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Arlington Is Running Out Of Homes For Sale

Question: We have been searching for a home for over 6 months and have expanded both our criteria and budget, but still not finding something we like. We have heard that the housing supply is low, is that true for Arlington?

Answer: The housing supply shortage in Arlington is a big problem and it’s not just Arlington that is feeling the pain, it’s most of Northern VA and the greater DC Metro (nationwide as well).

You’re not alone in your experience either, we have a handful of clients who have been looking for the better part of a year while also expanding their search area and budget, but unhappy with what’s available.

So, is the housing shortage mostly anecdotal and buyers are just too picky or to cheap? Nope… here are some charts that highlight the alarmingly low housing inventory in Arlington:

Eight Consecutive Quarters of Fewer Homes For Sale, Year over Year (YoY)

After seven straight quarters of YoY decreases in the number of homes for sale, Q1 2018 brought us the largest drop in YoY homes for sale with 21.1% fewer homes for sale than Q1 2017, which was already 7.2% lower than the number of homes for sale in Q1 2016. The chart below represents all homes for sale in Arlington.

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Existing Housing Supply Would Only Last 1.5 Months

Months of supply measures how long the existing housing inventory would last given the last 6 months of demands (absorption). Most economists say that 4-6 months of supply represents a well balance housing market and Arlington has hovered around 1.5 months of supply for the last 6 months.

I broke out the chart below by housing type (detached, townhouse, and condo) to highlight the fact that the problem exists across all housing types, but town-homes have historically been the least supplied type of housing in Arlington.

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Good Homes Are Selling Much Faster

This chart shows the YoY change in the number of homes sold within the first 10 days on market, which has increased the last six quarters in a row. There was an impressive 53.4% YoY increase from Q1 2016 to Q1 2017, followed by yet another double digit increase in homes sold within the first 10 days from Q1 2017 to Q1 2018.

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The $1M+ Home Market Is Healthy

The only sub-market in Arlington with a healthy supply are homes listed for over $1M, with around four months of supply, while everything priced from $300k-$800k is under one month of supply.

However, the $1M+ sub-market is only “healthy” on paper, take a deeper look and you’ll see two major problems (cue comments that the problem with $1M+ homes is that they are $1M+). First, most of those homes are actually $1.5M-$2M and second, most of those homes are tear down/new construction with very similar size and design, leaving wealthy buyers who don’t like new construction with very few options.

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Tips For Buyers

Here are some tips for buyers searching for hard-to-find homes in a tough market:

  • There are few, if any, great deals in an under-supplied market. In this market, good value is finding a home that meets most of your criteria, that you’ll be happy in, that you can afford.
  • If you want to negotiate, your best bet is to find something that has been on market for at least 2-3 weeks otherwise you’ll accumulate more rejected offers than homes currently on the market
  • Put in the time early in your search to understand the market so you can recognize the right home when it comes on market
  • Base your offer on what the home is worth to you, not just the asking price
  • Understand how Escalation Clauses work and use them to your advantage
  • Find out if there are offer deadlines (usually the Monday or Tuesday following the first day on market)
  • Understand the cost-benefit of contingencies (inspection, financing, appraisal are the standard contingencies) and how you can maximize the strength of your offer with limited risk exposure
  • Consider doing a pre-inspection — a home inspection before you make your offer
  • Have a strong financing approval letter from a reputable lender

A lot of readers have reservations about the value real estate agents provide in buying or selling homes, but without coming off as too much of a salesman for my industry, difficult markets like this are where having a strong agent makes a big difference. Not just somebody to open doors for you and draft a contract, but somebody who understands your needs that you trust to advise you on making the right offer, at the right time.

If you have an agent you trust, rely on them. If you’re looking for somebody, I’m available every day of the week to talk or meet, just send me an email at Eli@EliResidential.com and I’ll be happy to help.

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Business Improvement Districts (BIDs) Play Critical Role In Arlington

Question: What is the role of Business Improvement Districts in Arlington?

Answer: The Business Improvement Districts (BID) of RosslynBallston and Crystal Citydeserve much of the credit for turning these neighborhoods from convenient places to work to lively, family-friendly places to live.

Funded primarily by businesses located in the neighborhoods they represent, BIDs are an important bridge between residents, businesses and local government. Homeowners located in or near any of these BIDs can thank their leadership teams for increasing the value of their homes.

 

As a long-time Rosslyn resident, I have watched as Mary-Claire Burick and her team at the Rosslyn BID have transformed Rosslyn over the last five years.

I reached out to her for an interview to answer some questions about the role of BIDs in the community and how residents can take advantage of their influence on local government and business investment. Thank you Mary-Claire!

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What is the role of a BID, and what role does the Rosslyn BID play in the community?

Business Improvement Districts are nimble organizations that wear a lot of different hats. In Rosslyn, we work on urban planning, transportation and business and community engagement, just to name a few.

But I think one of the most important roles that we play is that of a convener who brings together the perspectives of various stakeholders in our neighborhood –including residents, businesses and county officials — to advance initiatives that will help our community continue to thrive.

We are in constant conversation with folks on the street, in our restaurants and in our business community to better understand not only what they love about Rosslyn but also what they want to see improved.

How does the Rosslyn BID engage with residents and visitors? 

As I mentioned, community engagement is one of our top priorities.

Probably our most visible presence on a daily basis is our Rosslyn Ambassadors Program. Our team is out on the street five days a week helping residents and visitors with directions and working to ensure our sidewalk and public areas are safe and clean. Be sure to say hello when you see them around the neighborhood in their purple shirts.

Our events are another important way that we connect and engage with area residents. In 2017, around 40,000 people attended more than 160 events that we hosted ranging from our popular Rosslyn Jazz Fest and Rosslyn Cinema series to lunchtime fitness sessions and pop-up concerts. Each one of these events represents a touch point for our team to engage with residents and employees in our region, and for interaction between these groups.

It’s that sense of community that these events help build that makes them so impactful.

What have been some of the BID’s most successful events?

Last year’s Rosslyn Jazz Fest was an incredible experience.

That event alone brought nearly 10,000 people to Gateway Park on one day, which was a record for us. The Rosslyn Cinema has long been a neighborhood favorite. Last summer, more than 20,000 people came out to catch their favorite movie. And it may surprise you, but Rosslyn is the largest pit stop for Bike to Work Day in all of D.C., Maryland and Virginia.

In 2018, we will continue to host these popular events, but are also introducing new activities and expanding others.

One example is the Rosslyn Farmers’ Market, which occurs weekly during the summer in Central Place Plaza. We’ve worked with FRESHFARM to introduce a new FRESHFARM Share program, similar to a community supported agriculture (CSA) program, to help bring more healthy food to Rosslyn residents and businesses.

I’d also like to point out that these events have a wider purpose and impact. They help bring thousands of visitors to Rosslyn who could one day be residents or tenants. And there’s an economic impact–restaurants and retail in Rosslyn usually see a boost in sales and exposure.

Some of the other local BIDs are Crystal City, Ballston and Georgetown. What are some of the most significant benefits of a community having a BID? Does a BID make sense for every community? 

From my perspective, there are a lot of benefits that a community can realize from having a BID. But simply having a BID alone isn’t enough. It’s important for all of the stakeholders to have a clear vision for what they want to accomplish, and to ensure a BID has the resources and buy-in to help realize that vision.

A BID with a distinct mission can be a leading driver of change for a community, serving as a liaison between government, businesses and residents. Residents, in particular, have a real opportunity to utilize BIDs to help create a viable, economically sustainable community that reflects their vision of the neighborhood.

How have new restaurants and retail spaces helped change Rosslyn? Are there any openings you are particularly excited about?

Restaurants and retail have been a critical part of Rosslyn’s transformation from a commercial area to a more vibrant, urban, mixed-use area. Between 2015 and 2017, 17 new restaurants opened in Rosslyn, adding to the more than 65 restaurants, cafés and markets within a ten-minute walk of the Rosslyn Metro. We’ve also seen more restaurants and bars staying open later, like Barley Mac, Quinn’s on the Corner and Continental.

This year, we’re looking forward to the continued evolution of Central Place, which is bringing multiple new restaurant offerings to the heart of Rosslyn. I think folks are going to be really excited to hear what they have in the pipeline.

We are also excited for the Central Place Observation Deck, opening this summer. This 12,000 square-foot-space will offer an unparalleled view of the Mall and the U.S. Capitol. Offering snacks and light fare, the Observation Deck will be the perfect place to bring out-of-town friends, a date or a colleague for an after work drink.

How can residents get involved with their local BID? 

Residents should utilize their local BIDs to advocate for what they would like to see in their community. Remember, a BID is there to serve the needs of a neighborhood’s residents as well as its businesses and visitors.

Residents can also get involved with their local BID by attending events, participating in community meetings and providing feedback on BID activities. Depending on an individual’s local BID, there may be opportunities to volunteer or be a community ambassador.

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Should You Buy Homeowner’s Title Insurance?

Question: We are buying a home in a few weeks and one of the closing costs is an optional $1,500 for Title Insurance. Do you recommend buying title insurance?

Answer: Yes, I do recommend buying Title Insurance. It’s a one-time fee that protects your ownership in what is likely the most valuable asset you own and you cannot decide to add Title Insurance in the future. However, like any form of insurance, it depends on your appetite for risk.

I’ve asked David Cartner, an attorney with Highland Title & Escrow, to provide a full explanation of the benefits of Title Insurance and some examples of when it would be used. Take it away David…

Do You Really Need Title Insurance?

As a real estate settlement attorney, buyers often ask me if they should purchase title insurance when buying a home. My response is that it depends on what level of risk the buyer is comfortable taking. A purchase of a house or a condominium is usually the biggest investment a person makes in their lifetime. If a buyer does not purchase title insurance, he/she risks losing the entirety of the investment.

Why, then, do buyers question purchasing title insurance when the risk of loss is so high? After all, no one seems to question the need for homeowners or rental insurance. I believe the reason is twofold: (1) buyers do not understand the benefits of purchasing it, and (2) title insurance is unlike other types of insurance in that it covers issues that have already happened.

Indeed, there is a long list of risks covered by title insurance, but basically what the buyer is hedging for are the unknown or hidden hazards that might jeopardize his or her ownership in the home. Hidden hazards may include:

  • Liens that were not revealed in title exam or made known to settlement agent prior to closing. Normally, a title exam reveals any liens on the property which need to be paid off and released prior to closing. If, however, the title examiner overlooked a judgment, tax, or mortgage lien on the property or failed to note it in the title exam, the buyer would be liable to pay the lien incurred by the previous owner.
  • Boundary line issues that an accurate survey would not reveal. For example, if a survey failed to note that a neighbor’s shed encroached on the purchaser’s property, title insurance would cover the cost of removing the shed and resolving any accompanying boundary line dispute.
  • Forgery or lack of authority. If there was a forged signature on the deed in the chain of title, or a person or corporation signed a deed without authority to do so, the transfer of ownership to the buyer would be in question.

 

  • An unknown heir of a previous owner came forth to claim ownership in the property.For example, suppose a seller passed away and his three children sold the house to a purchaser. If an unknown fourth child later came forth to claim his quarter ownership in the house, the purchaser’s title to the property is in jeopardy.
  • Instruments executed under an expired power of attorney.
  • Building permit violations. An enhanced version of title insurance is available that covers existing building permit violations. If a previous owner never obtained the appropriate building permits when remodeling a kitchen or bathroom or building a deck, enhanced title insurance would cover the cost of obtaining the appropriate permits. Note: the enhanced version is about 20% more expensive than the standard version and affords additional protection to the homeowner.
  • Mistakes in the public record at the county in which the property lies. Recently, Arlington decided to do a look back process on taxes for individuals that were exempt up to 20 years ago.  Arlington has audited the accounts to see if the exemption was applied correctly years ago. If not, the County is attempting to collect the back taxes from the current owner of the property.  At the time of the closing, there was no evidence of any taxes owed and a phone call to the County would not reveal any taxes owed. At Highland Title & Escrow, we have had two of these cases arise and luckily the owner purchased title insurance and the title insurance company will pay the back taxes.  

While lenders mandate that owners purchase lender’s title insurance (which only protects the lender’s interest in the property), homeowner’s title insurance is completely optional. It is a one-time fee that covers the owner for life.

Though there are certain factors that decrease the risk of an existing title defect, like having fewer previous owners of the house, a typical subdivided lot, or a recently constructed house, a buyer takes title to a house never knowing what title defect may already exist. In this respect, title insurance is unlike other types of insurance in which the purchaser can mitigate risk.

Contact David Cartner (703-760-3300 or dcartner@highlandtitle.com), an Arlington settlement attorney at Highland Title & Escrow, with further questions regarding title insurance or the real estate settlement process.

About David

David is an Attorney originally from Asheville, NC where he learned about the business from his parents who are both Real Estate Attorneys.

Prior to joining Highland Title & Escrow in 2013, he worked as the Managing Attorney of the District of Columbia division for Morris Hardwick and Schneider.  While there he tried many cases involving Foreclosure, Evictions, and Bankruptcy in front of the different courts in the District of Columbia.

David graduated, from the University of North Carolina at Chapel Hill, earning a B.A. in Public Policy specializing in Business and Government. He earned his J.D., from Campbell University, Norman Adrian Wiggins School of Law, graduating with a distinction in Business and Tax law.

David is admitted to practice law in the States of Pennsylvania, North Carolina, New York and the District of Columbia.

David currently resides in Arlington, VA with his wife, Melany, and their dog, Wheatley.

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Arlington Single-Family Home Rental Market

Question: Can you follow-up on last week’s column about condo/townhouse rentals with an analysis on the single-family home rental market in Arlington?

Answer: Thank you to ARLnow commenter Southy4Life for requesting that I follow-up last week’s analysis of the condo/townhouse rental market with a similar analysis of the single-family home (SFH) rental market.

The good news for those looking closely at the rental stats in Arlington is that the majority of SFH rentals are represented in the MLS data presented below, as opposed to a large percentage of condo/apartment rentals not represented in my data last week because most are handled outside of the MLS (commercial rentals, direct landlord-to-tenant).

Five Year Trends

Just like the condo rental market, there has been very little appreciation in rental rates in Arlington’s SFH home rates, until 2017, which saw a noticeable jump led by 22207, 22205 and 22203.

This doesn’t correlate to what we saw in the sales market from 2016 to 2017 so admittedly I don’t know why these three zip codes saw substantial rental growth, while the rest of the Arlington market remained relatively unchanged.

Below is a summary of the average cost of renting a SFH in each Arlington zip code over the last five years. 22206 and 22209 were removed for lack of SFH rental data points.

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Bedroom Breakdown

Below is a table of all 3-5 bedroom SFH rentals in Arlington since 2016, broken out by bedroom count and zip code, with rentals in 22206 and 22209 removed for lack of data points.

Key Findings:

  • The most expensive home rented was a 7BR/7+BA home on Arlington Ridge Rd for $12,000/mon and the least expensive home rented was a 2BR/1BA home in Columbia Forest for $1,595/mon
  • It costs about 20% more to go from three bedrooms to four, 25% more to jump from four bedrooms to five
  • If you’re renting a SFH in Arlington, expect to take 5-6 weeks to find your tenant and be prepared to discount your rate by 2-3% from what you’re asking
  • For families looking to rent a home in some of Arlington’s top-rated schools, the 22205 zip code is a great value
  • 75% of SFH offered for rent allowed pets, but only 28 had fully fenced yards
  • On average SFH for rent were built in 1950 and the average lot size was just over 10,000sqft (1/4 acre)
  • Only 49 SFH homes offered for rent were built in the last ten years
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Our team is happy to assist you with rentals, whether you’re a renter or landlord, so feel free to reach out if you need assistance with either! We are happy to put together more specific, personalized data tables for your as well.

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Arlington Rental Market

Question: I am moving to Arlington from out of town and not yet ready to buy. I’ve heard the rental market is high in the DC area and wondering approximately how much it costs per bedroom to rent in Arlington.

Answer: I spend a lot of time in this column talking about buying and selling homes in Arlington, but about 54% of the County is renters, so as we head into the busiest rental months, I thought it’d be appropriate to share some helpful statistics on the cost of renting in Arlington.

For the most part, renters tend to be more focused on functional space to meet immediate needs, so I like the idea of using cost per bedroom on rentals more than I do for ownership.

The good news for renters is that developers have added thousands of new rental units over the last 5 years, particularly 1-2 bedroom units in the popular metro areas of the Rosslyn-Ballston corridor and Crystal/Pentagon City. While the cost of these newer units has increased, it’s kept the cost of renting condos and townhouses from owners pretty stable (or down).

The data I pulled below is primarily made up of non-commercial rental units (condos and townhouses owned by individuals) and restricted to units leased through the MLS (agent database), so only included a portion of the total rental activity in Arlington. I also excluded single family homes from the dataset.

Key Findings:

  • It costs about 40% more to rent a third bedroom than it does to rent a second bedroom
  • Rents have not gone up for one bedroom units, and have only increased about $100/month for two and three bedroom units
  • Most rental units are on the market for 6-7 weeks before being rented
  • There’s not nearly as much negotiating on rentals as there is purchases, with only about 1% or less negotiated off the asking price, on average
  • The least expensive rentals are in the 22204 zip code because there are not any walkable metro stations and the housing inventory tends to be substantially older
  • 22204 is the only zip code where the average rent of a two bedroom is under $2,000/mon and one of only two zip codes (22206) with an average rent under $3,000 for a three bedroom
  • 22209 is the most expensive zip code to rent by a wide margin due to the fact that it hosts two of the most expensive buildings in the DC Metro in Turnberry Tower and Waterview, as well as a host of other high-end buildings. It claims this top spot, despite also hosting one of the least expensive communities in Arlington, River Place.

 

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One tip I’m happy to share with renters is that there’s rarely a better deal in the market than the deal you get being the first person to rent a unit in a new commercial rental building. The incentives they offer on the first lease usually include 1-2 months free rent, a period of free parking, and sometimes other fees discounted or removed (e.g. pet fee, move-in fee, etc). However, you should prepare for rents to increase substantially if you want to continue renting after your original lease expires.

Our team is happy to assist you with rentals, whether you’re a renter or landlord, so feel free to reach out if you need assistance with either!

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Impact Of Lower GreatSchools Rankings On Your Home Value

Question: Do you think the recent changes to the rankings of Arlington schools on GreatSchools.org will have an impact on home values?

Answer: Sometime in the last few months, GreatSchools.org quietly changed their school ranking criteria, which resulted in a drop in every high school and middle school in Arlington by 1-2 points (10 point scale).

The two biggest K-12 public school ranking websites in the US are Niche.com and GreatSchools.org with about 6M and 4M monthly visits, respectively (SchoolDigger is a distant third with about 500k).

In my experience, buyers in the DC Metro rely more heavily on GreatSchools because Niche lacks differentiation between schools (everybody is a winner). The change in Arlington County Public Schools rankings on GreatSchools is worth noting and I suspect that it will have a negative impact on the housing market.

GreatSchools’ Explanation

In the About section of GreatSchools, they explain the changes in their grading criteria with the following: “In the past, the overall GreatSchools Rating in most states was based on test scores.

In some states*, the GreatSchools Rating was also based on student progress (or “growth”) and college readiness data (SAT/ACT participation and/or performance and/or graduation rates).

Our school profiles now include important information in addition to test scores — factors that make a big difference in how children experience school, such as how much a school helps students improve academically, how well a school supports students from different socioeconomic, racial and ethnic groups, and whether or not some groups of students are disproportionately affected by the school’s discipline and attendance policies.

Many of these important themes now have their own rating, and these themed ratings are incorporated into the school’s overall GreatSchools Summary Rating.”

Old vs New Rankings

Below is a table showing the before and after scores for all Arlington County middle and high schools, as well as a limited set of Fairfax County/Falls Church middle and high schools (the ones I had documented scores for before the change).

All “old” scores are as of Fall 2017. Note that my request to GreatSchools for the “old” scores for all Northern VA/DC Metro schools was denied.

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Why It Does/Doesn’t Matter

I’d be lying if I told you I knew what the impact will be to Arlington home prices and demand, but I think a negative impact will be felt to some degree.

Schools are at the top of many buyers’ criteria list and most of those buyers, whether they’re local or relocating into the area, set a minimum score for the school boundaries they’ll purchase a home in and rely on GreatSchools for their data.

Below are some points I came up with for why it may or may not have an impact on the housing market:

  • It Doesn’t: It appears the majority of public schools in Northern VA were reduced by 1-2 points on GreatSchools, so buyers are still as likely to choose Arlington as they have always been. The alternatives have not improved.
  • It Does: While the reduction of most school scores in Northern VA may not change where or what people buy, the lower scores may decrease overall demand in Northern VA housing and result in less motivated buyers.
  • It Does: I don’ know if Montgomery County and Northwest DC public schools saw similar changes, but if they did not, we may lose buyers to those jurisdictions because their relative value has increased.
  • It Doesn’t: Arlington County Public Schools are still ranked the #1 school system in the state.
  • It Doesn’t: It doesn’t appear that Niche.com has introduced any changes and Yorktown and Washington-Lee are ranked an A+ and Wakefield is ranked an A on that site.
  • It Does: Could the fact that Arlington’s highest ranking high school is now a 5 impact the decisions of employers considering a move to the DC Metro?

I have no doubt that over the course of 2018 I will have local and out-of-town buyers tell me they do not want to purchase a home in Arlington because it has poorly rated (high) schools.

For me and my colleagues who know Arlington, we will point them towards resources that show how great the entire ACPS system is. However, if you recall from my column in July 2017, about half of the agents who closed a deal in Arlington only had one or two transactions here, meaning that agents who don’t know Arlington well are unlikely to have the appropriate background to give their clients better guidance about our schools.

What To Do?

GreatSchools.org wields a lot of power over home values across the country and the drop in our ratings is frustrating, but just like a bad Yelp review for a restaurant, we have to acknowledge the change and find ways to offset it by making it easy for buyers to find more favorable information.

I’d love to hear from readers in the comment section who purchased or are in the process of buying a home in Arlington, who placed a lot of weight in the GreatSchools rankings – how would these changes have impacted your decision when you bought or how are these changes impacting your current purchase strategy?

If you would like to discuss how the new GreatSchool rankings impact your upcoming plans to purchase or sell a home in Arlington, feel free to reach out to me at Eli@EliResidential.com to set-up some time to meet.

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Arlington Condo Becomes First To Ban Smoking

I am very excited to share with the readers that the Hyde Park Condominium at 4141 N. Henderson Rd, just a few blocks south of the Ballston Metro, successfully voted to change the by-laws to ban smoking in units and on balconies, as well as the already established ban in common areas!

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In July 2016, I wrote an article about banning smoking in condos and the reaction from readers both in the comment section and in email exchanges afterwards clearly showed how many condo owners wanted to ban smoking in their buildings.

It is a challenge that only a few Boards have taken on and none have been successful in the way Hyde Park has.

I’d like to congratulate the Hyde Park Board and its residents on a job well done and hopefully paving the way for many more buildings to ban smoking inside and outside of private units in the near future. I firmly believe that this type of ban in condos will increase property values both near and long term.

I’d like to thank Greg Hunter Esq, a local attorney and the Hyde Park Covenants Chair who led the ban, for agreeing to write a column explaining how they accomplished the ban, lessons learned, and other experiences over the last few years.

Below is what Greg wanted to share with the ARLnow readers. It is not intended to be an official statement from Hyde Park.

Hyde Park Smoking Ban, Greg Hunter Esq.

The owners of the Hyde Park Condominium recently passed a bylaw amendment to ban smoking in every part of the property, including private units and balconies.

With over 300 residential units and several ground-level commercial suites, Hyde Park is the first condominium in Arlington to successfully amend their bylaws to go smoke-free.

With the new bylaw, smoking is now banned in every part of Hyde Park, including outdoor areas, private homes and on balconies. There is a limited and non-transferable right for current unit owners to continue to smoke in their own units (grandfather clause), but not on their balconies.

Why A Bylaw Amendment?

Passing a bylaw amendment was not our original goal.

In an ideal world, everyone could live as they wish; any one of us could, if we so desired, smoke cigarettes or rehearse with our metal band or keep peacocks on the balcony and it wouldn’t bother anyone else.

At Hyde Park however, and I suspect every other condominium in the world, one person’s right to enjoy herself does not allow her to annoy her neighbors. We tried a lot of things to solve the problem without a bylaw amendment, including banning smoking in common areas and improving the ventilation systems, but in the end the only effective option we had was a bylaw amendment.

How Did Hyde Park Get There?

After hearing complaints about smoking for years we took a poll in 2014, asking all residents — owners and renters — to answer a few questions about their attitudes toward smoking.

We put a short poll card in every mail box and got a tremendous response, with over 80% of our residents responding. Our results were interesting — an overwhelming majority of residents reported that they really didn’t like second hand smoke and only a few residents reported having one or more smokers living in their unit, but the only thing a majority would support was a new rule to ban smoking in all common areas; only about 20% of residents supported passing a bylaw at the time.

Since smoking had long since been banned in all of the indoor common areas, we passed a new rule in 2015 to ban smoking in all of the outdoor common areas. “No Smoking” signs went up in the garage and around the property.

At the same time, our engineer and maintenance staff made improvements and repairs to the HVAC system and used a lot of sealants to try and keep air from passing from one unit to another, with little success preventing smoke from traveling between units.

The most important development from those early efforts was educational — nearly everyone at Hyde Park was against having second-hand smoke waft into their unit, but very few of us understood just how many of our neighbors felt the same way until we saw the poll results.

After about a year with the new rule, more and more residents asked about passing a bylaw at each monthly board meeting, so we took another poll in 2016. Knowing that we would need an affirmative vote from more than 66.67% of the total ownership, we only polled unit owners, the people who could actually vote.

Once again we got a tremendous response, with about 60% of resident and non-resident owners returning a poll card; about 80% of the resident owners and 75% of the non-resident owners expressed support for a bylaw. With strong grass-roots support, and little success from anything else we tried, we held several meetings and drafted a bylaw amendment proposal.

Over the winter and spring of 2017, we held public meetings, answered every question we heard and edited our draft amendment to reflect what a majority of the ownership wanted. Our draft amendment went to the Association’s counsel, back to us for review, back to counsel and finally to the Board.

They voted to approve the text of the proposed bylaw amendment and set a voting schedule for later in the year. A package was prepared for every unit owner with a letter from the President of the Association, a copy of the proposed amendment (a “consent form”), and answers to nearly every question we got in our three years of meetings.

The Board gave us 90 days to get the vote in and we managed to get over 68% of the ownership – about 220 units – to sign their forms before New Year’s Eve. From there, the consent forms went to our counsel for review, and within a few days our President was able to file the bylaw amendment with the Arlington County Circuit Court.

Questions And Advice?

Polling is important. Without the poll results many unit owners will not be comfortable with the idea of voting for a bylaw amendment, and without strong support there is no reason to take on all of the work.

It’s not a vote in the traditional sense. The law requires that at least 66.67% of the total ownership sign documents that show their consent to the amendment, and the votes are weighted by each owner’s percentage of the total ownership – this is a property record your neighbors are going to be able to see.

While you have to do what you can to preserve owners’ privacy, there’s no hiding from the results. Eventually any unit owner can know how anyone else voted, pro or con.

It’s also not an election in the traditional sense. There’s no question that smokers are a small minority in Arlington, especially in expensive condominiums.

We live in a county where smoking is illegal in every shop, office, store, restaurant, bar, classroom, theater, museum, bus station, airport, subway train, taxicab and outdoor parks, with little complaint. A strong majority of your ownership is going to support this, and very few people will be against it. T

he real question is whether you can get more than 2/3 of the ownership to sign the paper. It’s really more of a bookkeeping exercise. It’s also important to note that a an abstention or non-vote has the same effect as a “no” vote. 2/3 of the ownership must actually vote “yes” for the bylaw amendment to pass.

To some people, it will look like you’re piling on. To get the votes we needed, we tried everything we could think of. Small groups of supporters set up a table in the lobby several times to try and get a few votes, individual unit owners recruited and cajoled friends and neighbors around the building, personal notes were sent to every unit owner who hadn’t yet voted and more than a few nerves were frayed.

Having done this once it’s clear to all of us at Hyde Park just how burdensome the 66.67% requirement is; if you’re serious about this you’re going to have to do everything you can to get votes in, and some people are going to be perturbed.

There is a generational difference in how people view smoking. We have younger smokers who voted in favor of the amendment because they understand how offensive and toxic second-hand smoke is and they don’t want to impose on their neighbors or deal with anyone else’s smoke.

At the same time, we have older residents who don’t smoke (and non-resident owners who don’t allow their renters to smoke) who grew up in a world where smoking was allowed nearly everywhere and thought the bylaw amendment was a terrible idea.

One of our residents did some research that was very helpful in our efforts. The 2010 Census reflects that the number of Americans who smoke continues to decline and that Arlingtonians smoke at a much lower rate than the national average.

All of the Realtors we spoke with agreed that non-smokers outnumber smokers in the condominium market by an even larger margin, maybe as high as 19 to 1. At the same time, even as the number of rental buildings and condominium communities goes up each year, the number of rental apartments and condominiums where smoking is allowed actually shrinks.

There were approximately 32,000 rental units in Arlington County when we started this process, with about 8,000 of those units in condominiums. As commercial landlords like JBG Smith and Equity continue to ban smoking in their properties the smokers looking for apartments have to rent in condominiums.

And as new condominium communities are either LEED-certified or start out with smoke-free covenants, both renters and condominium buyers who smoke have to look to existing condominium communities rather than new buildings. Smokers may be less than 10% of the people looking to buy or rent a condo in Arlington, but if they can’t rent in commercial properties or buy in new buildings the existing condominiums are going to have more smokers looking to move in.

Hyde Park was the first condominium community in Arlington to ban smoking with a bylaw, but we’re not going to be the last.

Greg, thank you very much for such an informative write-up on the smoking ban. If anybody would like to follow-up with Greg to learn more about his experience over the last 3+ years leading this effort, please reach out to me at Eli@EliResidential.com, and I’d be happy to make an introduction.

I would also encourage other condo owners and Board members to use the comments section to share how smoking bans have been discussed within your communities and whether Hyde Park’s success may help your Board move forward with a similar effort.

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1/3 of Buyers Put Less Than 20% Down

Question: Do I have to put 20% down to buy a home?

Answer: This is the most common question I’m asked by buyers and there are a surprising number of people who are well-qualified and want to purchase a home, but sit on the sidelines trying to save for a 20% down payment. Over the last 18 months, nearly one third of buyers in Arlington put less than 20% down and most of those people put 10% or less down.

Popular Low-Down Options

  • Conventional loans are available at 3%, 5%, 10% and 15% down
  • FHA loans are available at 3.5% down
  • If you or your spouse are active or former military, you can qualify for a zero-down loan through the VA. I detailed VA loans in this post from May 2016.
  • Typically, if you have a Jumbo Loan (loan amount exceeds $679,650) you are required to put 20% down unless you qualify for one of many preferred mortgage programs available in the market, which I mention in this post from November 2017.

What’s The Downside?

If you use a non-VA loan with less than 20% down you will have to pay Mortgage Insurance (option to pay it off up-front), which is essentially a monthly penalty/fee assessed on top of your mortgage payment that increases the less you put down and the higher your loan amount.

I explain Mortgage Insurance in this post from July 2016, and explain the process for removing these payments in this post from February 2016.

How Much Are Arlingtonians Putting Down?

Below are statistics pulled from the MLS on the amount Arlingtonians put down to purchase homes over the last 18 months.

These numbers are manually entered by the listing agent at the end of the deal and I think that in some cases agents write 0% financed (cash) instead of entering the correct info so it’s my belief that the number of loans with low down payments is actually a bit higher than the statistics reflect.

  • 32% of all purchases were made with less than 20% down, 26% with 10% or less down, and 18% with 5% or less down
  • 39% of townhomes, 37% of condos and 22% of detached/single family homes are purchased with less than 20% down
  • 14% of purchases were not financed (cash)
  • Only 3% of purchases required FHA financing and less than 2% were FHA-financed condo purchases, so consider this if your Condo Association is setting rental caps simply to qualify for FHA financing

Feel free to reach out with any questions you have about your loan options for purchasing a home anywhere in Virginia, Washington, DC or Maryland. I’m happy to answer any specific questions you have or connect you with a lender who specializes in the type of loan you’re looking for. I’m available any time via email at Eli@EliResidential.com.

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Market Reaction To Higher Mortgage Rates

Question: As interest rates have increased over the last 6-12 months, how will the market react to higher rates and do you expect them to come back down in 2018?

Answer: The rates I’m seeing today are about 1-1.5% higher than what I’ve seen on average over the last few years and about .5% higher than where they’ve been over the last 6-12 months. Generally, most economists are projecting growth in the US and there are similar signs in Europe so if that holds true, expect interest rates to continue their upward trajectory.

Higher Mortgage Rates In 2018

According to Freddie Mac, the average Mortgage rate from the 1970s-2000 was about 7%, the average rate from 2000-2008 was 6% and we’ve been hovering around 3.5-4% since 2008. Freddie Mac currently predicts that rates will reach about 5% by the end of 2018.

  • Mortgage rates are at the mercy of the US and global economies so predicting their direction is no different than predicting how the stock market will do.
  • Contrary to popular belief, mortgage rates are not directly correlated to the Fed rate that you regularly hear about in the news. So when you hear that the Fed is planning to increase rates by .25%, that does not mean your mortgage rate will be .25% higher the following day. See chart below for historical trends of Fed rate vs mortgage rates:
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  • We are currently experiencing high daily and weekly volatility in mortgage rates, which is frustrating for many. Some weeks see swings of .25% so you can either benefit or lose out from those swings based on when you lock your rate. Discuss this risk with your loan officer.
  • You may have missed the lowest rates over the last few years, but historically mortgage rates are still well below average as you can see from the chart below from Freddie Mac:
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The Impact Of Higher Rates

For my clients, the ones who feel the rates increases the most are those who have been in the market for 6-12 months but have not purchased yet either due to lack of suitable inventory or urgency.

It’s tough to accept that rates were about 1% lower when they started looking and now they feel like they’ve lost. Those who are just now entering the market tend to be much better at brushing it off. It also impacts my clients who are not also selling a home because those who are selling will realize the benefits of the stronger market vs those who are just buying are at its mercy.

First time buyers are also more sensitive to rate fluctuations because most are already struggling to adjust to the hefty price tag of buying what they want in the DC Metro area.

Redfin recently asked 4,000 buyers who planned to purchase in the next 12 months how increasing rates would impact their purchase and found that only 6% would cancel their plans to buy while nearly 50% wouldn’t change anything or would increase their urgency to buy.

This might seem like a good result for homeowners, but losing 6% of buyers, having 21% reduce their budget, and 27% waiting for rates to drop is a bad sign. Especially if rates continue to go up and the 27% who were waiting for rates to drop decide to either stop their search or reduce their budget.

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I think the biggest reason increasing rates will slow the market is the psychological effect of higher rates vs the actual impact to buyers’ budgets. For buyers struggling to internalize the “loss” they’ve taken now that rates are higher, consider the following:

  • On a $400,000 loan, a .25% increase in rate represents $60/month. Try to decide if a $50-$150 change in your monthly mortgage cost is worth giving up on a home purchase or compromising on what you want/need. Most buyers decide to spend less than what they’re approved for, so there is usually some cushion.
  • The reason rates are higher is because the economy/stock market have done so well lately so your investments and/or income are hopefully increasing at a rate on pace with or above what you’re giving up in increased mortgage rates.
  • In 2017 the S&P 500 returned about 20% to investors so maybe you earned enough in the market to allow for a higher down payment?

Hopefully the net effect of everything that factors into mortgage rates is still positive for you.

With so much volatility around mortgage rates, it’s even more important that your lender be able to advise instead of just being a pass-through for today’s rates.

My clients have found Jake Ryon of First Home Mortgage (jryon@firsthome.com) and Troy Toureau of McLean Mortgage (ttoureau@mcleanmortgage.com) to be valuable resources during their home purchases and I’d encourage anybody to reach out for advice.

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Is The Market Off to a Hot Start?

Question: I’ve submitted two offers on home this year and both times lost to multiple offers. Is this normal or is the market more competitive this year?

Answer: 2018 has been a good year for sellers and a frustrating one for buyers already. Generally, I don’t start seeing multiple offer deals until late February/early March, when it starts to warm up and days get longer.

However, about 80% of the listing and purchase deals I’ve been on this year have ended up with multiple offers. I even had a listing that had been on market for three months receive three offers in one weekend. My colleagues who work in new construction and generally have the best pulse on market pace have also been surprised by the amount of activity this early.

Here are some numbers in Arlington from January to back up the anecdotal evidence of a hot market:

  • Supply Down, Demand Up: Monthly of supply measures how long it would take to sell all existing inventory at the current market pace (supply and demand) is down 21% YoY and at its lowest levels (1.31 months of supply) since March 2013 (1.22 months of supply)
  • More Homes Under Contract: Over 200 homes went under contract in January (215) for the first time since 2012 (219)
  • Homes Under Contract Faster: Of the 119 homes that were listed and went under contract in January 2018, 69% went under contract within one week. Over the last five years, 49% of homes listed and under contract in January went under contract within one week.
  • Average Number Of New Listings: The amount of new homes listed on market in January 2018 (234) is about average for what we’ve seen over the last decade
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Advice For Buyers

Periods of low inventory and high demand can be frustrating for buyers, so here are a few tips for buyers to create leverage for themselves without simply paying more:

  • Quality Of Lender: Have a pre-approval letter from a strong local lender who has review all relevant documents, not just somebody who checks credit score and asks for basic financial information. A strong lender letter gives the seller confidence you will close on the home on time, without complications.
  • Contingencies: Consider giving up your right to request repairs and credits after the home inspection and using a Pass/Fail contingency instead. This shows that you’re not interested in nickel and diming a seller, but just want to make sure there are no major issues. You can also offer to cover up to a certain dollar amount in the event of a low appraisal, if you are offering to pay above the asking price.
  • Close Faster: Most homeowners want to close as quickly as possible. A good lender can have you ready to close in 20 days vs the more common 30-40 day close.
  • Don’t Play Games: We all want to negotiate a great deal, but oftentimes a great deal is actually having your offer accepted not saving a few thousand dollars. When a seller has multiple similar offers, they often put more weight in who they think is most likely to close with the least complications. In that scenario it pays off to make it clear how much you love/want the home instead of acting like you could take it or leave in an attempt to negotiate a lower price.
  • Days On Market: The number of days a property has been on market should dictate how you approach an offer. You won’t have much leverage in the first few weeks or after a major price reduction.

The spring market can be a great time for buyers who are prepared for competition because you’ll see a significant increase in inventory, so that illusive 2 bedroom + den or half acre yard with a deck is more likely to materialize.

If you’re not prepared to make a strong offer, the spring can be frustrating and defeating because you may watch your dream home(s) go to other buyers who have made smarter, but not necessarily higher offers.

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How New Homes Are Toppling Long-Term Values

Question: A big reason I chose to live in North Arlington and pay the premium that comes with it is because most of the neighborhoods were full of large, mature trees.

I’ve watched over the last 5-10 years as so many beautiful trees have been removed to make room for large new homes, only to be replaced by small trees that don’t survive or aren’t fit for this area. What can we do to educate homeowners about the value trees have in the community and on home values?

Answer: Thank you so much for this question, especially on the heals of a terrific study on Arlington’s tree canopy. It’s one that I don’t think gets nearly enough attention from homeowners, my colleagues in the real estate industry and local government.

The loss of our tree canopy resulting from reckless tree removal by builders who are more concerned with maximizing profit on a single lot than promoting long-term growth of our communities is a major problem for Arlington. In 2017, I wrote an article highlighting the financial benefits to developers who actively work to keep the existing mature trees on a lot so if we can show both short-term and long-term benefits to builders and developers, what do we do?

Don’t Wait On Local Government

For starters, we can’t rely on government policy, but need to work within our communities at a Civic Association level to promote education and understanding. Not every homeowner is concerned about the tree canopy, but everybody is concerned about the long-term value of their home, so we need to educate everybody that the two are not mutually exclusive.

We are never going to stop the replacement of old homes with new ones, but we can support builders who take steps towards tree preservation and discourage residents from working with builders who have no regard for our neighborhoods.

Over the past couple of years, I’ve worked with some fantastic Civic Associations (residents of Williamsburg should be proud of their community leaders!) and the Arlingtonians For A Clean Environment to brainstorm ways to protect our tree canopy and I encourage anybody who has an interest to get involved.

An Education For Homeowners and Builders

I will continue this discussion through my column on ARLnow until we see progress. I hope that readers with an interest in getting involved can share ideas and connect via the comments section.

To kick things off, I want to introduce Heath Baumann, an ISA Certified Arborist with Bartlett Tree Experts, to provide education for homeowners and builders on tree preservation, tree replacement and tree care. Take it away Heath…

Preface

One of the most overlooked assets on a property is often the trees.

Trees not only improve quality of life with shade and beauty, mature trees can affect property value. As Northern Virginia continues to infill and urbanize, trees will face greater amounts of environmental stresses. Larger homes, less permeable surface area, soil compaction and heat island effects can stress both new and mature trees in your landscape.

Your home is comprised of multiple systems such as HVAC, plumbing and electrical. It helps to think of trees in the same manner. Routine maintenance performed by a licensed professional is affordable and extends the life of your trees.

Tree Preservation During Construction

Constructions projects can severely affect the health of trees. Physical stability, water and nutrient collection are vital functions of the root system. Here are some Do’s and Don’ts to preserving trees during construction projects:

Do’s

  • Develop a Tree Preservation Plan. Contractors and Consulting Arborists can develop this during the planning phase of your project.
  • Avoid intrusion into the critical root zone. Create a physical barrier with construction fencing to reduce soil compaction and physical damage to the tree by heavy equipment.
  • Have a licensed tree care provider perform any required root pruning.
  • Develop a tree care plan for affected trees. Certified Arborists can help the tree compensate for root loss and stress from construction activities.

Don’ts

  • Do not use heavy equipment to cut roots. Heavy equipment will cause extensive damage and compact the soil.
  • Do not allow construction materials, debris or chemicals to be stored around trees. Tree preservation zones are enticing areas for temporary storage. Soil compaction, chemical runoff and physical damage are all possible.
  • Do not use construction tools to perform pruning. Arborists’ tools are designed to make proper cuts reducing the impact on trees.

Replacing or Planting New Trees After Construction

Planting a tree is a wonderful feeling. A relatively simple activity can turn into a lifetime of enjoyment and an investment for future generations. The best part about planting trees is that nearly everyone is capable of doing it. It generally only requires a few tools that are available at your local hardware store or garden center. A few basic guidelines will help improve our success when replacing removed trees or adding to your landscape.

Do’s

  • Purchase your trees from a respected nursery or garden center. These businesses offer warranties, have higher quality nursery stock and have knowledgeable staff that can help you make the right selection.
  • Select the right tree for the location. Height, spread, shade tolerance and growth rate are all things to consider. A full sun tree will not thrive in an already shady landscape and vice versa.
  • Have your soil tested. The soil’s pH affects the nutrient availability for a tree. The Virginia Tech extension service and certified tree care companies can perform soil tests for a nominal fee. Use this information to select the tree or to build a soil care program with your tree care company.
  • Dig the correct hole. The hole for your tree should be 3 times as wide as the root ball. If possible, rototill an area 5 times the root ball to help root production. The bottom of the hole should remain intact.
  • Have your trees structurally pruned. Some tree species have growth tendencies that can lead to structural failure or root issues. An ISA Certified Arborist can show you how a few well-place structural pruning cuts can help your tree develop its ideal form.

Don’ts

  • Do not plant trees too deep. This is the most common mistake I see on landscapes. Ideally, the transition zone between the trunk and the roots should be slightly above soil grade.
  • Do not mound mulch. Mulch mounds, along with deep planting, can cause the roots to encircle the trunk of the tree forming a tourniquet that strangles the tree.
  • Do not leave the tree in the container. If the tree is in plastic container, remove the tree and loosen the soil and roots before planting. If the tree is in a wire encased burlap bundle, cut away the wire basket and remove the burlap from the sides of the root ball after placing it in the hole.
  • Do not overwater your tree. Infrequent, slow saturations with a soaker hose will help good root development. Frequent shallow watering will develop shallow, unstable roots. Constant soil saturation will lead to root diseases. If the soil at finger depth (4 inches) is dry, it is time to water.

Tree Care Basics

The majority of my clients are established homeowners who are concerned about the health of their trees. Sometimes it is a large, prominent oak or a bright, flowering ornamental tree. Here a few simple Do’s and Don’ts that home owners can follow to help their trees:

Do’s

  • Keep a mulch ring around the tree. This aides in temperature and moisture regulation while adding organic matter to the soil.
  • When watering use a soaker hose for infrequent, heavy saturations. This will ensure adequate soil moisture and help in root development.
  • Routinely look at your trees. The earlier an issue is caught, the better the odds of helping the tree.
  • Consult a professional. Certified arborists can work with you to develop a tree care plan based on your needs and budget.

Don’ts

  • Do not allow mulch to mound up at the base of the tree. Mulch can hold moisture against the trunk that can cause decay, increase stress and invite pests.
  • Avoid heavy application of lime or other lawn products. Lime and other lawn produces can affect the soil, making it unsuitable for trees.
  • Do not park or drive your vehicle over the root zone. This can lead to soil compaction.
  • Avoid damaging the tree with mowers and string trimmers.
  • Avoid employing a non-certified person or company to perform tree care. Improper pruning can lead to tree mortality and expose you to risks.

Even in ideal conditions, pests and diseases can attack trees. Fortunately, treatments exist for many of the common maladies in our area. If you are concerned about a tree, always contact an ISA Certified Arborist for a consultation.

Heath Baumann is an ISA Certified Arborist with Bartlett Tree Experts. If you wish to schedule a consultation with a Bartlett Arborist Representative, please call (703)550-6900.

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Home Values 10% Higher Than Assessed Tax Values

Question: My property taxes didn’t change much this year, but the County announced that residential home prices increased 3.9%. Are the County’s tax assessments a good way of determining the market value of my home?

Answer: Tax assessments are not a good way of establishing the market value of your home. In fact, if Arlington homeowners used their tax assessment to determine their asking price, on average they’d be undervaluing their home by 10%!

Also, just because the County saw appreciation of 3-4% this year doesn’t mean that will be applied to all homes. Tax assessments are adjusted on a much more localized level based on neighborhood, number of bedrooms, square footage and other factors specific to your home. I would also advise that just because your tax assessment did not increase, doesn’t mean the market value of your home did not increase (and vice versa).

Market Values Higher Than Assessed Values

The following table compares the average sold price (market value) with the average 2017 tax assessment for all homes sold in 2017. I cleaned up the data a bit by removing Co-op sales (River Place), Ballston’s Senior Living Community, new construction (new tax assessments may take a year to catch-up) and a handful of sales that didn’t have a tax assessment available.

Notable Findings:

  • The average Arlington home has a market value 10% higher than its tax assessment
  • Only 14% of homes sold in 2017 sold for less than their 2017 tax assessment
  • The County struggles the most assessing the value of detached homes in Arlington, likely because of how difficult it is to assess land value with due to the proliferation of tear-downs being bought for land only
  • The most under-assessed zip codes were 22213, 22205 and 22204 with homes selling for 12% or more above the assessed value
  • The most accurately assessed zip code was 22201, with assessments coming in within 7.4% of the average market prices

 

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Appealing Your Assessment

For the 2017 tax year, Arlingtonians will pay .996% of their assessed value in real estate taxes, up from .991% in 2016. Every year you have an opportunity to appeal your assessment and yes, it has worked, but the burden of proof is on the homeowner, not the County. Arlington provides an informative website on the appeal process.

Quick hits on the appeal process:

  • You should have received your 2017 tax assessment in the mail some time this month
  • Your first appeal with the Dept of Real Estate Assessments must be filed by March 1, 2018
  • Step 1: Call (703)228-3920 for information on how your assessment was determined
  • Step 2: File your appeal online here (First Level)
  • Step 3: An assessor will visit your home and you can provide relevant info to make your case
  • Step 4: If you’re not satisfied with the decision or have not received written notice by April 1, file your second appeal with the Board of Equalization online here (Second Level) by April 15
  • Step 5: If you’re not satisfied with the decision, your final option for appeal is with the Circuit Court, which will likely require you to hire an attorney

If you’re considering appealing your tax assessment, feel free to reach out to me to discuss building a case. I have access to micro and macro market data that can help you determine if your property is over-assessed and can help you create a clear report supporting your appeal.

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2018 Interior Design Trends

Question: I’m planning to do some remodeling this year and wondering what sort of colors and design trends you’re expecting in 2018.

Answer: If you’ve been inside a new home or professional flip the last few years, the preference towards white and grey is clear in today’s market. When using neutral colors like this, there’s a fine line between a clean, modern look and being too sterile so I was excited that in 2017 market leaders like Houzz and Sherwin Williams started pushing for warmer tones to offset the cool greys that have become so prevalent.

 

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If you’re remodeling with plans to sell in a few years, you’ll want to put more weight into current buyer trends. So visit some open houses for new construction homes to see what finishes builders are using and balance these with your personal preferences.

If you don’t plan to sell in the near or mid term, focus your decisions on personal preferences and don’t be afraid to go against the grain of the consumer market. There’s a good chance design trends will change anyway by the time you’re ready to sell so don’t compromise your style just because it’s not currently in demand with buyers.

Let’s take a look at what the experts are projecting for design and color trends in 2018:

Color

My favorite primary wall paint colors are this light grey or this taupe (each pictured below) from Sherwin Williams. Depending on the color of your floors, cabinets and counters, I think they offer a clean and calming effect that lends nicely to more aggressive accent colors.

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Every year paint companies introduce their “color of the year” recommendations and 2018 is definitely a year for the bold. I was not a fan of Pantone’s 2017 selection of Greenery but love their 2018 choice, Ultra Violet (pictured below).

In 2017, Sherwin Williams kept it conservative with Poised Taupe, which I liked a lot and was happy to introduce to clients, but they did a 180 this year and made Oceanside(pictured below) their 2018 color. It makes sense for your beach house, but I don’t see it working well in the DC Metro.

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Design Trends

Every year Houzz publishes their design trends and it’s always an interesting read. I pulled out some highlights from their 2018 Design Trends below:

  • Matte Black Finishes: We’ve seen the matte finish trend pick-up in appliances over the last year and it’s now carrying over to faucets, lighting and other smaller fixtures. I like the matte finish, especially on large appliances, because you eliminate the fingerprint smudging you get with stainless steel.
  • More Color In Kitchens: You may have heard white kitchens are out, but fear not recent home buyers, white kitchens are still the favorite, the growth is just slowing a bit from the surge we’ve experienced over the last few years. Try to accent your white kitchens with some warmer tones or take a shot at using one of the colors of the year noted above.
  • Concrete Accents: I’ve always enjoyed this look and am curious to see whether it catches on in our market. I’ve yet to see it used beyond an accent piece (e.g. coffee table) around here.
  • Bold-Colored Sofas: Just be careful because you could be one plastic wrap away from recreating Grandma’s house.
  • Defining Kitchens In Open Floor Plans: We’ve seen such an extreme trend towards tearing down all barriers between the kitchen and living spaces that South Park did an episode on it last year! I wouldn’t be surprised to see some movement back towards a more defined kitchen space with things like casual seating or storage being used to delineate spaces.
  • Dedicated Broom Closet: Nothing beats functional design! Just like putting a sliding spice rack into a narrow space, the idea is to take a few inches next to the refrigerator or pantry to install a tall, narrow sliding closet where you can hang a broom or mop to keep it out of your coat closet or pantry.

Are there any design trends you wish would return to popularity? Which current trends or colors would you like done away with?

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How The Tax Bill Changes Real Estate

Question: What were the real estate related changes in the new tax plan and how will those changes impact our local real estate market?

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Answer: Spending an hour every week working on my taxes in QuickBooks doesn’t qualify me as a tax expert, so before I provide my take, I’d like to introduce local tax expert Molly Sobhani, CPA of Klausner & Company, located in Rosslyn, to break-down the key changes in the new tax plan that will effect how buyers and homeowners make real estate decisions. Following Molly’s explanation, I will provide my personal thoughts and stats, which stand in contrast to most of the opinions I’ve read.

If you would like to follow-up with Molly about the tax bill or any other tax questions, she can be reached directly at msobhani@klausner-cpa.com or (571) 620-0159. Take it away Molly…

After weeks of confusing, convoluted and contradicting proposals introduced by the House and Senate, the Tax Cuts & Jobs Act (TCJA) was signed into law on December 22 by President Donald J. Trump. As the dust continues to settle on TCJA, taxpayers across the country are wading through the tax reform bill and the impact of those changes.

With increases to the standard deduction, changes to the deductibility of mortgage interest and limits on property tax deductions, current homeowners and potential homebuyers have a lot to think about. The housing market will undoubtedly be impacted but how – exactly – is still a big question mark.

Summary of Major Tax Law Changes Impacting Residential Home Ownership

  1. Interest will only be deductible on mortgage debts used to acquire your principal residence or a second home of up to $750,000 (or $375,000 for a married couples filing separately). The phase-out of deductible interest begins after the loan balance exceeds $750,000. This new debt limit applies to all loans incurred after December 15, 2017.
  2. Interest on home equity debt (also known as Home Equity Lines of Credit or HELOCs) will no longer be deductible. This is true regardless of when the home equity debt was incurred.
  3. State and local taxes (also known as SALT deductions) will be limited to $10,000 per year. This category of deductions also includes property taxes paid on homes.
  4. The Standard Deduction has increased substantially from $12,700 for joint filers ($6,350 for single filers) in 2017 to $24,000 for joint filers ($12,000 for single filers) in 2018.

One provision that did not change is related to the capital gain exclusion of up to $500,000 for joint filers ($250,000 for single filers) on the sale of a primary residence. You still must use the home as your primary residence for at least two of the last five years in order to be eligible for the full exclusion.

So why do these new tax provisions make homeownership a trickier decision? The incentives for being a homeowner have now been substantially diminished by the new laws for many taxpayers.

A Hypothetical Scenario

A married couple earns $150,000/year in wages and is looking to buy a home in Arlington, VA. Their total state income taxes are $8,625 (5.75% of their $150,000 wages.) They have no other deductions to itemize in 2017 so they will take the $12,700 standard deduction.

In January 2018, they buy a condo for $425,000. They put down 20% and borrow $340,000 at 4%. They are under the $750,000 mortgage debt cap so they are eligible to deduct all of the interest they pay on their loan each year. In the first year, their total interest expense totals $13,491. Their property taxes are $4,233 based on Arlington’s 2017 rates for a $425,000 assessment. Our married couple has a brand new home and all these brand new deductions, right?

But wait! After we add the new property tax deduction of $4,233 to the $8,625 they already pay in state income taxes, they are over the $10,000 limit for SALT deductions. In this example, $2,858 of their property taxes are not deductible.

Fine. Let’s look at their total deductions then: they have the maximum $10,000 SALT deductions and $13,491 of mortgage interest, totaling $23,491. Under the old tax laws, they would itemize their deductions and see a reduction in their Federal and state taxes for these additional expenses.

But we’re not working under the old laws anymore, are we? Under TCJA, even after spending all this money on buying a new home, paying the interest on their mortgage and paying their property taxes, they are actually still better off taking the standard deduction of $24,000.

Why Bother?

As you can see from the example above, by increasing the standard deduction to $24,000 for a married couple filing jointly, many taxpayers who otherwise would have itemized may now benefit more from the standard deduction. This essentially takes away the tax benefit of owning a house for some people. And the question that many potential homebuyers may consider is: “Why bother?” More and more, they may delay the decision to buy in favor of renting.

Other Potential Effects on Housing Markets

Home values may be impacted, too, by the change in tax laws. If mortgage interest is limited to $750,000, houses that are listed at prices over $937,500 (assuming a buyer puts 20% down) may not be as appealing to new buyers as lower-priced homes.

Another consideration is how the disparity in state income and state property tax rates may drive homebuyers into lower tax rate states. In high tax states, there could be multiple scenarios in which taxpayers lose 100% of the tax benefit of paying property taxes.

Conclusion

Of course, there are other (wonderful) reasons to buy a home and other (wonderful) reasons to buy a home in certain neighborhoods. The upsides generated from the Tax Cuts & Jobs Act, though, are severely lacking.

Eli’s Closing Stats and Thoughts

According to The Washington Post, Moodys Analytics predicts that home values in Arlington will drop 2.3% as a result of the new tax bill, with drops of 2% in DC, 2.5% in Montgomery County, 2.6% in Loudon County and 4% nationally. Of course, this analysis is limited to the impact of the tax bill and doesn’t take any other growth factors into consideration. In other words, if Arlington continues its growth from 2017 (3.1%), we wouldn’t see actual losses, but stunted growth.

The change in SALT deductions and increase in the Standard Deduction will reduce the benefit of homeownership for many Arlington residents, but let’s take a look at how many homeowners are likely to be impacted by the reduction of the mortgage interest deduction limit to $750,000. Of the 3,100+ homes sold in Arlington in 2017, just over 400 were bought with loans exceeding $750,000. Approximately 30% of detached homes in Arlington (350 of 1,150 sales) had a loan exceeding the new limit. Keep in mind, however, that homeowners with loans over $750,000 will still be able to deduct interest on the first $750,000.

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I Don’t Believe The Market Will Suffer

While these stats and Moodys’ analysis are great, they fail to capture how homebuyers actually make decisions in the real world. The majority of buyers decide to purchase a home because of a major life event (marriage, kids, job change, etc) and once they’ve decided to purchase a home, their budget is based on how much they have saved for a down payment and how much they can afford each month in housing costs.

Their monthly budget is primarily based on income and the sum of mortgage payments, property taxes, any HOA fees, insurance and maintenance. SALT and mortgage interest deductions don’t factor into any of the core considerations for most homebuyers.

Let’s Be Realistic

Let’s be honest, for most people, taxes are a once-a-year afterthought and tax planning is mostly crossing their fingers, hoping for a few dollars back. For those who do pay close attention to their tax exposure and who stand to lose out on the benefits of the mortgage interest and SALT deductions, I question how much it actually matters.

Previously, the mortgage interest was capped at $1M and there were just 163 (5%) homes purchased in 2017 with a loan of $1M or more who will be “fully” effected by the change to a $750,000 cap. In the first year, the interest paid on that difference of $250,000 is about $10,000 (drops each year), so for somebody with an effective tax rate of 30%, that’s a $3,000 change to their bottom line from last year.

Adding the change in SALT deduction increases that for many people and $3,000+ is nothing to sneeze at, but we’re talking about the wealthiest homebuyers with incomes exceeding $250,000/year. I’d bet that for those who are conscious of the net effect on their bottom line, they’re more likely to find ways to save this money somewhere else than their home purchase.

Plus, the tax plan provides substantial benefits to wealthy Americans and may very well have a net positive effect on their bottom line anyway. Also, does anybody really think that somebody negotiating on a $1.5M+ home they plan to live in for 15+ years will pay $5,000 less because that’s the calculated net impact from mortgage interest and SALT on their 2019 taxes under the new tax bill? No way.

Let’s be realistic about the psychology of home buying and what determines buying power because that’s what impacts home prices, not expensive studies funded by special interest groups (yes, I’m kind of calling out the National Association of REALTORS for fear mongering).

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2017 Arlington Real Estate Review

Question: How did the Arlington real estate market do in 2017?

Answer: In July I wrote that the Arlington market was picking up momentum and after two years of light growth in Arlington, we saw our first year of growth over 2% since 2014 (3.1%). Over 3,100 homes were sold in 2017 compared to approximately 2,900 in 2016 and total sales volume was nearly $2.1B compared to last year’s total of just under $1.9B.

In addition to solid price growth, other momentum indicators improved (if you’re a homeowner/seller) with homes selling nearly one week faster and for ½ percent closer to the original asking price than last year. Price growth and demand were driven almost entirely by South Arlington with 22202, 22204 and 22206 seeing some of the greatest improvement.

Top Sales

  • Once again, the most expensive sale in Arlington was a Rosslyn condo at Waterview with 3,800+ sq. ft. and unobstructed views of the Potomac. It sold for $3,258,000 and took just over a year to sell.
  • The most expensive single family home sold in Arlington was once again in Country Club Hills with nearly one acre for $2,950,000
  • The most expensive townhouse sold in Arlington was also located in Country Club Hills with over 8,000 sq. ft. located on Washington Golf & Country Club and sold for $2,825,000
  • The least expensive home sold in Arlington, not at auction, is a studio condo in The Carlton off Four Mile Run for $115,000

Price Growth: The average price of homes in Arlington has increased every year since 2010, but was slow the last two years. The 22201 and 22203 zip codes continued a steady decline, while 22205 surged forward with an incredible 6.9% YoY increase. Overall, Arlington continues to deliver as promised to most homeowners and investors… steady and stable growth.

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Demand Growth: Outside of price growth, my two favorite indicators of demand are days on market (time from listing to ratified contract) and the ratio of sold price to original asking price (100% = buyer paid full ask). Both indicators saw their biggest improvement since 2013 with homes selling faster and for closer to their asking price in seven of nine zip codes. While changes weren’t extreme, they’re enough to say the Arlington market has officially picked up steam heading into 2018.

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New Construction: 2017 was big year for new construction. We saw the release of two large condo projects – Trafalgar Flats and Key & Nash – as well as strong sales for the final phase of the luxury condos at Gaslight Square in Rosslyn. 2017 also brought the start and close-out of the highly successful Carver Place townhouse project off Columbia Pike by Craftmark, as well as the introduction of a luxury townhouse project, 1100 Block, a few blocks north of the Ballston metro.

Single family new home construction continues to impress with 130 new homes sold in 2017 for an average sale price of a whopping $1,540,000. Note that the below statistics do not include all sales of new homes, just those entered into MRIS (system of record), which is likely about 80% of total new single-family home sales.

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Looking Ahead To 2018+: Arlington residential real estate growth will continue to hinge on our office vacancy rates. With Nestle committing to Rosslyn in 2017 and arriving in 2018, the door is open to attracting big business not directly associated with the Federal Government. There’s no doubt that their decision will generate interest from other companies who otherwise would not have considered Arlington. If we make it to the second round of Amazon’s HQ2, we should have an exciting decade ahead.

Beyond vacancy rates, growth will depend on addressing crowded schools, balancing infrastructure investment across the entire county, business improvement along Columbia Pike and Lee Highway and ensuring that the natural beauty of our neighborhoods (trees and green space) isn’t destroyed by irresponsible development. With regard to the impact the new tax plan will have, expect a full column on this in the coming weeks.

I’ll close with a recent quote by Paul T. McDermott, President and CEO of Washington REIT, who recently sold their position in a major DC building to move assets into Arlington.

“We are strategically allocating capital out of 2445 M Street and into Arlington Tower to improve our long-term growth prospects in a resurging Rosslyn…Our research indicates that Rosslyn is at an inflection point with rising rents and declining vacancy as it transitions from a 9 to 5 Federal Government and contractor hub into a 24-hour urban destination with the demographics, amenities and infrastructure to attract top-tier corporations.”

If you’re considering buying, selling, or investing within the Arlington market in 2018, I’d be happy to schedule some time to meet. You can reach me any time by email at Eli@EliResidential.com or phone at (703) 539-2529.

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Fraud Warning To Home Buyers

I hope everybody had a great Christmas holiday and is enjoying some time off with family and friends this week! Instead of answering a specific question today, I’d like to offer something of a PSA to anybody buying a home right now or planning to in the near future.

There is a lot of wire fraud going on right now brought about by scammers who request wires using email addresses that look like they come from your agent, title company or lender. They hack the email servers of one of the parties to the transaction, identify where a buyer is in the settlement process, and send a technically accurate email with wiring instructions for an Earnest Money Deposit or down payment.

Oftentimes they use a Gmail address, but mask the name so that it says the name of somebody the home buyer recognizes, but in more advanced scams, they use a domain that closely resembles a real one. For example, they may use Eli@ElliResidential.com (two “L” in Eli) instead of Eli@EliResidential.com. It seems like most of the people carrying out the scams are familiar with the real estate settlement process because they’re able to communicate with a level of expertise that doesn’t raise any red flags.

Once you wire funds, the money is gone, so if you send a wire to a fraudulent account there’s no getting it back. Your first choice should be to use physical checks for deposits and final payments, but if you have to send a wire, but sure to contact your agent to make sure that the timing of the request is correct and call the receiving party at a known number (e.g. from their website) to confirm the accuracy of the wiring instructions.

Please share this notice with anybody you know in the home buying process. I’ve heard stories of too many people losing large amounts of money this year from these scams and hope this post helps avoid further loss. Until next year friends!

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Should You Re-List In The Spring?

Question: Are there certain considerations to be aware of when re-listing your home in the spring/summer market if you listed and then pulled it during the fall/winter market? Are there things that you would need to fix up in a slow winter market that you could let slide in a hotter market?

Answer: You’ve been on the market for months, had a few interested buyers, but nothing has stuck. Now you’re in the midst of the holidays during the coldest and darkest days of the year so you’re asking yourself what every seller is asking… should you pull your listing and wait for the market to heat back up in the spring?

There are three scenarios that I’ll consider advising sellers to take their home off the market during the winter:

  1. You are living in the home, are under no pressure to sell, have been on the market for more than 60 days without an acceptable offer and have exhausted conversations with any buyers who have shown interest.
  2. You have received feedback from agents and potential buyers that the home needs work and you will take time over the winter to make the necessary improvements, providing that the cost of those improvements will net you better terms than an immediate price reduction and avoiding additional carry cost.
  3. A key selling point of your home is landscaping and/or a view that is difficult to recognize during the winter.

Pros & Cons Of Re-Listing

  • Pro: More Buyers… The number of homes that go under contract drops substantially from November-January and picks up quickly in February. On average, the number of new purchase contracts more than doubles by March compared to December and January.
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  • Pro: Faster Sales… The increase is buyer activity (demand) results in homes selling a lot faster in the spring/summer
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  • Con: Not Necessarily Higher Prices… The increased buyer activity impacts days on market a lot more than it does pricing. The amount somebody is willing to pay or qualified to pay for a home often does not change based on the season, rather larger economic factors.

 

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  • Con: If you decide to re-list in the spring, you are probably planning to do so at a higher price. Be careful with this decision because agents and buyers have easy access to previous asking prices and if you have not made any substantial capital investments to your home to justify the increase, most buyers will base their negotiations on your previous asking price, not the new/higher one.
  • Pro: If you’re off-market for three months or more, your days on market count officially resets to zero when you re-list. This is a system rule for MRIS/BRIGHT (the database of record for agents), although most buyers use sites that show the full listing history and can easily see that something was withdrawn and re-listed.

The Spring Isn’t Easier

Don’t ease up on the marketing of your home in the spring just because there are more active buyers than the winter. You will be competing against 2-3 times more homes for sale so you could make a case that you need to do even more to stand out in the spring, not less. However, if you’re on a budget, you may want to allocate your repair, improvement and staging funds differently based on the season such as the warmth of the family room in the winter vs outdoor dining in the spring.

Happy holidays everybody!

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Are Two Bedroom Condos a Better Investment Than One Bedroom Condos?

Question: Is it true that two-bedroom condos are a better investment than one-bedroom condos?

Answer: If you’re asking this question strictly as an investor, the answer is purely based on the numbers. If you’re buying for yourself, you’ll want to consider appreciation as well as what makes the most sense for your lifestyle. For example, do not spend an extra $150,000 because a two-bedroom will appreciate faster, if you’ll end up using the second room for storage and an occasional guest.

Two-Bedroom Condos Appreciate More than One-Bedrooms Condos

Below is a graph showing appreciation of one and two bedroom condos in Arlington since 2010. To maintain consistency, the data set uses condos built from 2000-2008 limited to one bedroom units with 600-800 sq. ft. and two-bedroom units with 900-1,400 sq. ft.

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The average one-bedroom sold for $364,000 in 2010 and is selling for $409,000 in 2017 while the average two-bedroom sold for $529,000 in 2010 and is selling for $638,000 today. If you bought the average one-bedroom in January 2010 with 20% down, you’d have approximately $172,000 in equity today. If you bought the average two-bedroom in January 2010 with 20% down, you’d have approximately $294,000 in equity today by putting an extra ~$33,000 down in 2010.

If You’re An Investor

If you’re an investor, you’re looking at rental income, in addition to appreciation. As I wrote this spring, rental rates have been pretty flat in Arlington, especially along the Rosslyn-Ballston corridor, due to a lot of new rental buildings being built the last 5-10 years.

 

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Based on the average 2010 purchase prices, rental income and a 25% down payment (most common % down for an investor), the average investor along the Rosslyn-Ballston corridor has no cash flow from their investment. The table below does not include maintenance or property management fees and assumes average condo fees, taxes and insurance.

 

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So Why Invest?

Considering that the above monthly cash flow summary does not include maintenance costs, property management fees or vacancy periods where is the value in owning an investment property?

  • Equity Build-Up: For a one-bedroom, your tenants would have contributed an average of $460/mon over the last 8 years ($44,000) to your equity balance and for a two-bedroom, your tenants contributed an average of $680/mon over the last 8 years ($65,000)
  • Tax Benefits: Another major benefit of investing are the tax benefits. Being able to deduct expenses like condo fees, tax payments and repairs. As well as depreciate the value of the condo and provide a huge annual financial benefit to off-set the weak monthly cash flow. A one-bedroom investor may be able to deduct about $20,000 per year and a two-bedroom investor about $30,000. Of course, you’ll want to discuss any deductions with your tax professional first.

 

If you’ve invested in property in other areas of the country, you may be shocked by how little monthly cash flow a condo along the Rosslyn-Ballston corridor produces. A major reason for the lower ROI is the lower risk that comes with investing in Arlington condos. Your downside risk during an economic dip is much lower and the rental market is consistently strong with a large pool of well-qualified renters. It follows the basic economic tenets of risk and return.

If you’re considering buying an investment property, feel free to send me an email at Eli@EliResidential.com to set-up a meeting to go through your investment goals and options.

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How Much Does Land Cost In Arlington?

Question: Can you provide insight into how much a tear-down home costs in Arlington and how lot size effects sale price of a single-family home?

Answer: Breaking News… land is very hard to come by in Arlington. Only 11 homes sold in the last ten years had one or more acres, and it’s going to cost you over $1M to buy one. The average lot size of a single-family home in Arlington is about 8,400 sq. ft. or .19 acres with about 70% of homes on 6,000-10,000 sq. ft. lots.

Here’s a look at the impact of lot size on sold prices of single family homes over the last three years broken out by zip code:

Cost Of Arlington Homes By Lot Size

 

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The data above takes homes of all sizes and condition into account so it doesn’t do a great job of isolating the actual market price of the land or how much people pay for tear-down lots in Arlington.

To summarize that data, I pulled out the cheapest 15% of sales in each zip code over the last three years. I felt that the cheapest 15% of sales in each zip code were probably good bets for homes being bought for the land/location with the intention of tear-down or major renovations. Note: 22209 didn’t have enough sales to include in this table.

Cost Of Land In Arlington

 

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If you’re thinking of buying a tear-down and building new, a good way to estimate how much your home will cost is to add the following:

  • Land acquisition (see above table for estimated land cost by zip code)
  • $75,000-$100,000 for demolition, preparing the lot for construction, and permits
  • $400,000-$800,000 on construction
  • Carrying costs of the loan and taxes during construction of the new home

Earlier this year I wrote about the variance in County tax assessments and market data. How do the market prices for land compare to the County’s tax assessments, which are broken out by land assessments and improvement assessments (assessed value of the home)? Let’s take a look at how the County has assessed land values on homes sold over the last three years and compare that to the market assessment of land values above.

The County Values Land Less Than The Market

 

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Based on this data, the County values land at about 72% of the market value for land on the open market.

Once you’ve had some time to digest the cost of land in Arlington, let me know if you’d like to meet to discuss the process of buying a tear-down lot and building your own home! Email me at Eli@EliResidential.com to schedule an appointment.

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My Favorite Mortgage Programs

Question: Are there good loan options available if I don’t have 20% or more to put down?

Answer: There are an abundance of loan products on the market that cater to different professions, down payments and financial circumstances that you should be aware of. “Rate shopping” is easy and moderately effective, but “product shopping” can be much more valuable and something an informed Agent can assist you with. Here are some of my favorite loan programs and the lenders I work with who provide them:

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Doctors: Doctor Loan Program from SunTrust: CJ Kemp (cj.kemp@suntrust.com, (301) 651-4189)

The Doctor Loan Program is a residential mortgage loan specifically created for licensed medical professionals to make obtaining mortgage financing easier and more hassle-free. It recognizes the financial toll of medical school and strong, stable future income post-graduation. The rates on these loans are also fantastic.

Eligible Doctors include:

  • Licensed residents/interns/fellows in MD and DO programs
  • Medical doctors
  • Doctors of osteopathy
  • Doctors of dental medicine/surgeons/orthodontics/general dentists (DMD/DDS)
  • Psychiatrist licensed as a medical doctor

Available financing terms include fixed and adjustable rate mortgages for purchases and rate/term & cash out refinances.

  • 0% down up to $750,000 loan amount
  • 5% down up to a $1M loan amount
  • 10% down up to a $1.5M loan amount
  • No mortgage insurance required

Homeowners Buying And Selling: Second Trust/HELOC Program from First Home Mortgage: Jake Ryon (jryon@firsthome.com, (202) 448-0873)

This is a great program for current homeowners who will be buying and selling simultaneously. It allows you to use the future proceeds from your home sale to make a large down payment on your new home, before even putting your current home on the market.

They partner with local banks and credit unions to provide you with a second trust that allows you to put as little 5% down up to nearly a $1,000,000 loan amount. The second trust finances the remaining amount of your down payment (e.g. 15% if you put down 5%).

The HELOC/second trust payment is interest-only, can be paid off any time and can be used like a bridge loan to allow you to purchase a new home without a home-sale contingency and to sell your existing home unrestricted.

Low Down Payment: Mortgage Insurance Payment Eliminator from McLean Mortgage: Troy Toureau (ttoureau@mcleanmortgage.com, (301) 440-4261)

This program enables you to put as little as 3% to 5% down using conventional financing (not FHA) and eliminate the monthly mortgage insurance payment by making a one-time more affordable payment.  This provides multiple benefits including a potential increase in buying power by reducing the Debt-to-Income ratio (lower monthly payment), allowing you to negotiate for the seller to make this payment by rolling it into closing costs, and ensuring that the entire payment is tax deductible (confirm with your tax advisor).

Large Loan Amounts: Non-Confirming Jumbo Loan Program from Wells Fargo: Email me for contact info at Eli@EliResidential.com

It’s not just the Doctors who can find low down payment options without mortgage insurance for high-value (jumbo) loans. Wells Fargo’s “Professionals” Program lets you put 10.01% down on loans from $424,100 up to $1,000,000 without any mortgage insurance and the rates are incredible. They have options for fixed and adjustable mortgages as well. A high credit score and strong income are key factors for qualifying. It’s referred to as the “Professionals” Program because it’s popular amongst high earning, non-medical professionals like lawyers and consultants.

Make The Right Choice

Choosing the right lender is a combination of selecting the program that’s right for you, getting the best market rates, and working with somebody who provides a high level of service. Earlier this year I wrote an article with additional tips for selecting and comparing lenders. If you have any questions about the programs I summarized above, other lending programs like construction and rehab loans, or would like an introduction to one of my preferred lenders please reach out to me at Eli@EliResidential.com.

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