Answering Your Appraisal Questions

Question: Can you explain the basics of the appraisal process?

Answer: I sat down with one of the best local lenders, Jake Ryon at First Home Mortgage (Jryon@firsthome.com), and came up with a list of some of the most common questions we hear about appraisals, which I’ll answer below:

What is an appraisal?

An appraisal is an objective assessment of a property’s value, conducted by an unbiased third party who does not have a stake in the sale of the property.

Below is an example of the core component of a recent appraisal in Arlington, the Comparable Sales Analysis. It compares objective features of the subject property (the home being assessed by the Appraiser) to the same features of similar/comparable homes that have sold nearby to reach a valuation of the subject home based on the Appraiser’s determination of how the difference in features change the value of the homes.

Why are appraisals done?

In most cases, the bank/lender is the primary investor in a home purchase. If you put 20% down, the bank is investing the other 80%. Appraisals are done to ensure that banks are making responsible investments in homes they otherwise know very little about and to make sure they do not lose substantially if you, the borrower, default on the loan and the bank is forced to take over (and sell it).

In short, the bank conducts an appraisal to make sure they agree with the value (aka the agreed upon sale price) you’ve placed on the home.

Who does the appraisal?

Anybody can hire a licensed appraisal to provide an opinion on a property’s value, but most appraisals are done through a bank/lender. Lenders have a pool of independent, licensed appraisers or appraisal companies that receive a notice when an appraisal is needed for a loan and an appraiser from the lender’s pool claims the job.

The selection of the appraiser is designed to be a blind selection process to maintain independence and objectivity so that lenders can’t handpick the appraiser they want and potentially influence the results.

Is an appraisal required? What is an “appraisal wavier”?

Most lenders require an appraisal to approve a loan, but in some cases an “appraisal waiver” is issued if Fannie Mae/Freddie Mac determine that that they do not need the additional assessment of an Appraiser because the sale price falls within an acceptable range based on sales history and reliability of comparable sales.

Waivers may also be given if the borrower has a high enough down payment that enough of the risk of overpaying for a property is being absorbed by the buyer.

How long does an appraisal usually take?

When Appraisers are not overwhelmed with orders and a lender submits a rush order right away, I’ve seen appraisals completed in as little as a few days. However, in most cases, appraisal reports are usually completed within 1-2 weeks of the order being placed by the lender.

What effect does a low or high appraisal have on a property sale?

If the appraisal value comes in at or above the purchase price, the bank is happy and the loan proceeds along the approval process. If the appraisal value is below the sale price, the bank will require the sale price to be reduced to the appraisal value or that the buyer put more money down to satisfy the loan-to-value ratio.

In most cases, the amount of additional money a buyer needs to put down is equal to the percentage the bank is contributing to the purchase (e.g. 80% if you’re making a 20% down payment or 95% if you’re making a 5% down payment) multiplied by the difference between the contract’s sale price and the appraisal value. However, this additional contribution can vary or may not be needed depending on your down payment amount, type of loan, and other details of your loan arrangement.

What happens if we disagree with the value or it comes in low?

The borrower/buyer is the only party who can challenge an appraisal and they must provide other (better) comparable sales, facts, or justifications to support an adjusted valuation.

I have dealt with some frustrating scenarios as a listing/seller’s agent when an appraisal came in low based on factually incorrect information on the appraisal report (incorrect bedroom count, square footage, etc) and there is nothing that can be done unless the borrower/buyer requests a revision.

What is an appraisal contingency?

An appraisal contingency is one of the three “standard” contingencies in the residential real estate contract (inspection, financing, and appraisal are the “big three”). It protects the buyer in the event a property appraises for less than the sale price by giving the buyer the ability to renegotiate the sale price or void the contract without losing their deposit.

Who pays for the appraisal and how much does it cost?

Buyers pay for the appraisal as a pre-closing expense and the cost usually ranges from $500-$1,000 depending on the type of loan and value/complexity of the property.

Does appraisal value equal market value?

I would argue that the answer is no. Market value is the price a buyer and seller are willing to exchange a property for and often incorporates forward-looking expectations (future construction, development pipeline, market trends, etc).

The appraisal value is generally backward-looking given that Appraisers are tasked with determining a home’s value based on similar properties that have sold/closed nearby (generally within 6-12 months). There is subjectivity in which comparable sales an Appraiser chooses for the report and how they value different features, like a pool, view, or extra garage space.

Oftentimes I find that things the market values like beautiful finishes/design, a quiet neighborhood street lined with mature trees, or lot quality (privacy, flat yard, etc) are not valued by Appraisers to the same extend as they are buyers. Appraisers are generally focused on objective, measurable criteria like bedrooms/bathroom count, square footage, parking, lot size, etc.

It is worth noting here that Appraisers do know the contract sale price of the property they’re appraising in real-world appraisals for lenders (as opposed to my hypothetical scenario above).

Does appraisal value impact my property tax assessment?

No, the appraisal value has no impact on anything outside of the loan. The County will not receive the appraisal value to include in their assessment for tax purposes.

Can I switch lenders and use the same appraisal?

For Conventional loans (the majority of loans in Arlington), most lenders will not accept an appraisal done through another lender, but VA and FHA appraisals do have reciprocity on appraisals between lenders.

If you have additional questions about appraisals, you can email me at Eli@EliResidential.com or a great local lender, Jake Ryon of First Home Mortgage at Jryon@firsthome.com.

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.

Answering Common Real Estate Timeline Questions

Question: I’m getting ready to buy my first home and wondering how long things will take during the process. Can you explain some basic timelines I should be aware of?

Answer: Timelines vary by regional markets quite a bit due to different customs, contract structure, or local/state governance. Below, I’ll offer a quick answer to common timeline questions I get as it relates to real estate in the greater DC Metro area.

1. How long does it take to close/settle on a home after an offer is accepted?

The median contract-to-close period in Arlington has been ~30 days since 2018, down from ~36-38 days a decade ago. Most sellers want to close as quickly as possible, so buyers who can close faster have an advantage. Be sure to talk to your lender about how long they need to close before signing off on your offer. Some bigger, national banks and credit unions often need 35-40+ days to close. Many of our local lenders can comfortably close in as little as three works (sometimes even faster).

2. How long does a seller (or buyer) have to respond to an offer/counteroffer?

Our contracts do not stipulate a response deadline so any deadline for a response must be written into the contract or otherwise communicated by the party who wishes to set a deadline. Technically, an offer/counteroffer can go on forever if it is never responded to or withdrawn.

3. When is the Earnest Money Deposit (EMD) due?

It is common for the EMD (usually 1-3% or more of the sale price) to be due to the EMD holder (usually the Title Co) within 3-5 days of going under contract. With such a quick turn-around for a substantial amount of cash, make sure those funds are in an account that you can quickly and easily transfer (wire or check) money out of. For a reminder on what the EMD is, here’s an article I wrote earlier this year.

4. How long do you have to complete a home inspection and decide whether or not to move forward with the purchase?

The game has changed lately for home inspections, which I wrote about earlier this year, but for buyers who can secure a post-contract inspection contingency, they usually have as little as two days to as many as ten days from going under contract to complete the home inspection and decide whether or not to move forward or submit their requests for repair or credit. The timing and type of inspection contingency are all negotiable terms and factor heavily into the strength of offer.

5. How long does the mortgage financing process take?

As noted earlier, this varies by the type of lender you choose to work with and can range from as little as 10-14 days to 45+ days. Here’s an article I wrote earlier this year highlighting the importance of choosing the right lender.

6. How long does it take to have an appraisal done?

In most cases, when you finance the purchase of your home through a lender, they require a third-party appraisal before approving the loan. In short, they need to make sure that the market value of a home, per the appraisal, is equal to or greater than the purchase price of the home (here’s the most relevant article I have, but I’ll do a deeper dive into appraisals soon). Most lenders will order the appraisal within a week of you going under contract and it usually takes a week or two for the appraiser to visit the home and submit the report, so the total time to get appraisal results back is usually 1-3 weeks depending on when it’s ordered and if it’s a rush order.

7. How long does the Attorney Review take?

An Attorney Review period is common in other jurisdictions (New York/New Jersey), but not here so there is no legal review period built into our contracts. It is rare that an attorney outside of the Title Company is involved in the transaction.

8. How long does it take to sign paperwork at closing/settlement?

For sellers, it often takes just 10-15 minutes and for buyers it usually takes 45-60+ minutes, depending on the size of the loan package and questions you have for the title attorney while signing.

9. When can you start moving into the house after closing?

You can walk through the front door and start moving in immediately following the closing, unless otherwise stipulated in the contract.

10. How long can a seller rent a home back from a buyer?

If a home is being purchased using a mortgage for a primary residence, the law states that a buyer must intend on moving into the home as their primary residence within 60 days, so the longest time a seller can rent-back (link to an article I wrote in 2019 on rent-backs) in that scenario is 60 days. If the buyer is paying cash or buying the home as an investment property, there are no restrictions on how long a seller can remain in the home after closing.

11. How long does the home search process last?

This is the question everybody wants to know but there’s no good answer for. I have worked with buyers who plan on buying a home 6-12+ months from starting their search and end up finding a home they love in the first week and have worked with buyers who want to buy right away and end up spending two years searching for the right home. If I had to estimate, I would say that most buyers find a home within 6-12 weeks of starting their search.

Remember that these timelines are not fixed and vary widely by jurisdiction/market across the country and a heavily dependent on the negotiations/circumstances of the buyer and seller on a specific transaction. Use these timelines as general guidance on the customs and common practices in the greater DC Metro area.

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.

Expect Short-Term Increase in Listing, Contract Activity

Question: Will I see more homes being listed for sale in the fall or is there a stead drop in sales activity until next year?

Answer: It is completely normal for the market to slow down (pace of listing activity and contract activity)  during the summer, but it was discussed much more this year because the preceding months were so crazy, locally and nationally, and everybody is on high alert to a potential bubble.

Nothing I have seen so far has suggested that the change in market conditions over the last couple months is anything more than normal seasonal behavior, so I expect the next couple months to lead to similar seasonal patterns as in years past (except for 2020).

This means a quick bump in post-Labor Day listing activity and contract activity, followed by a steady drop in both measures through the end of the year.

The chart below shows monthly listing and contract activity as a percentage of total annual activity for Arlington from 2015-2019, broken out by single-family homes (SFH)/townhouses (TH) and apartment-style condos/coops. The following bullets are some highlights I pulled from the data:

  • The September bump in listing activity only lasts for a couple of weeks before starting a steady decline through the end of the year
  • The SFH/TH and condo markets behave similarly, but the changes in condo activity aren’t as extreme as the SFH/TH market. The spring peaks and summer lull are closer to average for condos, meaning seasonality plays less of a role in the condo market than the SFH/TH market.
  • The bump in post-Labor Day SFH/TH contract activity outlasts the short, but more extreme, burst in listing activity
  • From October-December, contract activity actually exceeds new listing volume, but this generally does not lead to better sales results during this time of year
  • The four months from March-June account for nearly 46% and 43% of annual SFH/TH and condo listing volume, respectively, and almost 44% and 40% of annual SFH/TH and condo contract activity, respectively.

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.

Should You Stage Your Home?

Question: Do you recommend staging for vacant homes?

Answer: When you stage a home, you are placing temporary furniture and accessories in a home while it is being marketed for sale. In most cases, I strongly encourage staging a home instead of leaving it empty.

The value of staging shows up in two critical parts of the selling/marketing process. It improves the quality of the photos by helping people understand the scale and purpose of a room. Better photos lead to more showings. Good staging also improves the way Buyers experience the home in-person during a showing. Better showings lead to better/more offers.

Figure 1: Great staging helped Buyers make sense of an otherwise large, open space at 3196 N Pollard St Arlington

In my opinion, the three main benefits to staging a home are:

  1. Add Life to Empty Homes: Walking into an empty house can be eerie and makes a home feel lifeless. Those are not feelings you want potential Buyers to have while walking through your home. Good staging can add energy and life to a vacant home.
  2. Help Rooms Feel Larger: This is counterintuitive, but most people perceive empty rooms as being smaller than they really are. I’ve experienced this on numerous occasions walking through empty rooms with Buyers who have trouble understanding how a bed or couch can fit into an empty room that is more than big enough for their furniture.
  3. Engage the Eye: Well staged properties keep Buyers engaged with room layout and functionality, but unstaged empty rooms allow Buyers to focus on flaws like paint scuffs, separating trim, poor lighting, and other things you’d prefer Buyers to overlook during their visit

You do not need to stage every room. In a larger townhouse or single-family home, that can get unnecessarily expensive. Prioritize the most important rooms like the living room, dining room, and primary bedrooms for the best return on investment. Accessorizing walls, countertops, and shelves also adds a lot of value.

Figure 2: Don’t forget about staging for outdoor spaces like this patio at 4645 4th Rd N Arlington

Good staging isn’t cheap, often ranging from ~$2,000-$10,00+ depending on the size of a home and type of staging furniture, but it should be looked at as an investment like anything else you do to prepare your home for sale like painting, cleaning, and landscaping. As a rule of thumb, I think that investing .25-.5% of the market value of a home generates a clear, strong return.

Cheap, thoughtless staging provides little or no value at all. Sticking a chair or two in the living room or simply laying a blow-up bed on the floor of a bedroom are not the same and provide little, if any, benefit.

If you intend on living in your home or leaving your existing furniture for the sale (photos and showings), consider “occupied” staging, whereby you hire a stager to help you maximize the use of your existing furniture and accessories. Just promise not to get offended if they recommend removing your favorite lime green shag carpet 

ies from the owner, with some add-ons from the Stager, in a great example of a successful Occupied Staging approach at 1276 N Wayne St #1230 Arlington

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.

Demand Drops Regionally, Remains Competitive

Question: Is the housing market slowing down?

Answer: Over the last 2-3 months I’ve experienced a noticeable slowdown in the single-family and townhouse market relative to what we’ve experienced most of the last 12+ months. While slower than it has been, the market is still very competitive, and prices are holding.

Properties that would have gotten 8-10+ offers a few months ago might get 2-3 now. Escalations over asking are still common, but less extreme. And in some cases, Buyers can secure modest contingencies (inspection, appraisal, financing). I believe the main factors in this change are:

  • Buyers have distractions they didn’t have for much of the lockdown (vacations, events, commute, etc)
  • Asking prices are more reflective of market values now that 6+ months of closed sales in 2021 are available for market pricing analysis
  • Some Buyers have given up after months of struggling to find/win a home
  • Normal seasonal behavior. Demand usually subsides in the summer, relative to the previous spring.

Home Demand Index Readings

To put the receding demand into perspective, I pulled out some charts from the most recent Bright MLS Home Demand Index, which tracks regional and local demand by analyzing data ranging from buyer showing activity to closed sales to feedback from local real estate agents.

Demand in the overall Washington DC Metro housing market dropped 17% from June to July and 13% year-over-year. The July 2021 Demand Index reading of 123 is lower than the Demand Index reading in 10 of the last 14 months, with the four months from November 2020-February 2021 being the only months with lower readings since May 2020. July 2021 is also the first month with a year-over-year decline in demand over the last 12+ months.

Home Demand Index

The Index uses the same price ranges to track demand across all Bright MLS market centers (DC, Baltimore, Philadelphia) so the price ranges aren’t the best for the DC Metro/Arlington, but still provide a good indication of regional and local demand trends.

The Demand Index for single-family homes $395k-$950k dropped 19% from June to July and 9% year-over-year. For single-family homes over $950k, the Demand Index dropped 29% from June to July and just 2% year-over-year.

While these reports show significant drops in demand recently, the actual demand is still very high and is enough to support recent price appreciation.

Single Family Home $395K-$950K
Single Family Home Above $950K

Listing Volume Still High

The number of condos listed for sale over the last 12 months is significantly higher than any other 12-month period we’ve seen in Arlington, but July listing volume settled down to finish closer to historical averages than we’ve been seeing. This is a sign that the surge in condo supply may be tapering off while we’re also seeing condo demand increase relative to the 2nd half of 2020 and early 2021.

High market values and changing housing needs have also led to an increase in the number of single-family homes listed for sale in Arlington lately, but that volume is much closer to the historical average than what we’ve witnessed in the condo market. It also does not seem like it to most Buyers because demand has quickly absorbed the extra supply.

New Listings In Arlington County

Looking Ahead

There’s usually an increase in demand and homes listed for sale after Labor Day and I expect to see similar seasonal behavior this year until we reach the winter/holiday market starting around early November when demand and listing supply both tend to retract.

Historically, it has taken until late February/mid March for demand and listing volume to ramp up towards their spring peaks, but the last few years we’ve seen the ramp-up period, especially for demand, start in January. I expect a similar pattern next year, but will be surprised to see anything like the double-digit price appreciation that we experienced in 2021 repeat in 2022.

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.

Arlington Condo Mid-Year Review

Question: How has Arlington’s condo market performed in the first half of 2021?

Answer: Given the tremendous appreciation we’ve seen locally and nationally on prices for single-family homes and townhouses, the mostly unchanged values of condos in Arlington highlights how much the condo market has struggled compared to the rest of the housing market. We did experience some periods of value loss in the last quarter of 2020 and early in 2021, but the first half data (and my experience in the market) suggests that prices have recovered and leveled out to about the same values we saw in 2019.

The biggest question I have is whether we will sustain these prices or see a slow decline as people adjust to new work arrangements and housing preferences in the wake of COVID. While it’s possible that we could see a delayed price surge due to sustained low interest rates and returns to offices, I think that scenario is unlikely.

This week we will take a look at Arlington’s condo market in the first half of 2021. Note that the data does not include Cooperatives (e.g. River Place) or age restricted housing (e.g. The Jefferson).

Prices Relatively Flat, Listing Volume and Inventory Up

I think the biggest story in the condo market for Arlington and the DC Metro area is the historically high number of condos being listed for sale since Q3 2020. There is clearly a flight out of condos by homeowners and investors and the demand is not high enough to absorb the extra supply, so inventory levels have returned to 2015-2016 levels when we were in the midst of a near zero-growth condo market (in Arlington).

The return to 2015-2016 inventory levels isn’t a bad thing, but the suddenness of that shift was difficult for sellers to manage after we experienced a red-hot condo market from late 2018 (Amazon HQ2 announcement) to early 2020 (pre-pandemic).

Demand Metrics Down, Disaster Avoided

Demand metrics like days on market, percentage of homes selling within a week, and the percentage of sold price to the original asking price are all down to 2017-2018 levels (pre-Amazon announcement) and prices are more reflective of what we saw in the first half of 2019.

During the pandemic, there were concerns of a fundamental shift in the condo market that would lead to a significant re-pricing of condo values but that’s clearly not the case. Sure, it’s tough for condo owners to take a step backward while the single-family/townhouse market surges ahead, but the condo market looks to be recovered and safe at this point.

If you’re interested in seeing last week’s mid-year analysis of the single-family housing market, you can check it out here.

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.

How Many Homes Sell Off-Market or Pre-Market in Arlington?

Question: A friend of mine found a house off-market through their neighbor. Do you have any data that shows how many homes get sold before every hitting the market?

Answer: Most people assume that there are a lot more pre-market and off-market home sales than there really are. The data I used to determine likely pre/off-market activity suggests that only about 4-5% of Arlington homes sell without being listed first.

However, within that 4-5%, you have a wide range of circumstances that cause homes to be sold pre/off-market that aren’t really part of the “standard” sale process including tenants buying from their landlords, investor deals, custom homes, new construction condos, deals between neighbors/family/friends, and others. In this case, I’m loosely defining the “standard” sale process as a homeowner who begins the process of preparing their home for sale with the intention of offering it to the public.

So, the actual percentage of “standard” sales that follow a more traditional sales process that end up selling pre/off-market is likely much lower, and probably closer to 1-3% of total sales.

To come up with my pre/off-market estimates, I looked at the number of sold (Arlington) homes in the MLS that had zero days on market and the number of homes with zero and one days on market. A home with zero days on market was almost certainly sold pre/off-market and a portion of homes with one day on market were sold pre/off-market, but it’s impossible to tell from the data how many of those were pre-market vs how many were listed and the seller accepted an offer on the first day.

Not every pre/off-market sale gets entered into the MLS so those sales won’t show up anywhere in my data, however, I think this dataset gets us pretty close.

The chart below shows the percentage of homes each year that sold with zero or zero/one days on market.

Changes in Pre/Off-Market Rules

You’ll notice from the chart that there was a steady rise in pre/off-market deals through 2019, followed by a quick reduction in those deals since 2020.

For years prior to 2020, in order to gain a competitive advantage, agents and brokerages were creating their own “shadow” pre/off-market listing platforms/feeds that circumvented the cooperative agreements established through the MLS.

In the fall of 2019, Bright MLS (our regional MLS) announced major changes to protect the cooperation agreements of the MLS and required a home to be entered into the MLS within one business of any public marketing or advertising (For Sale sign, social media, email blasts, mailers, website, etc). Since this announcement, the number of pre/off-market deals have dropped substantially, for the betterment of both buyers and sellers, in my opinion.

I wrote about these rule changes in more detail and explained the MLS/Bright MLS concepts further in this October 2019 column.

State of the Arlington and Northern VA Housing Market

Question: How is the real estate market doing so far this year?

Answer: 2020 ended with a surging single-family and townhouse market, especially further west, from buyers looking for more house and yard space, but a struggling condo market from an unusually high volume of condo inventory for sale and tepid condo demand. So what have we seen in the first six weeks of the 2021 real estate  market?

Single-Family and Townhouse Prices Up

The single-family and townhouse market is appreciating even further above where prices settled in 2020, with more competition (double-digit multiple offers). Through deals I’ve been involved in and conversations with colleagues, my unofficial estimate is that many single-family homes and townhouses are selling for 5-10% more than 2020 prices. I’m seeing this type of appreciation at all different price points too.

Condo Market Better, Slow Improvement Expected

The condo market worsened monthly from about June 2020 – November 2020, but reversed course a bit in December and remained slightly improved in January. I see the condo market picking back up at a slow pace and likely to continue improving through the spring, as demand hopefully/probably picks up, but I don’t see a return to the pre-COVID condo market any time soon.

Let’s take a look at some key charts for Arlington and Northern VA (Fairfax and Loudoun County)…

Arlington Months of Supply

Months of Supply is one of my favorite metrics because it combines supply and demand. The lower the Months of Supply, the more favorable a market is for sellers. Housing economists say that a well-balanced market has about six months of supply.

Single-family homes in Arlington hit an all-time low for Months of Supply in December and January, coming in at just a touch over one month, while the condo market has settled into just under 2.5 months of supply, which is about average for Arlington condos, save the two years after the Amazon HQ2 announcement.

New Listing Volume in Arlington

The number of condos listed for sale in January remained high, coming in 66.7% higher than January 2020. The number of single-family homes listed for sale remained stable, with an increase of just 11.9% over January 2020.

Dramatic Shift in Fairfax and Loudoun

If you think buying a house in Arlington is difficult, just try buying a house in Fairfax or Loudoun County, where single-family Months of Supply has dropped below one month to 2-3 weeks! This represents a much bigger shift in market conditions than what we’ve experienced in Arlington, which has been more competitive for longer.

Northern VA Condo Supply

All three Northern VA counties charted below (Arlington, Fairfax, Loudoun) have seen a spike in condo supply over the last 6+ months, but condo absorption has actually increase by enough in Loudoun County to not only offset the increase supply, but cause Months of Supply to drop to 10+ year lows of two weeks. Arlington County and Fairfax County have gone the other direction, with significantly higher Months of Supply.

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.

COVID Impact on Arlington’s Rental Market

Question: How has COVID impacted Arlington’s rental market?

Answer: Recent articles have shed light onto just how much COVID has hurt the apartment rental market in the DC Metro, including this article on rents dropping by 14% in Arlington and this article on rents in DC’s Class-A high-rise buildings dropping ~18%.

I have certainly experienced the difficult rental market in the last 10 months with clients who have struggled to find new tenants for their condos for months, even after significant price reductions. In some buildings, there are double-digit numbers of condos being offered for rent, with little interest.

I have also spoken to many condo owners who are turning to selling units after months of vacancy trying to rent them out, which is one of the reasons for last year’s explosion in condos listed for sale.

I took a look at last year’s rental market for apartments, townhouses, and single-family homes and compared it the previous four years to see how each sub-market performed. There’s a summary of key findings below and a detailed data table to follow.

Note that this only includes properties in Arlington that were rented through Bright MLS. Most commercial rental buildings do not use the MLS and not every homeowner with an investment property rents through the MLS, but the number of properties rented through the MLS is enough to make this statistically reliable data.

Key Findings

  • Condo rentals dropped in price for studios (-10.2%), one-bedrooms (-4%), and two-bedrooms (-1%). If you remove January and February (pre-COVID) listings, the price drops increase further. I suspect 2021 will see an even larger drop in rental prices because many owners are still trying to find a tenant.
  • The average time to rent a unit increased by 50% to two months and tenants negotiated significantly further below the asking price than ever before.
  • Two-bedroom units struggled, but not nearly as much as studios and one-bedrooms units, likely because the 2nd bedroom provides a much-needed home office.
  • COVID had the opposite effect on single-family and townhouse rentals with prices increasing to all-time highs, homes renting faster than ever before, and owners securing prices closer to their asking price than ever before.
  • Rentals of small two-and-three-bedroom houses and large four-bedroom townhouses were in the most demand, with average days on market just 3.5 weeks and some of the highest rental price to asking price ratios of any property type.
  • I expect single-family and townhouse rentals to have an even better 2021 (from the perspective of the homeowner) as people continue trying to get more space, avoid common living, and find buying those homes to be cost-prohibitive and/or too difficult (competitive).
Year ListedAvg RentAvg $/sqftAvg Rent $ to Ask $Avg Days on Market# Listed
Condo/Apartment
Studio
2016$1,409$3.0998.2%42113
2017$1,406$3.0298.7%45129
2018$1,434$3.2398.6%37123
2019$1,462$3.2598.5%31114
2020$1,313$3.0593.1%57146
One Bedroom
2016$1,783$2.3997.4%49553
2017$1,750$2.4497.5%58577
2018$1,886$2.5798.4%50572
2019$1,871$2.6398.1%36684
2020$1,797$2.4895.7%53579
Two Bedrooms
2016$2,519$2.2897.5%59494
2017$2,505$2.2897.3%63489
2018$2,605$2.3497.6%58471
2019$2,604$2.3797.8%46520
2020$2,576$2.3596.3%56469
Detached
Two Bedrooms
2016$2,339$1.9696.6%5658
2017$2,387$2.0097.0%4838
2018$2,435$2.0298.6%4054
2019$2,444$2.1896.8%4846
2020$2,456$2.1798.4%2759
Three Bedrooms
2016$3,030$1.7797.1%51177
2017$3,061$1.6997.5%51188
2018$3,108$1.8297.9%46172
2019$3,152$2.0797.1%35204
2020$3,299$2.1198.8%26182
Four Bedrooms
2016$3,518$1.5196.5%53128
2017$3,658$1.6297.9%46161
2018$3,665$1.7498.6%39149
2019$3,788$1.9296.9%41181
2020$3,883$1.9798.4%35155
Five Bedrooms
2016$4,528$1.2398.4%5645
2017$4,517$1.4598.1%4861
2018$4,553$1.5798.6%4153
2019$4,808$1.7697.2%4065
2020$4,873$1.7998.5%3563
Townhouse/Duplex
Two Bedrooms
2016$2,292$1.7697.7%58170
2017$2,342$1.7797.8%48163
2018$2,364$1.8998.3%39172
2019$2,390$2.0298.1%39213
2020$2,470$2.0898.2%29214
Three Bedrooms
2016$3,393$1.7997.4%60124
2017$3,395$1.8297.7%51156
2018$3,295$1.9198.5%43173
2019$3,378$2.0597.4%37173
2020$3,441$2.0697.1%34189
Four Bedrooms
2016$3,890$1.5698.3%4433
2017$4,051$1.7595.9%6530
2018$4,157$1.6898.6%5137
2019$4,090$1.9699.1%2739
2020$4,110$1.7199.1%2636

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.

Market Values 18.2% Higher Than County Assessments

Question: How accurate are the County’s tax assessment when it comes to determining the market value of a home?

Answer: Arlington’s property tax rate will remain unchanged in 2021 at just over 1%, but many homeowners will pay more in property taxes because of higher assessed values from the County. For those with plans to sell in the near future, the rapid appreciation of Arlington real estate values is a good thing, but for those with no plans to sell, appreciation simply means a higher annual tax bill.

If you’re upset by recent increases in your home’s assessed value, just know that you’re most likely getting a significant break compared to your home’s actual market value. Homes that sold in 2020 sold for an average of 18.2% (14.9% median) more than their most recent assessed value by the County. Last year, the average difference was 14.2% and the year before it was just 7.6%.

If County assessments were representative of actual market values, the average Arlington homeowner would pay just over $1,100 more per year in property taxes. So don’t forget to send the Department of Real Estate Assessments a Christmas card this year for such generous valuations 

Only 5.9% of homes sold for less than their most recent assessed value. On the other end of the spectrum, 6% of homes sold for 38% or more over their most recent assessed value.

Let’s take a look at the data!

Zip Code/Property TypeDifference of Sold Price to Assessed ValueStandard Deviation of DifferenceAverage Difference in Dollars
2220115.0%19.9%$104,341
2220219.3%15.6%$106,849
2220316.8%17.8%$90,066
2220418.5%12.9%$79,353
2220522.1%28.4%$176,473
2220619.0%10.8%$80,432
2220721.5%32.4%$188,480
2220913.0%11.1%$65,674
2221323.1%40.8%$171,539
Condominium15.7%11.2%$61,394
Detached/Townhouse21.1%27.7%$169,877
Arlington Total18.2%21.0%$111,887

If you believe that the County’s assessment of your home’s value is too high, you have the right to appeal the assessed value, but that must be done by March 1. Here are the key steps in appealing your assessment:

  • Your first appeal with the Dept of Real Estate Assessments must be filed by March 1
  • 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’d like to discuss buying or selling strategies, don’t hesitate to reach out to me at Eli@EliResidential.com.