Why Can’t I Find A House!?

Question: I’m prepared to make a strong offer in Arlington’s hyper-competitive market, but I can’t even find a house to make an offer on! Why is every home on the market either old and too small or new and too big??

Answer: While debates about Missing Middle and tear-downs continue, I thought it would be helpful to look at why Arlington is such a difficult place for most families to find good housing options. Most of Arlington’s single-family housing problems stem from when the majority of homes were built – before 1960 and within the last decade. Only 17.8 % of single-family homes sold since 2016 were built between 1960 and 2009!

Too Old, Too New

According to Arlington’s 2019 Profile, there were 28,500 single family detached homes in the County and according to public records, ~80% of those homes were built prior to 1960 or since 2010. Why is that a problem?

Many homes built prior to 1960 are functionally obsolete for most families (“the reduction of an object’s usefulness or desirability because of an outdated design feature that cannot be easily changed”) and homes built since 2010 have an average price of nearly $1.8M over the last 18 months.

Most homes built in Arlington in the 1940s and 1950s (with the original footprint) are plagued by 2-3 small bedrooms with small reach-in closets sharing one small bathroom, small enclosed kitchens, and small basements with low ceilings. They also lack the openness desired by most families in today’s market. Unfortunately, there’s very little one can do to bring these older homes up to today’s standards without extensive/expensive remodeling and/or expansion.

The economics of building a new home in the last decade doesn’t support the construction of a more modest homes (3,000-4,500sqft) so most new homes are built with 5,000-6,000+ square feet and are priced well above most budgets.

Just Right

It wasn’t until the 1980s and 1990s that Arlington homes were consistently built with designs more suited to today’s buyer including things like attached garages, master suites, and combination kitchen/dining spaces. While these 1980s-1990s designs may not be perfect, it makes for more reasonable compromises at prices many more Arlington families can afford.

Unfortunately, over the last four years, there have been fewer single-family homes for sale that were built during the 1980s and 1990s (4.3% combined) than any other decade until the 1910s.

Housing Changes Over Time

I put together some charts to highlight how home sizes have changed through each decade as well as how the average cost of a home changes by the decade it was built. These charts are based on Arlington single-family detached sales since 2016.

Note: Older homes that have been remodeled/expanded and sold are included in this data so the average size, bedroom, and bathroom count for older homes is higher than what you would expect from the original designs. Most pre-1960 homes were built with three bedrooms, one bathroom, and under 2,000sqft.

Note: Total finished square footage includes any finished basement space.

Here’s the data table for each of the charts:

Decade Built# SoldAvg PriceAvg BRsAvg Full BAsAvg Finished Sqft
<1930355$945,3453.62.42,302
1930s562$899,8673.52.42,315
1940s987$827,1973.52.32,121
1950s961$870,4533.72.52,413
1960s232$915,8184.22.92,760
1970s104$944,5764.02.82,919
1980s86$1,006,0184.23.03,193
1990s96$1,184,4094.63.23,641
2000s229$1,430,9054.94.04,697
2010s584$1,638,6965.24.65,004
Total4,196$1,022,3724.02.92,965
Using This Information

For those of you currently searching for a home or planning to start your home search, hopefully this information can be used to help you understand how likely/unlikely it will be to find the type of home you’re looking for and be more prepared to act decisively when the right home hits the market.

For those of you who own a home that falls within the middle-ground many buyers are seeking, you should have an even more favorable position within an already favorable market for sellers.

If you’d like to discuss buying or selling strategies, don’t hesitate to reach out to 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 20% Down Payment Myth

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.

Mortgage Insurance

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.