Question: Is it possible to buy a home with less than 20% down?
Answer: I’m always surprised by the number of people who assume they have to put 20% down to buy a home and delay their goal of becoming a homeowner for years because of it. Studies show that the most common reason people give for not buying a home is that they don’t have enough for a down payment.
In reality, about 1/3 of Arlington buyers purchase a home with less than 20% down and for many buyers, especially first-time home buyers, they’re putting as little as 3-5% down.
Programs For Everybody
For those with good credit, there are popular Conventional Loan programs allowing for as little as 3% down and for those with lower credit scores, FHA Loan programs range from 3.5%-10% down. There are also some exceptional programs available to those with great credit and strong incomes allowing for 10%-15% down at great rates.
Specialty Programs For Military and Doctors
If you are an active-duty or former servicemember you likely know about VA Loans that allow purchases with zero down. Doctors also have access to special loan programs offering great rates with low down payments for large loan amounts.
Most loans with less than 20% down will include mortgage insurance, which I wrote about here. It will increase your monthly payment and generally represents a higher percentage of your loan amount the less you put down. However, there are options to get rid of the mortgage insurance fees by buying it out or applying for early removal after a couple of years. There are also some programs that do not include mortgage insurance at all.
Impact on Negotiations
Clients often ask me how much a lower down payment will impact their ability to negotiate, so last year I ran the numbers on the impact of different down payments on the percentage buyers were negotiating off the sale price. The results showed that only cash buyers (100% down) and buyers not putting any money down were materially impacted by their down payment, the negotiation leverage was pretty similar for everybody in between.
However, it would be misleading to suggest that down payment percentage doesn’t have any impact. Most sellers will respond more enthusiastically to higher down payments and this comes into play in competitive scenarios (multiple offers), which has become common in Arlington and the surrounding DC Metro neighborhoods. When sellers are choosing between multiple, similar offers, buyers with higher down payments have an advantage.
Buyers can combat the potential negative impact of a lower down payment in multiple offer scenarios by getting a strong pre-approval letter from a reputable local lender, offering to get pre-approved by a lender of the seller’s choosing, increasing the Earnest Money Deposit, or a number of other tweaks to the contract that will be looked at favorably by the seller, without increasing risk to the buyer or increasing the offer price.
Favorite Mortgage Programs
Here’s a link to an article I wrote with some of my favorite mortgage programs and contact information for great lenders who offer them.
If you’d like any additional information or recommendations on lenders or loan programs, don’t hesitate to reach out to me at Eli@EliResidential.com. If you’re thinking about buying a home in Arlington or the surrounding Northern VA/DC Metro neighborhoods, I’d be happy to meet with you to discuss your options.
Question: How fast are homes selling in Arlington this year and how does that compare to previous years?
Answer: Days on Market measures the number of days between a home being listed for sale and when it goes under contract. Low days on market is one of the leading indicators of a hot market and signals future price appreciation.
The most common way to measure this is average or median Days on Market, currently 33 days and 9 days over the last six months in Arlington, but I also like to track the percentage of homes that go under contract within the first ten days. I generally find that this metric gives buyers and sellers a better feel of the market.
Fast & Furious 2019
The percentage of homes that go under contract within ten days has skyrocketed in 2019, doubling the rate seen in 2015 and 2016. Below, you can see how demand for South Arlington homes has been increasing relative to North Arlington over the last three years, not just since the Amazon HQ2 announcement in November 2018.
The table below breaks the market down a bit further by number of bedrooms within each market. Note the incredible demand of one- and two-bedroom homes (mostly condos) in South Arlington, with well over 80% going under contract within ten days. Even more impressive is that only about 25% of one-bedroom South Arlington properties were selling within ten days as recently as 2015 and 2016. If you bought one before the madness, congratulations!
Prepare To Pay
Sellers control the negotiations during the first ten days of a sale and the price paid on homes going under contract within the first ten days reflect that, with an average purchase price well above the asking price.
The table below breaks the market down a bit further by number of bedrooms within each market. It is based on net sold price (sold price less any seller credits). In South Arlington, homes that go under contract within the first ten days on market are averaging a net sold price nearly 2% higher than the seller’s asking price. One important takeaway from this data is that in 2019 buyers making an offer on a property that has recently hit the market have become accustom to including escalations, which is why you see average prices well above the asking price.
What Does It Mean?
Unsurprisingly, some national studies have determined that Arlington and Alexandria are the country’s hottest real estate markets. That’s great news for home owners, especially those looking to make a move into a less expensive market, renting, or downsizing. The frustration for buyers comes from all sides as well. There’s very little inventory to choose from and, as detailed above, good inventory moves quickly and for a premium.
If you’re considering selling, it’s important to understand just how high you can price your home without overpricing and missing the market, which can lead poor results.
If you’re hoping to buy a home, planning and preparation are critical. Despite the market conditions, I have worked with a lot of buyers this year who have found success in Arlington, but it requires the right approach.
I am available every day of the week to meet or schedule a call if you’d like to discuss your options to buy, sell, or rent in Arlington or the surrounding Northern VA, DC, and MD Suburb communities. Just send me an email at Eli@EliResidential.com to schedule some time to talk.
Question: Do you
think Pierce condos in Rosslyn will be able to sell for the prices they’re
Answer: A few
months ago, local developer Penzance
released details on their upcoming Highlands
development that includes three luxury residential buildings, one of which will
be a 27-story condo building called Pierce. Here’s a summary of what we know:
Floor Plans: 104 units ranging from a 1,270sqft 1BR+Den to a 3BR with over
Prices: Starting at $900k and increasing to over $3M
Finishes: Thermador appliances, hardwood throughout, Snaidero cabinets,
floor-to-ceiling windows, some direct-access elevators and other luxury touches
Amenities: 24hr staff, rooftop pool, two-story gym, club room, to name a
Courtesy of Mayhood at PierceVA.com
Is There Anything Else
It seems that Penzance is modeling its approach after
Turnberry Tower, the iconic all-glass blue building a block from the Rosslyn
Metro. Both buildings’ smallest units are 1BR+Den with about 1,300sqft, they
have similar high-end finishes, many units with direct-access elevators, and
both have luxury amenities.
Demand and prices at Turnberry have increased significantly
over the last 18-24 months, which is a good sign for Penzance.
Meeting New Demand
There is a significant, relatively new, demand in Arlington
for large condos to satisfy Baby Boomers downsizing from big suburban homes
around the DC Metro. Over the last 20 years of condo development in Arlington,
most floor plans have been 1BR-2BR, ranging from 700-1,000sqft. To find larger
floor plans, buyers are mostly left with buildings constructed in the 70s and
80s, so there is currently an underserved market for newer condos with large
For example, 2000
Clarendon, a condo building in Courthouse set to deliver next year,
originally planned six 2BR+Den units of ~1,400 and ~1,700sqft. They had so much
interest that they added two more. Their current waitlist for the 2BR+Den units
has over 20 people on it. However, the price of 2000 Clarendon units are about
half what similar units at Pierce will cost.
Will People Pay These
1BR+Den with 1,270+sqft start at $900k (4 units)
2BR with 1,320+sqft start at $1.1M (44 units)
2BR+Den with 1,953+sqft start at $2M (46 units)
3BR with 2,411sqft start at $2.6M (10 units)
More than half of the units will be $2M+
More than half of the units will be over
$1,000/sqft. Over the last five years, seven Turnberry condos and two Waterview
condos have cross the $1,000/sqft mark. DC hits this mark in its premier
Rosslyn has only begun its transition into a luxury market
and Pierce will be a great indicator of where Rosslyn is in the eyes of the
market. The sales won’t come overnight, or be without challenges, but the
developer can afford to be patient for:
The down-sizing Baby Boomers that Pierce is
suited for can afford to pay a significant premium for the right floor plan and
Amazon, Nestle, consulting/law firms, Defense
contractors, and tech start-ups are supplying more and more highly-paid
Executives to the Arlington housing market
International money will be drawn to its
proximity to DC and Amazon
Trophy units with direct views of DC and the
Potomac River should be in high demand because it’s unlikely that future
developments will block those views, something that has had a major impact on
many Turnberry owners in the last five years (I wouldn’t be surprised to see
some of them move a couple of blocks up the street to reclaim their views)
There are some challenges that will likely slow the pace of
sales and maybe even cause them to bring prices down on some units:
At these prices, buyers will also be looking at
similar units in DC’s top addresses in neighborhoods like Georgetown, West End,
and The Wharf
There will be a 7-11, fire station (quiet-exits
will help, but won’t convince everybody), and a school (a negative for most,
despite the beautiful design) within one block
Being up the (steep) hill from many of the
neighborhood’s top draws including Rosslyn Metro, Key Bridge, Mt Vernon Trail,
and new dining options
Rosslyn still has many elements from its sleepy
government office district days and probably 5-10 years from shedding that
completely via redevelopment that’s in the pipeline
Pre-sales are scheduled to begin in early 2020, but the
building probably won’t be finished and ready for move-in until well into 2021.
I don’t think the current market, or even the 2020 market, will be ready to pay
these prices for most of the 104 units, but I think by 2021 we’ll see Rosslyn
far enough along and Arlington’s market driving forward enough to generate some
eye-popping sales for Penzance’s Pierce condos.
Question: How do
I know that I have the right homeowner’s insurance coverage?
people will spend more time figuring out what movie to watch on Netflix than
setting up homeowner’s insurance on their most valuable asset(s). Despite how
fast and easy insurance companies make the process, you should be spending more
time with a real person designing an insurance policy that fits your home and
your risk tolerance.
Two weeks ago, ARLnow columnist Peter Rousselot wrote
an article about a home flooded with sewage because of a back-up in the
public sewer line that didn’t have proper Water & Sewer coverage and was
denied coverage by the County, thus costing them almost $20,000 and a ton of
headache. According to my insurance partners at Day, Deadrick, and Marshall (DDM
Insurance), Water & Sewer Back-up Coverage is one of many things commonly
missing from most homeowner’s insurance policies written by popular “fast and
simple” insurance providers.
In addition to having the right coverage, a good insurance
provider will also make sure you understand what is NOT covered that people
often think is covered. Basement flooding from heavy rains is a good example of
something that is often not covered, a lesson many locals have learned the hard
way over the last few years. If you understand what isn’t covered, you may make
different decisions on where and how you store valuables or where you invest in
I asked the team at DDM Insurance what some of the most
common mistakes are that they see in other homeowner’s insurance policies they
review and outlined some of them below:
Sewer Water Drain Backup (what was missing in the policy for the homeowner in Peter’s article): Applies to sump pumps, wells, toilets and piping within the structure. Separate coverage applies to the breaking or freezing of pipes, but any other back-up or over run of these sewage systems within a home require this coverage and should be no less than $25,000.
Additional Living Expenses: It covers hotel bills, restaurant meals, and other living expenses incurred while your home is being rebuilt. Typically, most policies will cover 20% of the value of your home, but for those with lower valued homes, it may be appropriate to increase this limit. In the event of a total loss, it is very reasonable for these expenses to be over and above that amount.
Guaranteed Replacement Coverage on the Dwelling: This provides additional coverage on the dwelling if there is a total loss, so the client gets a percentage over the dwelling coverage listed on the policy declarations. Those percentage options are usually 25%, 50%, or 100%, so if you have $100K on the dwelling coverage, with this endorsement, you get up to $125K, $150K or even $200K. This is a must because you never actually know what it will cost to rebuild until it has to be done. The replacement cost estimators that insurance companies require to be done are only estimates so this endorsement gives people a cushion so they are not out of pocket in the event the house is totaled.
Supply Line Coverage: This helps to defray the cost to replace the incoming/outgoing water and sewer lines from the street to the house. This covers the cost to dig up the front yard, replace the busted pipe and then backfill/repair your yard. It often costs $5,000-$10,000+ for this type of work, depending how far your house is from the street and the amount of landscaping/hardscaping to dig-up/replace.
You should also consider who the actual insurer is because
when a claim is filed, the quality of service and responsiveness of your
insurer is critical. Like anything else you buy, the cheapest providers often
render the cheapest service when called upon.
If your homeowner’s insurance was set-up online or without
involvement by a real person with expertise in local insurance practices, I
highly recommend getting another opinion from an insurance agency/provider who
offers a more personalized review of your policies. I also don’t suggest taking
those recommendations and sourcing the cheapest version of it elsewhere because
oftentimes, the personalized service you get (or don’t get) building a policy
is reflective of the quality of service you’ll get when a claim arises.
For a review of your current policies or help setting up a
new policy, I highly recommend contacting Matt Deadrick (firstname.lastname@example.org
or 301-937-1500 x13) at DDM Insurance,
who I use personally and recommend to my clients.
often should a condo building conduct a Reserve Study?
Answer: In my
opinion, the Reserve Study is the most important planning tool for Condo
Associations because it provides a roadmap for how much money needs to be saved
and what projects the Board should prioritize.
What is a Reserve
A Reserve Study should be done by an engineer who
specializes in condo or apartment buildings. The engineer inspects all of the
common elements like the roof, garage, hallway carpeting, pool, etc to
determine the remaining useful life and major repair schedules for all common systems/elements.
For buildings around here, the cost usually starts around a couple thousand
dollars and goes up from there.
After the inspection is complete, the engineer provides a
report that generally includes:
Summary of the common systems
Maintenance or repair recommendations
Replacement schedule over the next 30 years
Estimated annual cost of repairs and replacement
needs over the next 30 years
Analysis of the Association’s current reserve
balance, annual reserve contribution amounts, and projected annual costs to
determine if the current balance and contributions are enough to support costs
over the next 30 years
How Often Should a
Study Be Done?
Code states that a new Reserve Study should be done at least once every
five years. This will still be the case when the new code becomes effective on
October 1 2019.
The Reserve Study is important for many people including
owners, Board members, management, and buyers.
The financial analysis is critical for the
Treasurer to determine monthly fees and reserve contribution levels
The repair schedule allows the Board to set
priorities for themselves and management to solicit bids for major repair or replacement
Homeowners must provide a copy of the Reserve
Study and current reserve account balance to buyers once they go under
contract. Buyers have the right to cancel a contract within three days of
receiving this information so having an updated Study and sufficient reserve
funds is important.
Buyers should carefully review the Reserve Study
and compare the recommended reserve balance and contribution levels with the
current balance and current-year contributions in the budget.
After completing a new Reserve Study, you may find out there
are insufficient reserve funds and contribution levels. Boards generally have
two options – increase condo fees or issue a special assessment.
If the reserve deficiency is 5+ years out or relatively
small, there’s likely enough time to slowly increase fees until you’re caught
up. However, increasing fees by too much can have a negative
impact on sale prices, so sometimes a one-time special assessment is in the
best interest of the owners. A special assessment may also be your best option
if the money is needed quickly to cover reserve costs in the next few years.
Not only does Virginia Code request Associations to complete
a Reserve Study at least once every five years, it’s good practice for all
stakeholders to have an update Study available for better financial planning
and facility management.
Question: How did
the Arlington real estate market perform in the first half of 2019?
Answer: I am
excited to announce the first of many collaborations with Jeannette Chapman,
Deputy Director and Senior Research Associate, at the Stephen S. Fuller Institute at
George Mason University to bring you deeper, more insightful analysis of the
Arlington housing market. The Fuller Institute conducts incredible research and
analysis on the Greater Washington regional economy and I’d encourage you to
subscribe to their monthly
Washington Economy Watch reports. Jeannette is an Arlingtonian and housing
data junkie, which means even better market insights for ARLnow/Ask Eli
Amazon announced they were moving their second headquarters
to Arlington in November 2018 and there has been year-over-year double-digit
decreases in homes listed for sale in each of the seven months from December
through June, topping out with a 29.5% drop in April 2019 compared to April
2018. I think this is due to owners deciding to hold out for more gains once
Amazon employees start showing up.
The shortage in housing inventory forced buyers to compete
for homes, resulting in 46.1% of homes selling for more than the asking price in
the first half of 2019, compared to an average of 26.5% going over ask during
the previous five years.
Less inventory combined with shifts in demand (buyers moving
their timelines up and new investors entering the market) led to price
increases across Arlington in the first half of 2019, compared to the first
half of 2018, by an average of 4.6% and median 8.8%. This does not mean that
all homes in Arlington are worth 5-9% more than they were this time last year –
some sub-markets are up more while others haven’t experienced the
To get a more accurate picture of what’s happening in our
housing market, we separated the data into smaller sub-markets. Townhomes
aren’t included because there’s not enough volume to produce good data and we
left out the 22202 zip code, which makes up the Crystal City/Pentagon City area
(aka most of National Landing), because it’s a very different market than the
rest of the County and requires its own analysis in a future column. We chose
to remove new construction, age-restricted housing, and Cooperatives. Finally,
the time period is based on when a property actually went under contract
instead of when it closed.
Interpreting the Data
For the most part, the charts above reflect what I’ve
experienced in the Arlington housing market this year so double-digit appreciation
from South Arlington single-family detached homes and North Arlington condos
makes sense. However, I was very surprised by the South Arlington condo data.
My experience this year tells me that South Arlington condos
have appreciated more than most Arlington sub-markets, with examples of units
selling for 10-20% more than they would have last year. So why does the data
show that 0/1BR condos in South Arlington are only up 2% compared to the first
half of 2018? The make-up of the individual sales is different in 2019 and 2019
sales are down nearly 50%, meaning our sample size is too small.
During the first half of 2018, there were more expensive
sales and fewer inexpensive sales, as a percentage of total sales, compared to
the first half of 2019. Sales in 2019 have also been 32sqft smaller with 7%
higher condo fees than the sales in 2018. These differences in the make-up of
the data have skewed the median and averages in a way that doesn’t accurately
represent what we’re seeing from individual sales.
The lesson? Real estate data is tricky and doesn’t always
communicate what’s actually happening in the market (e.g. this
June column about 17.3% appreciation in Arlington).
We took a look at the strongest performing sub-markets in
the first half of 2019 to see how these gains look from a historical
perspective, going back to 2000:
North Arlington condos show the biggest
“Amazon-effect” with a sharp deviation from relatively stable prices over the
last 10+ years. Note that existing condo sales dropped off more than the chart
suggests during the recession, but the sales in newer, more expensive buildings
helped maintain the market-wide median price.
History suggests that the North Arlington condo
market will level off and remain relatively stable at these prices. It’s easier
to add new condo supply to the market compared to other housing types, so
supply usually adjusts to meet demand.
Single-family detached homes in South Arlington
received a noticeable boost from Amazon, but were already trending up over the
last 3-5 years so the 12.3% gains are likely a combined effect
Volatility in the South Arlington single-family
detached market will likely continue for years to come as the area develops and
the market finds a balance. I am bullish on most single-family detached housing
in Arlington because it’s nearly impossible to add more supply to meet
There’s no doubt that Amazon has had a major impact on
Arlington’s housing market already, but at this stage, it’s all speculative.
Homeowners speculating they’re better off waiting to sell. Investors
speculating that property values will appreciate. Home buyers speculating that
they’re better of buying now.
I expect the North Arlington condo market to taper off and
provide owners with modest, long-term growth and believe the best days for
North Arlington townhouse and single-family detached homes are 3-5 years out.
Even though the aggregate data doesn’t currently show
double-digit growth in the South Arlington condo market, that’s what is
actually happening (see earlier explanation). I think this, and the South
Arlington townhouse/duplex market, will stabilize next year and provide modest,
long-term growth. I wouldn’t be surprised if there was a pull-back in the South
Arlington single-family detached market next year, but I think it has the most
growth potential over the next 8-12 years, outside of the 22202 zip code. The
ceiling for South Arlington will depend on the quality and pace of development
along Columbia Pike, parts of South Glebe, and Nauck.
Some of the questions I have about the next 6-24 months in
the Arlington housing market are:
Will homeowners react to recent appreciation and
take advantage of a “seller’s market” by putting more homes on the market in
the next 6-18 months or will they continue to wait?
Did 2019 cannibalize buyers who were planning a
purchase/investment in 2020-2021 and will that demand be replaced with new
buyers or will we see a drop in demand until Amazon hiring picks up?
What decisions will the County make to increase
density and will that provide for more townhouse/duplex development instead of
How will the headwinds from a potential downturn
in the US economy impact local real estate momentum?
How much more will office
vacancy rates drop and will another Fortune 500 company soon follow the
lead of Nestle and Amazon?
If you’d like an analysis on how the value of your home has
changed in 2019 or would like to discuss a strategy for buying or selling a
home in Arlington or nearby communities, feel free to email me at Eli@EliResidential.com to schedule
time to talk or meet. Our team covers Northern Virginia, Washington DC, and the
Board of Directors is planning for the 2020 budget and we’d like to get a sense
of the market rates in Arlington, particularly in the Rosslyn-Ballston
Corridor. What are the average condo fees in the Arlington area on a cost per
square foot basis?
Answer: It’s that time of year for most Condo Associations – budget planning time! As a former Condo Board Treasurer, I understand the pressure you’re under to balance responsible spending and reserve contributions with resident expectations of low, stable fees. Let’s take a look at what condo fees are across Arlington…
Condo Fee Rates
Fees are generally set on an annual basis by dividing up the
Association’s total budget, including reserve contributions, by the ownership
percentage assigned to each unit. Ownership percentage is determined by the
builder and can be found in the legal documents you received prior to purchase.
In most cases, it’s determined either by the number of bedrooms or square feet.
On a square foot basis, the average condo fee in Arlington
is $0.54/sqft with a median fee of $0.53/sqft. Along the Rosslyn-Ballston
Corridor the average jumps a bit to $0.57/sqft and the median remains the same.
On a per bedroom basis:
Average R-B Corridor
Not All Fees Created
Before you jump to any conclusions about the relative value
of your condo fee, you need to consider what’s included.
Amenities that require staffing and/or expensive maintenance
like an attended front-desk, on-site management, and pools add significantly to
the budget. The value for those amenities is subjective. Amenities that take up
a significant amount of space within a building like large lobbies, party
rooms, or rooftop gyms take away from the total unit count, thus increasing the
ownership percentage of each unit.
There’s also a wide range of utilities included, or not, in
a condo fee. Some fees include all utilities (water, sewer, trash, gas, and
electricity) while others may only include trash with the rest paid directly by
each owner. Some fees even include internet and cable! These differences can
change your monthly bottom-line between two condos by hundreds of dollars.
Another important consideration when analyzing condo fees is how well they’re being used to fund the reserves (the Association’s savings account for major repair or replacement work) and whether future planned/unplanned building expenses will require a fee increase or special assessment. A well-funded reserve account usually means long-term fee stability and decreased chances of a special assessment. Associations should complete a new Reserve Study every five years to maintain a sufficient reserve balance and healthy building maintenance.
Question: Is it true that more people are choosing to rent than buy a home?
Answer: I’ve certainly been hearing this theory for a while now too – people are foregoing the American Dream of owning their own home for the ease and flexibility they get from renting. That’s usually paired with some scary data about how Millennials only rent and are ruining everything (see my August 2018 column about this topic). While that trend was true for most of the last 10-12 years, it’s proven false over the last two years.
Home Ownership Way Up, Renting Slightly Down
On a National level, the US Census Bureau is reporting a third straight year in increased home ownership with 2018 being by far the largest growth we’ve had in home ownership since 2004. The numbers of renters dropped for a second year in a row, the first drop in National rental rates since 2004.
Why The Sudden Change?
I believe there are two main reasons why the trends have reversed course over the last two years.
First, the majority of Millennials are finally of home-buying and settling down age and have had some time to build up a savings after taking on historically high amounts of student debt and graduating into a recessions/slow economy. I always laughed when I heard “experts” claim Millennials would never buy homes while most of them were under 30 and financially unprepared for a mortgage.
The second reason is the strong economy we’ve witnessed over the last few years that has finally led to higher income. Better pay and more job security will always lead to higher rates of home ownership.
What About Arlington?
As of 2016, the home ownership rate in Arlington was just 44.2%; well below the National (63.6%), Virginia (65.8%), and Greater Metro Area (63%) average ownership rate. Arlington home ownership has only increased by .3% since then. I recently heard that 20% of Arlington’s population moves every year (most in the Country) so you can expect such a transient population to favor renting over ownership when compared to the rest of the country. Given how expensive it is to live in Arlington, I don’t see the ownership rate increasing much over the next five years, which is a good thing because there’s already nowhere near enough homes for sale to support the current ownership rate.
Question: Has there been an increase in the number of homeowners putting their home on the market after Amazon’s decision to move to Arlington?
Answer: For me, this was the big unknown — would the announcement of Amazon HQ2 cause homeowners to quickly put their homes up for sale to take advantage of a higher resale value or would those owners decide to hold on for the mid/long run, hoping for a much greater return 5-10+ years from now? The early data in Arlington and Alexandria suggests a preference for the latter.
New Listings Way Down
The easiest way to answer the question is to look at the Year-over-Year change in the number of new listings to hit the market each month. Over the last three months, the YoY difference in new listings in Arlington has been -11%, -18.4%, and -13.9%. The City of Alexandria has followed a similar pattern.
Months of Supply…Also Way Down
Months of Supply is a supply/demand reading that tells you how many months it would take for all the homes currently on the market (supply) to sell, given the current rate of sales (demand). Economists generally consider six months of supply to represent a well-balanced real estate market for both buyers and sellers. Arlington and the City of Alexandria have hovered around 2-3 months of supply for most of the past 6-7 years, having never dropped below the one-month mark for 10+ years…until December 2018, when the two combined to average about .75 months of supply each of the last three months.
What Does This Mean For Northern VA?
You can shield the Seven Kingdoms from White Walkers by stacking up all of the frustrated buyers searching in Arlington and Alexandria. Some may decide to pass on buying a home and continue renting, find a way to make their existing homes work, or move out of the area altogether, but many others will start to look further west for value (it’s there, trust me). Expect to see an immediate spillover into Annandale, Falls Church, and Springfield; that shift has already started with many of our clients.
Question: I’m hoping to purchase a home this year and wondering what types of inspections I’ll be able to do on the home before buying it and about how much they will cost.
Answer: Most sales contracts include an Inspection Period (usually 3-14 days after an offer is accepted) for buyers to conduct various inspections of their choice on the property. Depending on how the contract is structured, buyers may have the right to negotiate for repairs or credits based on the findings and/or the right to terminate the contract.
General Inspection: This is the most common inspection for buyers to conduct with costs ranging from about $300-$1,000 depending on the size, age, and type of the home. A General Inspector is hired by the buyer and works for the buyer, not for the seller or the buyer’s agent. A general inspection is classified as a “visual inspection” of the surface, structural, and mechanical components of a home like appliances, flooring, electrical, plumbing, foundation, and other elements which includes running all mechanical components they can access. Your inspector cannot open up walls or floors and, in many cases, cannot climb on roofs. A good inspector will be able to identify many of the home’s flaws through the general inspection as well as identify any signs that further specialty inspections are needed (see below). Some inspectors carry high-end thermal readers to find evidence of moisture, poor insulation, or faults in the ductwork. After the inspection, you’ll receive a detailed report with photos, descriptions, and recommendations of everything the inspection covered. An extra benefit of an inspection is that you’ll learn a lot about how your home works and propert maintenance.
Radon Testing: Radon is toxic gas from the ground that is known to cause cancer with prolonged exposure above certain levels (EPA website). Most homes in Northern VA have an average to above average risk of elevated radon levels and it is impossible to know without testing. Radon levels can vary widely from one house to another on the same block. I always recommend buyers test for radon if they have basement/below ground living areas (radon generally doesn’t impact above-ground levels). The test is relatively inexpensive ($150-$200) and most general inspectors can administer the radon test as well, which requires a small box to sit in the basement for 2-3 days. In the event of elevated radon levels, radon remediation systems are highly effective and usually cost about $1,000.
Wood-Destroying Insect (WDI) Inspection: Around here this is primarily an inspection for termites or carpenter bees. With a cost of $50 or less it makes sense for buyers to order this for a purchase of a townhouse or single-family detached home (generally not necessary for a condo). Of note, the Northern VA Sales Contract requires sellers to cover the cost of any treatment or repairs related to WDI. This can usually be ordered with the general inspection or separately with a pest company.
In some cases, it makes sense to bring in specialists for additional inspections. This may be on the recommendation of your General Inspector or for a number of other reasons. Ultimately, this comes down to a cost-benefit analysis by you and your agent because you can easily spend thousands of dollars on specialty inspections. The following is not an exhaustive list of specialty inspections, but those that tend to be the most common. Cost estimates do vary.
HVAC Inspection ($150+)
Chimney Inspection (free-$200): A structural flaws in a chimney or a failing liner can be very expensive or unsafe if you plan to use the fireplace. A chimney inspection will include a scope of the interior of the chimney.
Roof Inspection (free – $200)
Mold Testing ($150+): Ranges from air sampling to testing of a specific area with known mold
Lead Testing (varies): If you suspect lead-based paint or want to test for lead in the water. This is worth further discussion around lead and lead paint with your agent.
Structural Inspection ($250-$1,000+): Settling and settlement cracks are normal, but signs of continuous or abnormal settlement warrant a visit from a structural engineer. A good General Inspector will be able to tell you whether or not further structural evaluation is recommended.
Water/Sewer/Gas Line Inspection: ($500+): The main lines connecting your water, sewer, and gas from the public lines to your home are expensive failure points, with replacement usually costing $5k-$10k in addition to repairing any landscaping, driveway, etc torn up in the process. Tree roots are a common cause of damage. These inspections involve scoping of the entire line and get pretty expensive. An alternative to paying for these inspections is purchasing relatively cheap insurance through Dominion Energy’s insurance partner HomeServe.
Electrical Inspection ($200-$500): If there are concerns over the quality of the electrical system/installation, you can hire an electrician for further evaluation
Plumbing Inspection ($200+): If there are concerns over the quality of the plumbing lines, you can hire a plumber for further evaluation and, for an additional cost, scope the plumbing lines
Pool Inspection (varies)
I usually recommend starting with the standard inspections and adding additional inspections as needed. If you want to include a bunch of specialty inspections in addition to the standard inspections, you’ll want to make sure your contract provides enough time in the Inspection Period to complete all of them and set that expectation with the seller up-front, especially if the home is occupied. Keep in mind that even with a full Inspection Contingency in place, with the right to negotiate for repairs and credits, there’s no guarantee that after paying thousands of dollars for inspections that the seller will agree to repair, replace, or credit everything you ask them to.