Impact of Coronavirus on the Real Estate Market

Question: How will the threat of Coronavirus impact the real estate market in 2020?

Answer: I wasn’t planning to write this, it seems a little click-baity (now my “Trump’s Impact on Real Estate” column has some competition!), but I got the question four different times in under 24 hours last week so here I am writing about it.

Too Early To Know

Nobody knows how Coronavirus is going to impact the real estate market over the next month or the next ten months because we don’t know what the real impact of the virus will be on public health and markets. According to President Trump, it could disappear one day “like a miracle” and according to others, we could face a devastating pandemic.

Yesterday’s stock market closed down nearly 8% and this morning, the Futures were up almost 4%. Uncertainty slows the real estate market down and the only certainty right now is how uncertain the markets and public are about COVID-19. It’s hard to see how this type of uncertainty doesn’t create a drag on real estate across the country, the question is how long it will last.

Beyond the uncertainty, you have the very real impact of a sharp decline in investment/retirement accounts that many people use for down payments. With many accounts down double digits over the last two weeks, some buyers may reconsider their decision to sell stocks right now.

On the other hand, interest rates are historically low, hitting all-time lows last week, and the real estate market across the greater DC Metro has been on fire since January so it’ll take a major shift in demand to slow things down as we head into peak buying season.

What I’ve Heard

So far, what I’m hearing from clients, colleagues, and other industry partners (lenders, title, etc) is that buyers are hoping the Coronavirus slows the market down so they can have a better opportunity to buy, but there seems to be very few people actually pulling out of the market or reducing offers because of it.

Currently, buyers still seem more motivated by historically low rates and lack of buying opportunities than they are concerned that the likely impact of the virus. It seems that long-term confidence in local real estate is still a stronger influence on people’s decisions.

I think this mindset could change quickly, having broad negative effects on the local real estate market, if markets continue to tank, systematic failures in the market appear (e.g. Mortgage-backed Securities in 07-08), or people begin experiencing more direct effects of the virus like work/school closures or people they know testing positive. This is an important change to watch for if you’re considering putting your home on the market in the coming weeks.

Don’t Overvalue Speculation

It’s important to distinguish between fact and speculation and not overvalue speculation. If you spend 30 minutes online today, you’ll be able to find an assortment of well-supported reasons why the markets is on the brink of another recession as well as well-supported reasons why everything will be just fine, with growth ahead.

Your decision should be rooted in things you can rely on like how long you can live happily in a home (nothing creates value like longer ownership periods) and what your best alternatives are to buying (renting, staying put) or selling (do you have a better utilization of your equity?).

Of course, you want to consider the national, regional, and local economy as well as neighborhood trends, development pipelines, and other factors that will influence appreciation/depreciation potential, but be careful not to overvalue speculation.

Early Real Estate Market Conditions Are…

Question: How is the market shaping up for 2020? Have things cooled down or picked up where they left off last year?

Answer: The early Arlington/Northern VA market conditions are…crazy. After a fast and furious 2019 for condos and detached/townhouse properties in Arlington, it looks like we’re in for another year of fast-paced sales and strong appreciation.

In some of the most in-demand markets (e.g. R-B Corridor condos and $800k-$1.2M detached) pre-inspections (buyers do an inspection before making an offer), zero contingencies, and escalations 3-10% over the asking price no longer guarantee an accepted offer because there are multiple buyers offering those terms.

From the activity I’ve seen on both the buyer and seller side of this market, it seems like sellers can safely increase their asking price by 3-5% over what 2019 sales support and soon enough appraisers will have the necessary data points to support these increases, thereby eliminating much of the current appraisal risk for financed purchases.

Activity Over The Last 30 Days

The market fired up within the first couple weeks of January, but you know I never like to make statements about the market without also backing it up with data. So here are some highlights on the type of activity we’ve had over the last ~30 days (excluding relisted homes, Coops, and age-restricted housing). The data is of 7AM Tuesday February 18:

  • 223 homes listed for sale
  • Of those 223 homes, 150 (67.3%) are sold or under contract
  • Of the 150 homes sold or under contract, only 16 (10.7%) were on the market for 10+ days and 97 (64.7%) were on the market for 6 days or less (indicative of multiple offers)
  • Of the 73 homes still for sale, 37 (50.7%) are still within their first week on the market (high probability of going under contract soon) and 16 (21.9%) are $1.7M+
  • Of the 25 that sold, only one sold for below the original asking price and it was in a condo building with a major pending lawsuit that makes it nearly impossible for a buyer to get a loan. 7 have sold for over ask.
New Supply Increasing, Total Supply Decreasing Less

There is a glimmer of hope for buyers amongst all the competition and price appreciation. Arlington had a YoY increase in new listings for December ’19 and January ‘20 for the first time since October ‘18 (Amazon HQ2 announced in November ‘18). While demand is still outpacing new supply, resulting in 45(!) consecutive months of YoY decreases in housing supply, the drop in YoY supply was below 20% for the first time since October ’18 (-8.8% drop). So what does that mean in plain English? It’s getting less bad.

Where Do We Go From Here?

Here are some of my thoughts about what the rest of the spring/2020 might look like:

  • Once more of the early sales close, asking prices should adjust upwards to reflect the current market so we won’t see the same volume of offers but I expect prices to maintain the recent increases and buyers will continue offering very attractive terms to sellers (little or no contingencies, quick closes, etc).
  • In many cases there are 5-10 losing offers for every sale so those buyers are still active and possibly even more motivated, hence why I don’t see the market slipping in a couple of months after an early surge
  • I think there’s a good chance that we continue to see YoY increases in the number of new listings as homeowners decide to take advantage of the price increases over the last 18 months to move up, downsize, or relocate to a less expensive market
  • Low interest rates, strong stock market/economic performance, and the long-term local growth potential from Amazon, Nestle, and others will keep demand high
  • I’m interested to see how the elections impact market conditions this year. Usually buyers freeze up and sellers hold back on listings in the months leading up to a national election. I wouldn’t be surprised to see demand dip this fall given how much negativity will surround this year’s campaigns. However, with so much momentum in the market and if supply also drops, I’m not confident that it will result in buyers paying less.

For those of you currently looking or planning to look outside of the Arlington/Alexandria markets hoping for an easier buying experience, I’m sorry to say that homes are moving quickly with multiple offers and favorable contingency terms (for sellers) all over Northern VA. Expect this level of activity/competition to last through May/June.

If you’d like to discuss the best buying or selling strategies in the current market, feel free to email me at Eli@EliResidential.com to schedule time to talk.

Resale Value of New Construction

Question: We bought a new home in Arlington five years ago and are considering selling, but we’re concerned about the resale value of new homes given the amount of newer homes being built in the market. Do you have any data on how new homes do when they resell for the first time?

Answer: The new/newer construction market is the only Arlington sub-market that is anywhere close to properly supplied, with almost 4.5 months of inventory available (number of homes for sale divided by average sales per month = months of inventory).

Most housing economists say that a market is at balance for buyers and sellers when there is six months of inventory. For comparison, sub-markets like one-and-two-bedroom condos, <$1M detached homes, and townhouses each have between one and three weeks of supply.

New Homes Are Appreciating…

There’s a logical case to be made that when a new home (built within the last decade) gets resold, it will struggle to compete with other brand-new homes given how similar these homes have been over the last ten years, combined with the amount of supply in the market. Fortunately for owners of recently built homes who may sell in the near future, that logic does not prevail and new homes are being sold for more the second time around.

…But Just A Little

There aren’t a ton of data points yet (most people buying expensive new construction will be there for a long time), but just enough that I think we can start to get a good idea of how new homes (that aren’t new anymore) from the past decade perform when they’re resold into a market with many similar new homes.

To study this, I identified homes built since 2012 that have since resold, excluding homes that sold within one year of their original purchase or any homes with major improvements since the original purchase or clearly left in disrepair. Here’s a summary of my findings:

  • 53 homes met the criteria, nearly all in North Arlington
  • Average appreciation on resale was 6.7%
  • Average annualized appreciation was 2.1%
  • Only seven homes sold for less than they were bought
  • Sixteen homes sold for at least 10% above what they were bought
  • On average, it took 64 days for these homes to go under contract, about 30% longer than the entire detached home market during that same period
Cause For Concern?

For those who own a new(er) home, you may be underwhelmed by these numbers relative to what the rest of the market is doing — compared to other detached homes in the Arlington market, new homes are appreciating at a noticeably slower rate.

Part of that is due to the fact that there’s a much higher supply of similar new/newer homes for sale so that will naturally keep prices more stable. Another reason is that it takes longer for the upper end of the market to appreciate, so the growth we’ve seen <$1.25M hasn’t impacted the $1.5M+ market as much.

So is a new home a bad investment because it appreciates less than other homes? Not at all.

First, one of the reasons buyers pay a premium for new/newer homes is because your maintenance and repair costs should be significantly lower for the first 10-15 years. Investment value isn’t only about what you buy and sell for, it’s also about how much you spend between the two transactions keeping the house operating (often more valuable than appreciation).

Second, for most families, a new/newer home offers square footage and a floor plan they can’t find anywhere else so the non-financial/quantifiable benefits are significant. Opportunities to customize to taste also factor into the non-financial/quantifiable return that owners may receive.

The new construction market operates differently from the rest of the housing market. If you have any questions, don’t hesitate to reach out to me at Eli@EliResidential.com. And a quick plug for two custom homes on ¼ acre lots I’m selling in Bellevue Forest, being built by James McMullin, Arlingtonian and third-generation Arlington developer/builder. Demolition and excavation will start in the next month!

2020+ Interest Rate Predictions

Question: Do you expect interest rates to remain low in 2020?

Answer: Mortgage rates increased sharply in 2018, peaking at 7+ year highs in the fall of 2018, and most experts expected that trend to continue into 2019 and for 30yr rates to clear the 5% mark for the first time since spring 2010. However, changes in economic policy and financial markets pushed rates down at the end of 2018 and throughout 2019, coming close to all-time lows in the 2nd half of 2019.

Average 30yr Fixed Mortgage Rate Since 1971
Average 30yr Fixed Mortgage Rate Since 2010
Rates in 2020+

The Mortgage Bankers Association and Freddie Mac each predict that rates will remain low, right around current levels, through 2021 with an average 30yr Fixed Rate hovering around 3.7-3.8% through that period. The Mortgage Bankers Association predicts that rates won’t start increasing until 2022, when they’re predicting the average rate to increase modestly to 4.1%.

If these projections are accurate, it should support strong price growth over the next few years in Arlington, Northern VA, and the greater DC Metro.

However, keep in mind that just over 12 months ago, most experts predicted that mortgage rates would be over 5% by 2020 and, according to Freddie Mac, the average 30yr Fixed Rate last week was 3.64%. Changes in the global or US economy, the election, and the stock market can all change the course of rates in 2020 and beyond.

Lender Advice

If you’re considering purchasing in 2020, I wrote a column a few years ago about the value of a good lender that I’d encourage you to review. If you’d like to talk to somebody, I suggest reaching out to Jake Ryon of First Home Mortgage at JRyon@firsthome.com.

If you’d like to meet to discuss buying or selling in the area, don’t hesitate to reach out to me at Eli@EliResidential.com.

Home Warranty Recommendation

Question: Do you think it’s worth it to buy a home warranty and, if so, is there a provider you recommend?

Answer:

What Is A Home Warranty?

Home warranties protect many of the systems in your home including things like the HVAC (heating and cooling) and appliances. If one of those systems stops working while you’re covered, the warranty provider will repair or replace the system or cut you a check to replace it yourself. One year of protection generally ranges from a few hundred dollars to one thousand dollars, depending on the scope of coverage.

The most common time to purchase a home warranty is for/by a buyer when they’re buying a home. However, sellers can also purchase a warranty and transfer the coverage to a buyer and also benefit from coverage if something comes up on the home inspection. Home owners can also buy a warranty at any time if they want coverage. The provider usually requires a month or so between the time of purchase and coverage taking effect to prevent people from buying a warranty when something goes wrong (pre-existing condition).

Are They Worth The Cost?

I generally find home warranties to be worth the cost for at least the first year of ownership. If the home you’re buying has old systems, consider buying multi-year coverage. Think of the expense like you would home or auto insurance. If you’re somebody who prefers to pay higher premiums for more coverage/peace of mind, a home warranty probably makes sense for you.

A common scenario I see where home warranties pay-off is with HVACs when a new owner transitions from heating to air conditioning in the spring. During the winter, it’s often to cold outside to test the air conditioning during the home inspection so AC issues may present themselves after closing. With a home warranty, those issues should be covered.

Recommendation: Super Home Warranty

Warranty companies have a pretty bad reputation with complaints ranging from difficulty filing claims, low quality contractors, and lengthy delays. I actually stopped recommending warranties to clients because of these issues.

However, in the last couple of years I have had fantastic experiences with a newer home warranty provider called Super Home Warranty and I would highly recommend them. They’re responsive, have a good user platform/app, use high quality contractors for repairs, and I’ve yet to run into unfair claim denials.

They also have some really valuable inclusions that other warranty companies don’t offer. They have a contractor concierge that gives you access to their vetted contractors for any work you need like tree removal, roofing, plumbing, and remodeling. Super also offers a bunch of helpful services for $75 like re-keying locks, carpet cleaning, and HVAC cleaning.

It’s worth noting that I don’t get anything from Super for recommending them.

Merry Christmas and Happy Holidays!
The Real Story About 22202 Property Values (Amazon Zip Code), Part 1

Question: I have read articles about the 22202 zip code suggesting everything from extreme appreciation to homes now selling for pre-Amazon prices. Can you shed some light on what’s actually happening in that market?

Answer: After months of articles about extreme appreciation in 22202, the Amazon HQ2 zip code making up neighborhoods like Crystal City, Pentagon City, Aurora Highlands/Hills, and Arlington Ridge, there was an article published last week by the Washington Business Journal claiming that prices are now below pre-Amazon HQ2 announcement levels. The supporting data was that median sold price in November 2019 was 12% lower than November 2018 prices.

This is yet another example of lazy reporting on Amazon’s impact on local real estate with the sole intention of generating clicks. First of all, if you use the average sold price instead of median, there was a 2.3% increase in prices from November ’18 to November ’19, not a 12% decrease. Second, with a drop in total sales from 30 in 2018 to just 12 in 2019, with prices ranging from $255,000 to $1,145,000, there’s just not enough data to draw any sort of reliable conclusion on market performance by comparing the two months.

To generate reliable real estate trends, you either need a lot of data points (sales) or drill into smaller data sets. With that said, let’s dive into some real analysis on how Amazon HQ2 has impacted residential real estate for its new neighbors in 22202.

Market Make-up

The 22202 market offers a diverse supply of housing. This year, condos have sold from as little as $195,000 for a 500sqft studio to $1,250,000 for a 2,900sqft 3BR/3BA penthouse. The least expensive detached home sold for $630,000 to be torn down and the most expensive a 6BR/4.5BA for $1,600,000.

Homes in the area tend to be pretty old with most detached homes being built prior to the 1960s and only one condo building has delivered since 1990.

Of the 135 homes to sell so far in 2019, 76 were in condo buildings, 47 were detached homes, and 11 were townhouses.

Condo Market

Inventory levels in the 22202 condo market took a huge hit, dropping 40% from 130 sales in 2018 to just 76 in 2019 (with two more scheduled to close in 2019). The decline is attributed to owners choosing not to sell (holding out for more appreciation), certainly not lack of demand.

As a whole, the average sold price in the 22202 condo market increase 22.8% ($402k to $492k) and median price increased 18.6% ($379k to $450k) for properties that went under contract after Amazon’s November 13 HQ2 announcement.

However, don’t think individual property values appreciated ~20%. The entire market is skewed higher because of a big drop-off in less expensive studios (60% decline) and 1BRs (33% decline).

Let’s take a deeper look at how property values actually changed by looking at similar sales within comparable buildings. I’ve grouped all buildings along Arlington Ridge and Army Navy Drive, along Crystal Drive, and both Eclipse buildings so that we have larger sample sizes to compare pricing activity from within comparable buildings. I limited this data set to one- and two-bedroom units.

The percentages for each building group represent the change from properties sold in 2018 and 2019 that went under contract pre-Amazon announcement vs post-Amazon announcement (Nov 13 2018).

Building GroupAvg $/SqftAvg Sold PriceAvg Days on MarketAvg SqftAvg Condo Fee# Sold
Arlington Ridge – Army Navy+7.9%3.8%-36.4%-3.1%1.3%-9.5%
Post Amazon$359$385,450331,064$70938
Pre Amazon$333$371,198521,098$70142
Bella Vista+4.4%37.7%-65.4%28.8%31.8%-58.3%
Post Amazon$462$579,800101,235$7345
Pre Amazon$443$421,02529959$55712
Crystal Drive+23.5%12.3%-79.9%-10.2%8.7%54.5%
Post Amazon$506$558,618291,112$91017
Pre Amazon$410$497,5321451,238$83711
Eclipse+8.1%26.5%-65.5%16.4%14.4%-50.0%
Post Amazon$526$525,184161,000$47519
Pre Amazon$487$415,20146860$41538

There’s a ton of interesting information packed into this table, here are some of my key takeaways:

  • The two groups with enough sales to offer reliable data, AR-AN and Eclipse, suggest actual appreciation of around 8% based on $/sqft. I think $/sqft is a better measuring stick than sold price in this case.
  • Across all condo buildings, the average price of 1BR condos increased 9.8% and 2BR condos increased 12.1%
  • Not shown in this table, but calculated elsewhere, is that the standard deviation of the average sold price increased by 49% and 72% in one-and-two-bedroom condos, respectively. This highlights the variability of pricing in the area and why it’s important to drill down into the data instead of just looking at overall average and median price trends.
  • In my personal market assessment, by comparing individual sales of similar units, I believe actual property value appreciation in the 22202 condo market is 8-12% depending on factors like property condition, condo fees, bedroom count, and age of building.
  • Sales activity increased significantly along Crystal Drive and decreased only slightly along AR-AN, as long-time owners saw an opportunity to sell condos that were previously difficult to unload due to building age and high condo fees. The 80% drop in days on market along Crystal Drive is incredible.
  • I’ve said for years that I thought the Eclipse buildings (3600 and 3650 S Glebe) offer some of the best long-term value in Arlington/Alexandria, and I still believe that to be true even after Amazon price increases. It would be great if I listened to my own advice and bought an investment property there…

I’ll provide a similar analysis of the detached single-family home market in Part 2, but the next two Tuesdays are Christmas Eve and New Years Eve, so I may wait until January to publish it. If you have any questions about my analysis or you’re considering selling a condo in 22202 and would like some more specific analysis done of your property, feel free to email me at Eli@EliResidential.com.

Tips To Start Your Home Search

Question: We are looking forward to buying our first home in 2020. Do you have any recommendations on how we should start the home buying process?

Answer: Google “home buyer tips” or “what to know before buying a home” and you’ll find plenty of advice on the topic, so I’ll include some suggestions I don’t see on most of those lists and also put my own spin on others that you have heard before.

Weighted Criteria

It’s easy to come up with 3-5 things that are most important to you, but challenge yourself early to come up with 12-15 things that are important to you. Then give yourself 100 points and allocate points to each based on how important they are to you and you’ll end up with a weighted criteria list to help you focus your search and objectively compare properties.

If you want to take it to the next level, bring your weighted criteria list with you on showings and score each house out of the total points allocated to it.

Length of Ownership

This is one of the most important conversations to have with yourself/your partner. You should focus on the following:

  1. Likely length of ownership
  2. Difference in criteria for a 3-5 year house vs a 10-12+ year house
  3. Difference in budget requirements for a 3-5 year house vs a 10-12+ year house

Appreciation is not guaranteed and difficult to predict, but the value of longer ownership periods is undisputed. One way longer ownership adds value is the potential for eliminating one or more real estate transactions, and the associated costs (fees, taxes, moving expenses, new furniture, etc) and stress that comes with moving, over the course of your lifetime.

If you have an opportunity to significantly increase your length of ownership by stretching your budget, it’s often justifiable. On the other hand, if your budget or future plans restrict you to housing that’s likely to be suitable for just 3-4 years (and buying now still makes sense), it’s generally better to stay under budget.

Influencers (not the Instagram ones)

Family, friends, colleagues…they’re all happy to offer opinions and contribute to your home buying process, but the input can be overwhelming and unproductive if you don’t set boundaries. Try to determine up-front who you want involved in the process and how you’d like them to be involved.

Think about how you’ve made other major decisions in life – what college to attend, what kind of car to buy, where to get married, whether to change jobs – and if you’re the type of person who likes input from your friends and family, you’ll likely do the same when buying a house. Plan ahead with those influencers so their input is productive.

Does Your House Exist?

Before jumping too far into the search process, spend a little bit of time searching For Sale and Sold homes on your favorite real estate search website/app to see if the homes selling in the area you want and within 10% of your upper budget are at least close to what you’re looking for. If not, spend some time adjusting price, location, and non-critical criteria to figure out what high-level compromises you’ll need to make and then compare those compromises to your current living situation and/or continuing to rent.

Know Your Market

We’re in a strong seller’s market right now with low supply, high demand, and increasing prices. Each sub-market behaves a bit differently and comes with its own unique set of challenges and opportunities, so take time early on to understand the sub-market(s) you’ll be involved in and what you’re likely to experience. This is something your agent should be able to assist with.

Pre-Approval & Budget

There is a lot of value in working with a lender early on in the search process. For starters, you’ll have somebody who can provide real rates and advice based on your specific financial situation/needs. A lender can only do this if they’ve reviewed your financial documents and credit. The more you put in, the more you get out.

You’ll need to have a lender pre-approval to submit an offer (seller has to know you qualify for the purchase you’re offering to make) so if you have to do it anyway, why not doing it early on so you get the most value out of your lender? It also means that you’ll be prepared to make an offer if you find the right home before you expect to be ready.

Given how competitive the Arlington/Northern VA/DMV real estate market is, the quality of your pre-approval can make a big difference when you make an offer. You should strongly consider partnering with a local lender with a great reputation to give yourself an advantage (or not put you at a disadvantage) when making an offer. Pre-approval letters from big banks and online lenders don’t go over as well in our market. If you’re looking for a recommendation, consider Jake Ryon of First Home Mortgage (JRyon@firsthome.com).

Find an Agent

The least surprising suggestion on this list! Agents come in many different forms and finding somebody who suits your personality and goals is important. Ask friends, colleagues, and family for referrals and meet with multiple people until you find the right fit.

The worst thing you can do is choose your agent based on whoever responds to an online showing request faster. A good agent can provide a ton of value being involved in your buying process 3-6+ months before you’re ready to buy. Be wary of anybody who wants you to “wait until you’re ready” before working with you.

If you’re considering buying (or selling) in the DMV in 2020 and would like to meet, feel free to email me at Eli@EliResidential.com!

How To Choose A Title Company

Question: Do you have any guidance on choosing which Title Company to work with when buying or selling real estate?

Answer: Title companies handle the legal side of the transaction such as ensuring the buyer has clear ownership, reviewing and recording the deed, issuing title insurance, and preparing paperwork for the buyer and seller to sign at closing. They operate in the background of transactions and usually the less you hear from them, the better. They are not legal representatives of either party and objectively support the buyer and seller.

In Virginia (and DC/MD), buyers select the title company. In some cases, a seller may want to use their own firm/attorney and will request a “split settlement” but that is less common and should be done for a good reason.

Most people don’t know a title attorney or get a referral from a friend, so how do you go about choosing your title company?

Your Real Estate Agent

You shouldn’t be hiring a real estate agent because they’re the first person to raise their hand to meet you at a property you found online. Among the reasons you hire an agent should be because you trust their advice and want access to their network of professionals who are relevant to a real estate transaction.

Your agent should be the first person you turn to for a recommendation on the title company. He/she has likely worked with dozens or hundreds of title companies before and hopefully has one or two to recommend.

It’s perfectly fair to ask your agent why they’re recommending a specific title company.

Fees

The highest fee associated with a title company is title insurance and those prices are set by the insurance company, not the title company. Different title companies work with different title insurance companies, but rates are similar (or identical) amongst them. If you see big differences in title insurance between two title companies, one may be quoting a basic vs enhanced coverage (buyer’s choice).

I rarely see discretionary fees charged by the title company vary by more than a few hundred dollars. You can always find a cheaper option for title services, but the legal support on a real estate transaction worth hundreds of thousands or millions may not be a smart place to save a few hundred dollars and risk quality of service.

Location

It’s important to use a local title company who is familiar with local real estate and tax practices, not just licensed to practice here. I use one title company (Universal Title) for Northern VA transactions and one title company for Washington DC and Maryland transactions (District Title).

Attorney Experience

Most sales follow a pretty standard, predictable process that inexperienced title companies/attorneys can handle but occasionally something unexpected comes up that requires experience/expertise to identify and resolve an issue. If problems do surface, having access to an experienced local title attorney can be the difference in whether or not the problem is even identified, whether a sale closes, and/or how much time and stress it takes to resolve the issue.

Back-Office Support

The quality and experience of the support staff is equally as important as the attorney. Look for a title company who has experienced processors who have been with the company for a while. Title companies who can afford to cut fees below their competition likely do so by not having a full supporting cast or not paying to hold onto experienced processors.

Insurance Provider

One of the key roles of a title company is that they issue title insurance, which protects your ownership interests in the property from any future claims. Most title companies have one insurance company they issue policies for such as First American, Old Republic, and Chicago Title.

Most buyers are indifferent about their title insurance provider, but you may want to confirm who the title company uses to do some background on them such as size (market share) and how long they’ve been in business. I generally prefer larger insurers who have been in business for a long time.

If you’d like a recommendation on a title company in the DMV, don’t hesitate to reach out to me at Eli@EliResidential.com.

The Missing Ultra High-End in Arlington

Question: I recently saw a home listed in Arlington for almost $30M. Are there neighborhoods in Arlington with ultra-expensive homes like this?

Answer: We hear a lot about the “missing middle” in Arlington housing, but there’s another market that Arlington struggles to support that nobody is talking about…the super-rich. Sure we have plenty of homes that sell for $1M-$2.5M (457 sold in 2019) but in 2019 there were only seven sales over $2.5M and just one over $3M (and that was a sub-dividable lot). So what gives with everybody calling Arlington “expensive” if we can’t support the super-rich? Where do they live? (I hope my sarcasm is coming across…)

405 Chain Bridge Rd Arlington VA 22207. Listed by Mark Lowham, TTR Sotheby’s.

Arlington’s Most Expensive Homes

The recently listed $28.5M home, by Mark Lowham of TTR Sotheby’s, on the Potomac River side of Chain Bridge Rd is an anomaly in Arlington. Outside of the prestigious Country Club Hills neighborhood and Turnberry Tower penthouse-level condos, sale prices in Arlington rarely eclipse the $3M mark and even in those communities the handful of $3M+ sales historically top out at $4M. And then you have a very small pocket of ultra-luxury homes at $5M+ along the Potomac, off Chain Bridge Rd, which fall within Arlington County, but actually have a Mclean mailing address and zip code (22101).

Note: There are dozens more homes in Arlington worth $3M-$5M that just haven’t been sold. Many are custom built in the last 10-15 years with the original owners still occupying them. There are also a handful of private sales that aren’t entered into the MLS because they were sold off-market.

Why Doesn’t Arlington Have Ultra-Expensive Homes?

So with so much wealth and close proximity to DC, why doesn’t Arlington have more ultra-expensive homes? The answer is lot size.

For anybody that has looked for a home with a little elbow room/privacy in Arlington, you’ve reached the unfortunate conclusion that it’s very difficult to find anything with more than ¾ acres (even ½ acre is highly coveted) and there are just a small handful of properties with more than 1.5 acres. Smaller lots make it difficult to build enough house to justify a $5M+ price tag.

Where To Spend $5M+?

So where do people with $5M+ to spend on a home live? In Northern VA, most of those homes are in Mclean or Great Falls, as well as further west in Loudon County’s horse/wine country. DC’s most popular ultra-expensive neighborhoods are Georgetown and Kalorama, with a spattering of other neighborhoods west of Rock Creek Park. In Maryland you’ll find the most expensive homes in Potomac along River Rd, as well as Chevy Chase and Bethesda.

Enjoy Some Photos

For those of you who are here just for the pictures, here you go! I’ve linked to $5M homes either for sale or sold in the last few years in the area:

Northern Virginia

Washington DC

Maryland (Montgomery County and Eastern Shore)

How Agents and Agent Teams Are Structured

Question: I’m in the process of searching for a real estate agent and having trouble understanding the different organizational structures. Can you explain how it works?

Answer: Most real estate agents operate as independent contractors within their brokerage (office), thus have autonomy to operate their business/service model as they choose. With over 12,000 Realtors in the Northern Virginia Association of Realtors alone, the organizational structures and business models vary widely to suit an agent’s style of business and/or target clientele.

I think it’s almost as important for home buyers and sellers to learn about their prospective agent’s operating model as it is to make sure they know your market. An agent’s operating model will impact your experience and you need to make sure it aligns with your expectations.

I’ll break down some of the organizational structures that are most common today so you have an idea of what to look for.

Brokerage

At the top of the organizational structure is the brokerage, which is best described as the office your agent works for. The brokerage is the legal entity involved in the transaction and when you sign a Buyer Representation or Listing Agreement, it’s actually with the brokerage, with your agent as the assigned representative of the brokerage.

Currently in the DC Metro, most brokerages are made up of multiple agents, often dozens to hundreds, and function like a shared office. An agent cannot operate independently outside of a brokerage, but an individual agent can have their own broker’s license and operate an independent brokerage.

Most agents operate as independent contractors within their brokerage, but there are some models, Redfin being the most popular, where agents are employees.

Agent Models

In most cases agents operate individually or within a team, structured in a some common ways:

  1. Individual Agent, No Support: Many agents work independently without any sort of support staff. The advantage for clients is that you always know who you’ll be working with and who is handling every detail of your transaction. The main disadvantage is that there is a single point of failure if that person is unavailable.
  2. Individual Agent With Administrative Support: Some independent agents hire one or more people to support administrative tasks like scheduling and marketing. Some brokerages also offer this type of administrative support to their agents. This should be an advantage over #1 because the agent has more time for high-value tasks, but it also requires the administrative support to be on top of things and strong communication between agent and admin.
  3. Team Partnership: Two or more experienced agents with strong individual businesses may partner to share some administrative support costs and build a stronger brand together. For the client, it has many of the same qualities as #2, but there’s usually an added benefit of knowing that there’s at least one other experienced agent available as back-up in case your agent in unavailable.
  4. Team Lead With Coordinators: An individual agent or partnership with a large book of business that uses specialized buyer and seller coordinators to support client activities. An advantage to clients is that the transaction is generally led/directed by an experienced agent and that there is no single point of failure, you’re working with a support team. A disadvantage is that some or many high-value pieces of the transaction are handled by coordinators, not the lead (experienced) agent.
  5. Team “CEO” With Junior Agents: An experienced agent who acts more as a CEO, overseeing the operations of a large team of agents, and personally handling very few transactions, if any. Clients should benefit from systems and processes the “CEO” agent used to become successful, imparted on the junior agents. A disadvantage is that these teams often have dozens or more agents and the experience of those agents varies widely and don’t necessarily reflect the talent of the “CEO” agent.
What Should You Ask?

It’s important for you to understand how your real estate agent operates and it shouldn’t be hard to find out by asking some simple questions.

  • Will I work with anybody else during the transaction?
  • Will anybody else work on my transaction?
  • What happens if I need something when you’re unavailable or out-of-town?

I hope this has been helpful for anybody starting out their search for an agent or just generally confused by how the industry is structured. As always, if you would like to meet with me about buying, selling, or renting in Arlington or the surrounding DC Metro communities, feel free to email me at Eli@EliResidential.com.