Ask Adam

Ask Adam: Upgrade Your Home Like a Flipper

By ARLnow.com

This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013. Please submit follow-up questions in the comments section or via email.

Question: My wife and I recently purchased a house in Arlington and plan to make some improvements to it over the next couple of years.  Can you recommend which improvements will bring us the most value when it comes to resale value?

House flipping isn’t just a popular TV show genre (Flip This House, Flip That House, Flip Men, Flipped Off, etc.), it can also be a profitable mindset to adopt when considering home improvements.

Here is a list of the top 5 improvements in order of what I think Arlington home buyers will value most. Each of these improvements can have wildly varying degrees of style and quality. You will have to weigh the options against your budget when making these choices.

Home kitchen (photo courtesy Courtland Homes)1) Kitchen — A nice kitchen is not just a box the potential home buyer is checking off, it is often where the emotional attachment to the home begins. Granite counters and stainless steel appliances used to make a home stand out from the crowd. Now they have become a minimum standard in Arlington real estate.

If you are on a tight budget, I recommend exploring some of the options available at Ikea. If you are not on a tight budget I recommend choices that will help your home stand out such as eco-friendly materials or exotic stones and woods. Amicus Green Building Supply in Kensington, Md. is a great source for eco-friendly options.

2) Bathroom — I’m sure it is no surprise that bathrooms are a close second to kitchens. Many home buyers appreciate a nicely updated bathroom. The level of your bathroom upgrades should correspond to your target audience and your “competition.” Consider the homes you looked at while shopping for the one you ultimately chose. Which bathrooms stood out to you?

Some savvy shopping can save you a lot of money on this category. I’ve even spoken to builders who are now relying on the internet to purchase vanities from places like Overstock.com.

3) Flooring — There are people out there who want carpet, but they are in the minority. Whenever possible go with a hard surface. Hardwood is usually the preferred option. Alternatives like bamboo and cork are also very nice. I would stay away from ceramic and marble in the living areas of your home. They are expensive and not appealing to the masses.

Be sure to research the durability of the flooring you are considering. Nothing is worse than investing a lot of money only to have it damaged by pets and high heels.

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Ask Adam: Are There Any Bargains Left in Arlington?

By ARLnow.com

This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: Are you seeing any bargains on the market still? My preference is not to deal with a fixer upper.

The usual knee jerk reaction is to hunt for the elusive foreclosure deal. At the time I’m writing this, there are seven foreclosure listings in Arlington. I used to sell foreclosures for the big banks, and I can tell you firsthand that they are not always the great values that consumers perceive them to be, especially when they turn into bidding wars. You should also take into consideration that many have not been maintained very well.

From my vantage point, homeowners who purchased new construction in 2012 saw very lucrative gains. Two new townhome neighborhoods that come to mind: Mosaic in Merrifield and MetroWest near Vienna metro station.

In an inclining market, the key is getting in early. The developers have a lot of homes to sell in these neighborhoods and they start off their sales, priced to be very competitive with resale inventory. Then they often begin steadily increasing prices throughout the remainder of their sales cycle. I have clients who purchased early in the two neighborhoods I mentioned, who saw nearly double digit percentage appreciation last year. I’m basing this off of the difference between what they purchased their homes for and what they are selling / appraising for today.

This an Arlington based website so I won’t go into much detail about these communities, which are located in Fairfax County. I do however, expect even greater demand (and appreciation) when similar neighborhoods become available in Arlington County this next year.

There is a construction site that recently broke ground in Ballston that looks interesting. It is a townhome development by local builder, Madison Homes.  It will consist of 28 new homes and will be called Ballston Park. If they deliver a good value and have initial housing options in the $600-$800k range, I expect that they will do very well.

I’m also keeping an eye out for the 44 townhome development that will occupy a portion of the 5-acres that was formerly a Rosenthal Jeep dealership at 3400 Columbia Pike. I hope to see these initially priced in the $500-700k range.

It would be nice to see some of the rental buildings that were originally slated to be condos, convert back to condos. Two prospects that would not surprise me at all are The Joule in Ballston and Zoso Flats in Clarendon. There is a huge shortage of newer condos along the Orange Line and I would expect to see people line up for either of these buildings, if priced well.

There is also a chance that JBG will decide to sell Sedona or Slate as a condo. They are 12 and 14 story residential buildings being constructed three blocks from Rosslyn metro station with 12,000 square feet of retail on the ground floors. As of right now the word on the street is that they will both be rentals, but I am sure they are exploring the possibility of going condo with one of them. JBG is planning to sell 25 townhomes as part of this development, which I am guessing will be offered in the luxury price range.

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Ask Adam: What Does a $250K Income Buy You in Arlington?

By ARLnow.com

This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: A certain politician has been using $250,000 in income as the benchmark for rich families in America.  In an expensive area like Arlington, I’m wondering how much home an income like this can afford you? 

That’s an interesting question. I don’t want to touch the political aspect of it with a 10 foot pole, but I’ll do my best to describe what a typical family could purchase with that income.

It is a good idea to start with a debt-to-income ratio. In an area like Arlington where the cost of living is nearly 50% higher than the national average, I think we should use a conservative debt-to-income ratio of 28%. Meaning that your total debt will not exceed 28% of your gross income.

(In this case, “debt” refers to obligations including mortgage, car loans, child support and alimony, credit card bills, student loans and association fees.)

In order to calculate how much house they can afford, we need to make some assumptions:

  • They have $1,750 a month in car loans, credit card bills and student loans.
  • They want a house and many houses in Arlington are not part of a home owners association (HOA). It is safe to assume they will not have any HOA fees.
  • They have saved up enough money for a 20% down-payment so we don’t need to worry about private mortgage insurance (PMI).
  • Their interest rate is 4% on a 30 year fixed rate mortgage.

According to the online calculator I used, they will qualify for a mortgage of $705,258. If they are putting 20% down, they should be able to purchase a home up to $846,310.

At the time I am writing this, there are 15 houses available in Arlington with at least 3 bedrooms and 2 baths, within the $750,000 to $850,000 price range.

Again, this is a conservative example for a fictitious loan program. There are financing alternatives that offer different interest rates, terms and down payment options that could allow such a family to purchase a more expensive home. If you have questions about what you could qualify for, it’s best to discuss your specific situation and preferences with someone who can address your individual situation.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

Ask Adam: Repairs After the Home Inspection?

By ARLnow.com

This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: We are purchasing a home in Arlington and want to know what we should be able to ask the sellers to fix as a result of the home inspection.

There isn’t a set standard when it comes to asking for repairs. However, I can provide some tips that may help you decide for yourself.

If you are buying new construction, I highly recommend a home inspection even though many buyers will forgo this step in the home buying process. In my experience, builders are willing to take care of any reasonable request. It is your opportunity to get the home as close to perfect as possible. Even the smallest cosmetic blemishes are fair game. If the builder thinks you are taking your requests too far, I’m sure he or she will let you know.

When it comes to resale properties, things changed a little bit in 2012. The standard purchase contract was updated and paragraph 7 was modified. Previously it required that the following items be in normal working order at the time of settlement:

  • heating
  • air-conditioning
  • plumbing
  • electrical
  • appliances
  • smoke detectors

There is no longer this minimum standard unless you add it to the contract yourself. More pressure is placed on the home inspection and your ability to convince the seller that he or she should agree to your requests.

Many sellers think their home is in perfect condition so it is never easy to convince them that they should pony up for repairs on a home they are soon leaving. It will help your cause if your inspection report contains the following:

  • Well written descriptions of the issues found.
  • A typed report that is easy to read and share.
  • Photos of the issues found.

You should prioritize your list. If there are items you are planning to replace anyway or don’t mind fixing yourself, put them at the bottom of your priority list. I find that sellers are much more reasonable when they feel that you are also being reasonable with your requests. Sometimes this means focusing only on the major concerns.

Additional Tips:

  • If you have concerns about items that are cosmetic, include them in the initial contract as an addendum.
  • You are going to have a hard time convincing a seller to replace an item that is at the end of its estimated life, but working properly. You may want to consider purchasing a home warranty to cover these types of items if they fail within the next year.

Also take into consideration that if the seller makes the repairs, they are likely to do so at the least possible expense.  You may want to ask for a credit so that you can have more control over the quality of repairs. If you go this route, be sure to check with your lender first to be sure they will allow a closing cost credit.

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Ask Adam: How Does an Escalation Clause Work?

By ARLnow.com

This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: Can you please explain how an escalation clause works?

When there are multiple offers on a property and you are considering making an offer above the list price, it may be a good idea to use an escalation clause. The challenge when competing for a home is that you (usually) are not privy to what the other offers are. An escalation clause allows you to bid competitively with the other offers, without paying more than you need to.

Let’s use the example of a $500,000 listing.

  • Mike offers $505,000
  • Susie offers $490,000
  • Bill offers $500,000 with an escalation to $507,000 in increments of $1000
  • You offer $500,000 with an escalation to $510,000 in increments of $1000

Your offer will escalate to $1,000 above the next highest offer. In this example, your offer escalates to $508,000, which is $1000 above Bill’s max of $507,000. It works a lot like bidding on eBay.

Let’s try another example where you don’t use an escalation clause. Again the list price is $500,000.

  • Mike offers $505,000
  • Susie offers $490,000
  • Bill offers $500,000 with an escalation to $507,000 in increments of $1000
  • You offer $510,000

You are committing to paying $510,000 for the home regardless of what the other offers are. You could have possibly saved $2,000 by using the strategy in the first example.

How do you know what the other offers are? Usually they are not revealed until after the seller has made a decision. The sellers will complete the escalation addendum with the details of the next highest offer including the offered purchase price and total concessions. When representing a buyer, I will normally ask for the pages of the other contract that provide proof of the offer price and concessions.

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Ask Adam: Collapsing Retaining Wall

By ARLnow.com

This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: I’m wondering if you know who is responsible for a collapsing retaining wall between two homes?

I have asked Arianna Gleckel to answer this question. She is a local Arlington-based attorney I highly regard.

The answer to your question may be as simple as finding and marking the property line. The property on which the retaining wall sits is responsible for maintaining the wall. If the wall is not on your property, you are not responsible for the upkeep, maintenance and repair of the retaining wall, even if it is for the benefit of your property. I would recommend getting a licensed surveyor to mark the property line for you along the retaining wall with stakes, and possibly having an engineer evaluate the structural condition of the wall and any remediation that may be needed, based on your description of its current condition. You also should check your deed description and plat to see if they clearly identify whether the retaining wall is on your property. If you have a fence installed already, there is a good chance that your fence abuts the property line and that the retaining wall is not on your property.

However, if the retaining wall straddles the property line, the answer may not be as simple. In Virginia, typically when a retaining wall has been constructed by a property owner to provide lateral support for the soil of a neighboring property, the owner of the neighboring property is not responsible for the upkeep of the retaining wall. So the answer would depend on which property is getting the support from the wall.

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Ask Adam: Home Energy Audits

By ARLnow.com

This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: I own an older Arlington home with fairly high utility bills (in my opinion), do you think a home energy audit is a good investment?

I think that you will find a good home energy audit to be well worth the investment. I personally own an Arlington home that is about 6 years old and an energy audit discovered a valuable list of improvements for us to make. I’m happy to report that most were accomplished for little to no money.

Our energy audit cost $400, but has saved us many times that amount of money on gas and electric usage. In fact, I wrote an article earlier this year about how Dominion Power had accidentally switched our account with my neighbor, who owns the exact same house. Once the administrative mess was cleaned up, we were credited almost $1200 for the lower energy consumption of our house.

I spoke with Chris Conway, one of the area’s leading home energy auditors. He confirmed that most improvements are very low cost with a resulting 5%-30% savings on energy bills.

Chris explains that his audits typically include a blower door test and thermographic scan of the home, but the most important benefit of a home energy audit is the homeowner education. He teaches you how to achieve a tight building envelope for a long term return on investment. According to the Department of Energy, 54% of your total energy bill comes from heating and cooling. With the right information you are empowered to make decisions that will provide the biggest bang for your buck.

Though I would recommend a home energy audit for most homes regardless of age, older homes tend to have the most room for improvement. A blower door test will reveal exactly how much conditioned air your home is leaking per hour. In older homes, this is sometimes equivalent to leaving a window or door open 24×7.

Chris recommends an energy audit for anyone interested in making home improvements, improving air quality, saving money on energy bills, increasing comfort, mitigating moisture problems, or reducing your carbon footprint. During our conversation he mentioned a startling fact that recent EPA data states 1 in 5 families have a member with respiratory problems and a typical home can actually have up to 3 to 4 times more contaminants on the inside compared to the outside. A simple home energy audit can address these types of environmental issues.

There are more than a few home energy auditors to choose from in the Arlington area. I spoke to at least half a dozen before choosing someone for my own home. I was curious about their background, education, track-record, equipment, references and philosophies. I also wanted a sense that they would spend time educating me about my home. Feel free to contact me for a list of the local home energy auditors I would recommend.

The cost for a professional home energy audit can range from $150-$600 depending on the depth of the audit and the size of your home. If you are worried about the cost, you can look out for promotions from companies like Everblue and Dominion Power. State funded programs have also existed from time to time.

My final piece of advice is to make a list of any issues you are having, such as rooms that are notoriously drafty, cold, warm or damp. These insights will help the auditor identify the best solutions for your home.

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Ask Adam: Winning the Home in a Competitive Situation

By ARLnow.com

This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: Are you seeing competition for homes in Arlington? If so, what is the best way to win?

I am seeing more competition for homes in Arlington than I expected to see this year. Unless housing supply begins to catch up with demand for certain types of homes in Arlington, this trend is likely to continue.

The most obvious variable in a purchase contract is price, but nobody wants to pay more than they need to. It would be nice if we knew exactly what others have offered, but the listing agent is not allowed to share this information unless he or she has written consent from the seller to do so. Most sellers don’t feel the need to share this information so you are usually going to be in the dark about the amount of other offers.

You can, however, include an escalation clause with your contract. An escalation clause allows you to start with a certain price while allowing your offer price to escalate in predetermined increments until it gets to a maximum or beats the other offers. For example, you could write your offer for $500,000 with an escalation to $510,000 in $1,000 increments. If the other highest offer is $505,000 your offer would escalate to $506,000. That does not mean you automatically win the contract. In fact, I have seen plenty of situation where the person offering $505,000 (in this example) wins the contract.

You have to keep in mind that there are many other criteria being considered in an offer beyond price. Below are seven items you can use to strengthen an offer for little or no cost. You may also want to consider these seven items to strengthen your negotiation position even if you are the only one writing an offer on the home you want.

1) Earnest Money Deposit (EMD)

In Arlington, we are usually able to get away with an EMD equal to about 1% of the purchase price. Sellers prefer to see more because it makes them feel as though you are more committed to the purchase. Assuming you fulfill your obligations under the contract, this money is credited back to you at settlement. Therefore, why not increase the EMD amount to strengthen your offer? Talk to your Realtor about a percentage that makes sense for your situation.

2) Appraisal Contingency

Most contracts request 21 days or more for the appraisal contingency. The regional contract even suggests that 21 days is typical. Sellers prefer for this contingency to be as short as possible so they know the outcome sooner than later. Let me share a secret, most lenders can get an appraisal completed in 3 days if they need to. I guarantee you that mine can. Why not shorten the contingency period? Talk to your Realtor and lender to decide on a number of days that they can live up to.

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Ask Adam: New Construction Choices in Arlington

By ARLnow.com

This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: I would like to buy a new home in Arlington. I’ve seen quite a bit of construction, can you tell me what is going to be available by end of year?

I’m happy to do so. Below are brief introductions to the various new construction projects that currently have homes available for move-in before 2013.

Arlington Condos:

Turnberry Towers is located in Rosslyn at 1881 N. Nash Street. This is the most luxurious addition to the condo market in Arlington. Imagine living in a 5-star hotel with valet service, doorman, a grand lobby, indoor pool and every amenity you can wish for. The homes are larger than your average condo in Arlington and come “decorator ready” so that you can pick out your own flooring and wall coverings. All other premium finishes are included. Turnberry Towers is at the tail end of sales with only 11 homes remaining. Prices range from $825,000 to $4,350,000.

Gaslight Square is located between Rosslyn and Courthouse at 1700 Clarendon Boulevard. Gaslight Square is selling in three phases. The first phase is complete, models are available to see and residents have begun moving in. This is the same builder as Wooster & Mercer Lofts, located next door. Gaslight is a little more refined and includes private elevator access to all upper level units. Every home includes outdoor space ranging from grand rooftop terraces to modest balconies. Prices range from $769,900 to over $1,400,000.

Lyon Pointe is located in Lyon Village within walking distance of Clarendon metro station. The address is 2702 Lee Highway. This is a true boutique building with only eight homes total (two per floor). Like Gaslight Square, the building offers private elevator access where the elevator opens directly into your home. The finishes are top notch. The penthouse units come with huge rooftop terraces and the ground floor includes sizable garden patios. Though the building is located on Lee Hwy., the high quality windows buffer most of the noise and there is decent separation between the building and the road. Construction of Lyon Pointe is still underway, but sales have begun. Prices range from $699,900 to $829,900.

Dominion Heights is located in Cherrydale at 2702 Lee Highway. Unlike the others, this is not within what most people would consider walking distance to the Orange Line. Cherrydale does have its own share of shops, restaurants and charm. The building is targeting LEED Gold certification so homeowners can expect low utility bills and improved comfort. Standard finishes include hardwood flooring, gas cooking with stainless steel appliances, and granite counters in the bathrooms & kitchens. Prices range from $312,500 to $716,000.

Arlington Townhomes:

The Court at Lyon Village is located in Lyon Village at the intersection of Lee Hwy. and Veitch. They are about three blocks north of Courthouse metro station. 13 new townhomes are being constructed. Each townhouse includes outdoor space perfect for entertaining, gardening and grilling; on lots that range up to 3053 square feet. Each home also includes a 2-car garage. Another bonus is the view that comes with some of the homes. The Court at Lyon Village sits on hill with views that reach parts of McLean, Georgetown and the National Cathedral. Currently there are two townhomes left, priced at $950,000 and $1,100,000.

Cathedral View is located adjacent to Washington Golf and Country Club. I have not been in these homes, but the photos are truly extraordinary. They include elevators, four finished levels, three car garages, slate roofs, views of the National Cathedral (hence the name), and size & finishes to rival the premiere single family homes in North Arlington. There are four homes still available starting at $4,295,000.

Arlington Single Family Houses:

The Enclave of Ballston is located on the outskirts of Ballston off of Carlin Springs Road. There are a total of 10 lots. Each home includes three finished levels, two car garage, professionally landscaped and fenced yards, dual zone gas heat and high end finishes. The exteriors are stone and cement composite siding. Depending on the lot you chose, you may be able to select the homestyle and finishes. Only five lots are currently available and prices from $1,300,000 to $1,500,000.

There are a number of custom and spec homes being built throughout Arlington that I’m happy to provide you a list of if you would like. Just send me an email: [email protected].

*All pricing and descriptions are deemed reliable but not guaranteed.

Ask Adam: When Is the Best Time To Sell?

By ARLnow.com

This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: When is the best time of year to sell a home in Arlington?

This is a question that comes up quite a bit. I’m going to share a couple tools I use to analyze the peaks and valleys of market activity. As usual, I’ll also share my opinions.

Google Insights provides a graphical analysis of when people are searching various subjects. Obviously real estate is the subject of interest for this article. It seems that year-after-year there is an incline in the amount of people searching for real estate that starts around the beginning of the year and peaks in July. There is then a decline that continues into November. As you might guess, the number of searches for real estate are the lowest during the winter holiday season. This is a demonstration of interest level, but does it translate into sales?

RBI provides a graphical analysis of real estate sales activity based on information collected by MRIS (our local multiple listing service). As you can see in the chart (right), sales activity follows a very similar trend to that of Google searches for real estate.

According to these charts, late spring and early summer are going to give you largest audience for the sale of your home, especially if you have identified families with children as your target market. I’ve found that many parents prefer not to have their kids switch schools in the middle of the year. They often like to start looking for homes in May and June.

This is also the time of year when the most homes are on the market, so there is naturally more competition between sellers. If you are not targeting families with children, then I don’t think you need to feel as constrained to May and June. You may do just as well during one of the shoulder months.

If at all possible I recommend not listing your home in November, December or January. People are distracted by the holidays, it’s not the most desirable climate to be shopping for a home and if you have a yard it is not going to look its best this time of year. To be on the safe side, take some pictures of the exterior of your home when it is in full bloom so that you can display them if you do have to sell your home mid-winter.

Another consideration I’ve been hearing about lately is the election. If there is a transition to a new president, it will cause people to move in and out of our area. That said, I can’t find any evidence that this event would create a significant enough amount of movement in Arlington for you to benefit from planning around it.

Other non-seasonal factors you should pay attention to are interest rates, limited time tax incentives and employment rates.

If you are considering the sale of your home and would like a look how your local market is performing, please feel free to send me an email: [email protected]

Ask Adam: Getting Closing Costs Paid For

By ARLnow.com

This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: My fiance and are planning to purchase a home in Arlington this fall and are wondering if we can expect the sellers to pay all the closing costs?

Let me start with some basics.  When closing on the sale of a home, the buyers and sellers each have their own set of closing costs that they are required to pay for.  In some circumstances, a buyer will negotiate to have the seller subsidize a credit towards the buyer’s side of closing costs.  You may want to check out my recent ARLnow article for tips on calculating your closing costs.

Sellers are primarily concerned about the net value of the contract they are considering rather than whether it includes a closing cost concession or not.  If the value of the contract is $500,000… they make the same amount of money whether you pay $500,000 and cover your own closing costs or if you pay $510,000 and ask for them to subsidize $10,000 of your closing costs.

The question becomes whether asking for a closing costs subsidy is the best strategy for you.

A ramification of asking for a closing cost subsidy is that by artificially inflating your price to $510,000 you are essentially financing 80% of that $10,000 over the life of your loan.  That $10,000 could cost you a whole lot more by the time you sell your home or pay off your loan.  Another consideration is whether it will weaken your offer.  A well advised seller knows that appraisals can be challenging in this market.  Using the above example, the home would have to appraise for $510,000 rather than $500,000 if the seller agrees to subsidize closing costs.

A benefit of asking for a closing cost subsidy is that you can hold on to your $10,000 rather than using it towards closing costs and invest it elsewhere.  With interest rates as low as they are, I can see you making a strong argument for this.

Now that I’ve talked a little about whether it is a good idea or not, let’s talk about whether it is possible.

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