which can really compromise a buyer’s negotiation leverage in a competitive market. On the other hand, many local lenders have no problem closing in 3-4 weeks, with some able to close in two weeks under the right circumstances.

Appraisal: All lenders require an appraisal, which usually takes 1-3 for the final appraisal report to be submitted.

Timelines vary based on how busy the market is (how booked up appraisers are), how quickly the request is made and whether it is requested as a rush order. With interest rates increasing over the last 12 months, refinancing has dropped significantly, thus freeing up appraisers’ schedules for purchases and allowing for faster turn-around times.

Underwriting: Underwriting is the lender’s review of the borrower’s financial information, property information, Association information (if applicable) and any other relevant facts they need to determine whether or not they will approve/fund the loan.

Buyers play a big role in how quickly this process moves by responding quickly to any lender requests for new or updated documents or explanations. Once a loan has been approved by underwriting, there is a mandatory three-day loan terms review period the buyer is required to have before the property is purchased.

Title Review (3-7+ days)

Before a property is sold, a Title Company or attorney specializing in the field will order a title search and (usually) a survey of the property to check is there are any outstanding claims against the ownership of the property (liens), no issues with property boundaries or other red flags that may impact the ability of the owner to transfer the property’s title free and clear.

This process generally takes anywhere from a few days to a week, as long as there aren’t any issues that need to be resolved.

HOA Resale Package (3-14+ days)

If the property is located in an Association (Condo or Homeowners), Virginia requires that the seller provide certain Association-related documents for the buyer to review, including a resale inspection of the property, by the Association, to make sure there aren’t any violations.

Associations have 14 days from the date they’re ordered to turn these documents and inspection around, but most Associations are able to fulfill the request within 7-10 days.

Ask Before Offering

If you are considering making an offer on a home, I recommend asking the seller/seller’s agent if they have any preferences for the closing period. While most sellers prefer to close as quickly as possible (especially if the home is already vacant), some need time to move out and offering a three-week closing may not have the right effect if the seller needs six weeks to move out.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Can a Seller Back Out?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: Can a seller back-out of a home purchase contract?

Answer: Sellers have practically no way out of a home sale contract in Northern Virginia (or DC), but buyers have multiple opportunities to void an agreement without risking their deposit. The most common ways for a seller to get out of a home sale contract are:

  • Kickout Clause: Kickout clauses allow the seller to give the buyer notice that they intend to void the agreement if the buyer does not perform a specific action. The most common example of this is when a purchase is contingent on the buyer selling their home. Sellers can give a buyer notice of their intention to void if the buyer does not provide a bona-fide contract on the sale of their home or remove the home sale contingency all together. If the buyer fulfills either requirements, the seller must remain under contract and cannot void.
  • Buyer Default: If a buyer falls into default of their contractual obligations such as not making their required deposit on time or not applying for their loan on time (7 days), the seller may void the contract.
  • Technicality: A seller who really wants to back-out of a contract may look through the agreement for a missing initial or some other contractual technicality in an attempt to claim the contract was never formally ratified. This isn’t very reliable and I would not recommend any seller rely on this method.

Buyers (Usually) Have Outs

On the other hand, most contracts afford buyers multiple opportunities to void a purchase contract without losing their deposit. This includes the home inspection, financing and appraisal contingencies found in many contracts.

Also, if the property is located in an Association (condo or HOA/POA), buyers have a non-negotiable right to void within three days of receiving the required resale/Association package (by-laws, budget, rules & regs, etc).

Voiding Without Cause

If a buyer voids a purchase agreement outside of the legal means (contingencies) of the contract, they risk losing up to 100% of their deposit, which is usually 1-3% of the sale price.

However, sellers are not required to make a similar type of deposit as security for performance under the terms of the contract. If a seller decides to back out of an agreement without cause, the buyer is faced with a decision to accept the seller’s decision and walk away, accept a buy-out/settlement from the seller (if offered), or take legal action and sue for specific performance (force the sale) or financial remedy.

As a buyer, you hold the cards and command the most leverage over the purchase agreement remaining in force or being voided.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Are Escalation Clauses a Trap?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: A few of our friends who bought homes recently told us that we should expect to use an Escalation Clause/Addendum when we make an offer, if we want our offer accepted. Is that your experience and is there a better way of making a competitive offer?

Answer: I thought this would be an appropriate follow-up column to last week’s column on the dangerously under-supplied housing market and it’s also become a frequent topic of conversation with clients.

With so much competition for hard-to-find homes that have just come to market, it’s critical for buyers to understand the purpose and risk/reward of using Escalation Clauses/Addendums in their offer.

Please note that this column is specific to contracts in Northern VA; Maryland and DC contracts vary in language and use.

What Is An Escalation Clause/Addendum (EA)?

An EA allows you to make an offer at a starting price while agreeing to increase your offer to a higher price if another offer is higher than yours. It includes a ceiling/maximum escalation value and an escalation factor, the amount your offer will increase by, over the next highest offer.

The contract allows for the seller to execute a purchase contract (ratify) at an escalated value, without the buyer having to agree to the new price. However, to protect buyers, the seller is required to deliver the next highest contract that was used to escalate your offer.

That other offer must also be materially similar, meaning the other offer cannot include seller credits or a material difference in contingencies (e.g. the other buyer has to sell a home before buying this one).

When To Use an EA

EAs are best used when there are multiple confirmed or expected offers and the seller has set a deadline, asking for best-and-final. It is very common in our market for sellers to set an offer deadline after their first full weekend on market and often those deadlines are set with the expectation that all offers will be best-and-final and the seller will make a decision shortly after the deadline, without any back-and-forth with buyers.

Buyers are often skeptical of this practice and assume that sellers will come back for more negotiating anyway, but in my experience, most sellers stick with the plan and a buyer who leaves something on the table is often informed that another offer was selected.

Managing the Risk & Reward of an EA

Used correctly, EAs allow you to maximize the chances of your offer being selected, without grossly overpaying relative to the rest of the market. It allows you to offer as much as you’re willing to pay for a home, without actually committing to pay your maximum if nobody else in the market values the home as much as you do.

In my experience being on both sides of the transaction, and speaking with colleagues, the winning offer in a multiple offer bid almost always includes an EA, however, the winning offer escalates all the way to its ceiling only about half of the time.

The clear risk to you is that you’re exposing the highest price you’re willing to pay to a seller and if there aren’t other offers that justify automatically escalating your offer, the seller may attempt to simply counter your offer at a number equal to or close to your escalation ceiling.

There are things both the seller’s agent and buyer’s agent can/should do ahead of accepting/offering EAs to avoid a potential messy situation where this occurs.

As the buyer, you should think about how you will respond if the seller attempts this. I have had (buyer) clients walk away from a deal when this occurs, leaving the seller with nothing or a much worse offer, but have also had (buyer) clients thrilled to be countered at a price below their escalation ceiling, even if there weren’t other offers to support it.

Key Takeaways

  • EAs have become common-place in the market
  • EAs should be used when there are confirmed or expected multiple offers and a deadline has been set by the seller
  • EAs help the seller get the best price and allow buyers to maximize their chance of securing a home without grossly overpaying relative to the market
  • EAs carry a lot of risk and reward, so be sure to understand them before including one in your offer

If you are thinking about getting into the market for a home purchase and would like to discuss strategies that will help you maximize your chances of a successful home purchase, without exposing yourself to unnecessary risk, feel free to reach out to set-up a meeting with me. You can reach me any time at [email protected].

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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