Ask Adam

This regularly-scheduled 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 & 2014. Please submit your questions via email.

Q. My condo is considering a limit on the number of rentals in the building. We will basically have to get on a waiting list to rent out our condo if the max number of allowable rentals has been reached. Will this hurt our values?

A. I’ve personally been a victim of what can happen if the ratio of owner-occupied units to renter occupied units is not kept in check.  I bought a condo in 2002 that I lived in for a while and eventually decided to rent out. A few years after moving out, mortgage interest rates dropped considerably and I tried to refinance the home. Even with over 30 percent equity and lender connections all over town, I could not find anyone who would refinance this home for me because the percentage of rented units exceeded 50 percent.

I had no choice but to stick with my original (more expensive) mortgage. Fast forward another few years and I decided to put the condo on the market. The first offer I received was from an investor who was planning to finance his purchase with 25 percent down. We quickly found out that he was not going to be able to buy in my building because the percentage of renters was still above 50 percent. This narrowed my pool of buyers to those who could pay cash or those who planned to occupy the unit as their primary residence and had financing that would look past the percentage of rented units.

To help answer your question, I reached out to mortgage expert Paul Nagel at First Home Mortgage.  He had the following to say:

One little known role of the condominium developer and/or manager is to protect and ensure that as many financing options are available to potential buyers of any homes for sale in that condominium complex. More financing options available translates to more available buyers, which most likely translates to selling one’s condominium with less time on the market, and selling the home at a higher price as there will be more competition/buyers for each unit for sale.

Maintaining a proper budget, master insurance policy coverage, and sufficient emergency funds are examples of some of the criteria that Fannie Mae, Freddie Mac, FHA, the Veterans Administration, and many other loan programs require to be met as a condition for financing a home purchase in that condominium complex. If one of the criteria is not met, for example, a buyer may not be allowed to use an FHA loan to purchase a home in a given condominium complex.

One such criteria of almost all loan programs is that at least a majority of units must be “owner occupied” or, in other words, not rented to a tenant. Accordingly, a developer or condominium manager often works to limit the number of homes rented to tenants, so that the sales of units in that condominium complex are available to be financed by as many loan options as possible. Conversely, if the number of units rented is not regulated by the condominium manager, sometimes a “downward spiral” occurs, where unit owners cannot sell their units, so they rent the units, making it even harder to get financing for home sales in that unit, resulting in even more units being rented.

Getting back to your question, I think Paul and I agree that proactively limiting the number of rentals in a condominium complex is good for the long-term value of your home. I say this even though it may discourage potential investors from purchasing in your building. You will be protecting mortgage options for those who want to refinance or purchase. You will also be attracting occupants who have a vested interest in maintaining the condominium.

I know there are some people who feel as though their condominium is better off without such limits.  I hope you will share your opinions and reasoning in comments.

This regularly-scheduled 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 & 2014. Please submit your questions via email.

Q. I heard about a new first time homebuyer savings plan being introduced in Virginia. Do you have any information you can share with me about this program?

A. I’m glad you brought this up as it is a brand new program I am excited about. I have to be careful when it comes to anything that may be considered tax advice, so I am simply going to share the general information provided by the Virginia Association of Realtors (VAR). You can download a PDF document from for additional details.

The First-Time Homebuyer Savings Plan (FHSP) allows first time home buyers in Virginia to invest up to $50,000 for the future purchase of a home. Earnings on that money will be exempt from Virginia state taxes. The money can be invested in almost any account you have with a financial institution including savings account, life insurance plan, stocks, bonds, CD, money market or mutual funds. $50,000 is the maximum that can be invested in principle, but the money can grow in value up to $150,000.

From what I understand, these funds can only be used towards the closing costs associated with a home purchase. In most cases, the closing costs range from two-percent to three-percent of the purchase price so the above maximums should be more than enough for most homebuyers.

The money does not have to be for your own purchase. It can gifted to a relative or close friend. This may be especially valuable for a young child that you are putting money away for as your investment will have lots of time to increase in value.

When filing taxes, you’ll just include a 1099 from the financial institution you are investing your money with and a simple one page FHSP document.

I found the following two examples from the VAR website helpful:

Funding for a child

Phillip and Leigh put $10,000 into a mutual fund that they will use to help their son buy his first home. The money grows over the years. When their son is 26, he decides to buy a home. They sell the shares in the fund — now worth $18,500 — and give it to their son to help with his down payment.

Normally they would pay state tax on the $8,500 in earnings, but they file a FHSP form with their Virginia taxes and don’t have to pay a cent in state taxes.

Changing your mind

Emma decides to start putting money away for a first home when she graduates college. She opens a high-yield savings account with a few hundred dollars and adds to it when she can over the next 12 years. The account grows.

Each year, Emma files an FHSP form with the Department of Taxation so she doesn’t have to pay Virginia tax on the interest she’s earned.

Then Emma marries Sam, and Sam already owns a house. She won’t need the money after all. They decide to use it for a vacation instead.

Because Emma used the money for a “non-eligible” purpose — the vacation — Emma must now pay the back taxes on the 12 years of earnings on the account, as well as a five percent penalty on the amount of the earnings over that 12-year period.

Disclaimer: I am not a tax professional and I highly recommend speaking to one before making any decisions that pertain to the FHSP.

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This regularly-scheduled 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 & 2014. Please submit your questions via email.

Q. We are going to be selling soon and have been following the sales in our neighborhood. The homes currently on the market don’t seem to be priced as high as the homes that sold earlier in the summer. Which listings should we be looking at to determine the current value of our home?

A. This is an interesting real estate market we find ourselves in right now. Typically you can generalize the conditions of a market based on a steady plateau, incline or decline. This year has seen a lot more ups and downs when it comes to home sales. Some months have been much better than others as well as certain neighborhoods and price categories. My point is that you need to be looking at both the most recent sales and current listings to determine your home’s value in this market.

Most homeowners and agents look at the last six or 12 months of home sales to determine a home’s value. In this market, I have tightened my threshold to home sales within the past three months because of all the market fluctuations. I am also paying very close attention to any homes currently on the market and under contract.

The benefit of data from sold homes is that you are seeing what the market was willing to bear for comparable properties. You know exactly how many days it took to go under contract and if they had to adjust their price at any time. The photos and description will also provide clues as to how the home compares to yours and what adjustments you need to make in your comparison.

By factoring in active home listings, you can gain insight into the most current market activity. You can also visit the homes to see exactly how they compare to yours. You just have to be careful about how you evaluate the price. Just because someone is listing for more than the last house that sold, does not mean they will get it. As you can imagine, some sellers can be overly optimistic about their list prices.

The process I follow to determine a home’s value, starts by evaluating recently sold homes. I use this data to establish an initial baseline price that I think the home is worth. I then take that number and fine tune it with the current and under contract listings.

I evaluate my baseline number against the other homes currently for sale in the area. I usually look at active listings $50,000 above my number and $50,000 below my number. If it looks like there are some homes currently priced for less than my number that compare favorably, then I may need to adjust down. If it seems like we compare favorably to homes priced higher, then I may want to adjust up.

Then, I’ll look at the most similar homes to my subject property. If they are having a hard time selling for the number I was hoping to shoot for, then this information is insightful about the experience we may have on the market at that price. Conversely, if there are similar homes that went under contract quickly at my number, then maybe we should push for a higher price than they were asking for.

Lastly, it is important to take into consideration what I am experiencing with nearby listings I have active in the market. This is where it becomes important to work with a local area expert. I’ll also consider any upcoming criteria that may affect our listing (i.e. seasonality, interest rate hikes, buyer trends).

Pricing homes is much more of an art than a science. Take a look at all the information you can get your hands on. I know it is tempting to take the easy route and base your price off of Zillow or, even worse, your tax assessed value. Please don’t do that. You run a huge risk of pricing too low and leaving money on the table or pricing too high and having to chase after the market. Either situation will cost you thousands of dollars.

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

This regularly-scheduled 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 & 2014. Please submit your questions via email.

Q. I have a 1980s condo in good condition that I’m planning to sell when my tenant moves out. The condo will be vacant, so per the advice of a Realtor friend I got an estimate to stage the condo. It came out to around $2,500.  Wouldn’t it be better to invest that money improving the condo (i.e. new appliances) rather than spend that money on staging?

A. It’s hard to say for sure without seeing the condo firsthand, but in most cases staging provides a return on your investment that is hard to beat. I know it is a lot of money to invest in something that seems so temporary, but I have witnessed over and over that it makes a major difference in how the home shows and how much interest it creates. Remember that you are trying to create an emotional connection between the home and the potential purchasers.

Take a look online at homes for sale and compare the photos of ones that look staged to the ones that are vacant. Ask yourself which homes you would be more inclined to visit if you were a buyer.

If your condo is relatively small or has any awkward shaped rooms then it is especially important to show it with furniture as these spaces can be challenging to visualize. It sounds counter intuitive, but vacant rooms actually look smaller. They also make it more difficult to judge what kind of furniture will fit.

New appliances are nice, but unless you are upgrading the whole kitchen, they may look out of place. It’s also possible that they won’t be the style or color that the new homeowner would prefer. There’s nothing worst than inheriting brand new upgrades you don’t like.

I answered a similar question about staging in a May article that I recommend checking out. Below are some statistics I shared in that article.

According to StagedHomes.com:

• The average sales price of a staged property is 6.9 percent higher than a non-staged property
• Staged homes typically sell 50 percent faster than non-staged homes.

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

This regularly-scheduled 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 & 2014. Please submit your questions via email.

Q. This may be a silly question, but I am wondering if I can use an escalation clause if I am offering less than the listed price for a home? 

A. It’s not a silly question at all, but let me briefly explain what an escalation clause is and how it works for anyone who may not be familiar with it.

An escalation clause allows you start with an initial offering price and specify how much you are willing to escalate your offer price above the next best offer. You may start at $500,000, but specify that you are willing to go up in increments of $1,000 above the next best offer. If the next best offer is $525,000 then yours would escalate to $526,000.

You also specify a maximum amount that you are willing to let your offer price reach. For example, you may set a maximum of $535,000. Your offer will not escalate above $535,000 even if the other offers meet or exceed this number. The process of using an escalation clause is very similar to the process of bidding on eBay.

Back to your question… You will not want to use an escalation clause if you are the only one writing an offer for the property. All that will accomplish is showing the sellers how much you are willing to go up to. Savvy sellers are going to use this information to formulate a counter offer.

The only time it may make sense to include an escalation clause in an offer for below asking price is if you are competing to purchase a property for which you expect all other offers to be below asking price. An escalation clause in this scenario, has the potential to put you in the strongest position in terms of price, without going higher than you need to in order to outperform the other offers.

In a situation where an escalation clause reaches or exceeds the asking price, it is rare that a seller would counter on price. If an offer escalates to a price below the asking price, don’t be surprised if you receive a counter from the sellers if they still don’t think your offer is strong enough, even if you had the highest price.

To learn more, please check out a previous Ask Adam article I wrote about escalation clauses.

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

This regularly-scheduled 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 & 2014. Please submit your questions via email.

Q. I’ve been in my house a few years and am about to start a home renovation. Prior to purchasing my home, a second full bathroom was added to my house sometime in the the 70s or 80s. My property assessment only lists one bathroom.

When the Arlington inspector comes to my house during the reno, is he required to make note of any discrepancy? If/when I do sell, and I want to maximize the value of the house, can the MLS listing include the second bath or is that information exclusively dependent on county assessment records?

A. If you have two full bathrooms, but the Arlington tax records only lists one… it makes me wonder if permits were ever approved for the installation of the second bathroom. That’s the first question I would try to answer if I were you. You can check for permits online: https://permits.arlingtonva.us/.

If your purpose is to have Arlington County account for the second bathroom then this can be arranged by contacting the department of real estate assessments: 703-228-3920.

If you are concerned about Arlington County discovering the existence of an unapproved second bathroom then this is a situation I recommend exploring with your contractor. A licensed contractor with experience in Arlington is going to have more insight into the possible pitfalls of this situation than I do.

The MLS is dependent on information manually entered by your Realtor. You are able to advertise all the bathrooms that exist in your home regardless of whether they are included in the tax record. You’ll probably still need to update some of the real estate websites that automatically generate information about your home (i.e. Zillow), just in case they are pulling from the tax record.

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

This regularly-scheduled 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 & 2014. Please submit your questions via email.

Q. We’re going to be selling our house in Arlington. Between my wife and I, we have six real estate agents in our network of friends, including the wonderful person who helped us buy our home. How should we pick who to use?

A. For most people, their home is their most valuable asset they have. That being the case, you should treat this purely as a business decision. It should go without saying that this is not a contest to be won by who you like the most, but who will produce the best results.

There are thousands of real estate agents in the D.C. area. Their level of experience, areas of expertise, organizational skills and ethics vary wildly. Not to mention their marketing, sales and negotiation skills. Commenters on my previous articles have shared many a horror story about the person they unfortunately chose to work with in the past.

I’ll provide some criteria to use in your evaluation, but I’m guessing you intuitively have a hunch who would be the best choice.

Experience — I am much less interested in how many years someone has been in the business as I am by how many transactions they been involved in like yours. You want someone who who can skillfully handle all the situations that may present themselves during the home sale process.

Time — Make sure that they have enough time to make your listing a priority. Ask how many other active and under contract listings they have right now. If they are also working with buyers, find out how many buyers they are helping. You’ll have to compare these numbers amongst the agents you are evaluating to decide what you feel comfortable with.

Niche – Do they have a niche or are they a generalist? If they do have a niche, does it fit with the home you are trying to sell? Think of it this way… if you had a serious health concern, wouldn’t you seek out the specialist who is most qualified to help you?

Marketing — ask to see examples of the marketing they do. Ask what things they are doing to market properties that are beyond the norm. This one is huge in my opinion.

Negotiation — ask about their strategies for negotiating in the current market. Bonus if they can show you examples of their results.

Violations — check the DPOR website to see if they have open or closed complaints against them. You may also want to check Yelp and Angie’s List for reviews.

Team or Individual — teams have become very popular in the real estate community and they come in all shapes and sizes. Understand up front who you are going to be working with and in what capacity.

It’s also important to pick someone you feel comfortable working with. If these are friends of yours, you probably have a good feel for this one and how similar your styles of communication are. For example, if you prefer email and texting, don’t pick the agent who is still dialing in to an AOL account.

I hope this helps. Having been in situations like this before, it is best to be up front and honest with the parties involved. They may not love your decision, but they will respect it if they are true friends.

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

This regularly-scheduled 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 & 2014. Please submit your questions via email.

Q. Do you know about any new condo developments coming to market in the next year or so? Specifically along the Orange Line corridor. I have seen close to a dozen new apartment buildings crop up in the last 1-2 years, but I cannot recall seeing any new condos. Anything in the pipeline?

A. I’m assuming you are are aware of Gaslight Square, which are luxury condos currently being sold between Rosslyn and Courthouse.

The only other development on the radar is the condo conversion in Virginia Square located 3409 Wilson Blvd. It was originally built to be a condominium building called the Joule in 2006. A company called AKA bought the before it was occupied and repurposed the building for luxury corporate rentals. ARLnow.com reported last month that they are switching back to condos this fall.

I haven’t been in the building in eight years, though I remember that the homes have a lofty feel with high ceilings and exposed ductwork. It is slim on amenities, but has a nice rooftop terrace. The new condo website boasts that the condos will include quartz counters, stainless steel appliances and solid hardwood floors. Pricing has not been released yet, but you can register for updates at ARC3409.com

An alternative, if you don’t mind leaving the Orange Line, is Columbia Place Condos. They are located just off of Columbia Pike on S. Walter Reed Drive and 11th Street. Sales are underway and delivery is expected to begin this winter. Prices for the almost 1300 square foot, two-bedroom, two-bath homes begin in the $500,000’s. It’s a boutique building with only 14 units total.

Feel free to check back with me at any time or provide more detail about what you are looking for and I can let you know when I hear about something matching your criteria.

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

This regularly-scheduled 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 & 2014. Please submit your questions via email.

Q. I started looking for a good iPhone app to use during my home search and was a little overwhelmed. Do you have one that you recommend?

A. I have tried a bunch of different real estate apps and have narrowed them down to my top three favorites.

1) Homesnap is the one I use most often. If I want to learn about a home and whether it is for sale, I open Homesnap and press a button on the screen like I’m taking a photo of it. It pulls up a map and asks me to confirm the home I am interested in. I am then provided with details such as the following:

• Estimated value
• Sales price and listing data, if it is for sale
• Number of bedrooms and bathrooms
• Lot size
• Square footage
• Year built
• Parking
• Historical sales data
• Comparable listings
• SmartZip HomeScore and InvestorScore

I can sign up for notifications when the price changes. I can even request that a competitive market analysis (CMA) be delivered to me.

In short, it’s the perfect nosey neighbor tool!

2) Maybe I’m a little biased, but I like using ArbourMobile.com when I’m searching for a specific address, city or zip code. It’s quick, accurate and has up-to-date information provided by the local multiple listing service (MLS). It allows me to display results in a list or on a map.  It provides all the listing detail including Walk Score. If I were in the market for a home, I would be inclined to use the favorites, notes and share functionality as well.

3) I like to use Zillow when I want information about real estate outside the DC area. Like if I’m on vacation dreaming about owning a beach house and wondering what the Zestimate is for the house next door. I would prefer to use Homesnap in these situations, but they currently have a limited service area.

In a previous article, I have listed some additional apps that may come in handy during the home buying process.

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

This regularly-scheduled 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 & 2014. Please submit your questions via email.

Q. Given your thoughts on the Ballston condo market, what kind of impact do you foresee for the three townhouse communities triangled between N. Glebe Road, Wilson Blvd, Carlin Springs Road, and Vermont Street?

A. I can’t think of any reason why the townhomes around Ballston wouldn’t be poised to ride the same wave of appreciation that I spoke about in my recent article about Ballston condos.

I’ve been particularly interested in a townhome for sale in Ballston Green that is currently listed at $1,230,000. According to the tax record, it was purchased new from Madison Homes in January of this year for $953,675. If they get their price (which is a big “if”) then it would be almost a 29 percent jump in less than a year. Even with high demand and low supply of newer townhomes, this will be an extraordinary amount of appreciation compared to any location in the region.

The specific townhomes you are describing have been selling quickly this year. The average number of days on market for the last six months is only five days. Thats even faster than the popular townhomes at Clarendon Park, which are currently averaging 18 days.

The key variable I see for the Ballston townhomes you mentioned is their updates. Some are 32 years old so you get a wide range of upgrades, if any at all. The homes that have been rented out for the last 10 years and have original finishes throughout are going to slow down average appreciation for the neighborhood as a whole.

It’s an improving area where the car dealership has been replaced by class A office space and new restaurants. The tired shopping mall will be replaced by a new structure and a fresh crop of retailers. You can walk to your local grocery store and weekly farmer’s market. The Ballston Metro station provides easy access to the Orange and Silver lines. Route 66 is only a stoplight or two away. I like the future of Ballston for condos, townhomes and the sprinkling of single family homes.

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

This regularly-scheduled 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 & 2014. Please submit your questions via email.

I just watched the Ballston BID development plan video on YouTube. How do you expect the plans to effect condo values in the area? I’m interested in both the next couple of years when we’ll continue to be “under construction” in a big way vs. 2017 when much of it should be complete.

For those who have not seen the video, it’s an animated rendering of what the future of Ballston may look like. It includes improvements such as:

• Seating for outdoor entertainment in front of the Ballston Metro station.
• Additional landscaping and water features in front of the Ballston Metro station.
• The exterior of the Ballston Metro station is a colorful work of art.
• Attractive landscaping has been added to the medians along Fairfax Drive.
• There is an outdoor market in Welburn Square (901 N. Taylor Street).
• A “beachfront,” “cloud” and “forest of knowledge” art projects are displayed in Welburn Square.
• New trash and recycling receptacles.
• A new Marymount University building on the corner of Fairfax and Glebe.
• A gateway sign signifying the entrance to Ballston.
• A new “parklet” on Glebe. I’ve not heard of this term before seeing the video, but it seems to be a tiny park area designed for relaxing and conversing.
• Digital banners displaying points of interest.
• Bocce court park outside Ballston mall.
• Completion of the new Liberty Center block.
• The fully renovated Ballston mall with outdoor facing shops and dining.

In my opinion the renovation of Ballston Common Mall alone will significantly improve interest in Ballston. The mall in its current form has been the black eye of Ballston since Ballston began shedding its rough-around-the-edges image back in the early 1990s. Not only is it going away, it is being replaced by an attractive building by today’s standards with shops and dining that will cater to the demographic who live along the Orange Line.

Clarendon has long been the leader in condo values and the highest cost per square foot in Northern Virginia. I don’t expect Ballston condo values to exceed those in Clarendon, but with improvements like the ones described above, I think that they will catch up.

I took the average cost per square foot for the last three sales at two comparable condo buildings — The Phoenix in Clarendon and Liberty Center in Ballston. The Phoenix is currently selling for a little over 2 percent more than Liberty Center. Going back to last year around this time, the difference was over 4 percent. Maybe the current improvements in Ballston along with speculation of what’s to come, is already closing the gap between Ballston and Clarendon condo values.

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