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. Please submit follow-up questions in the comments section or via email.

Question: I found your last article about the Arlington real estate market helpful.  I’m in the market for a home along the Orange Line.  It sounds like everything is selling pretty well right now, but can you tell me which ones are at the top?

Based on what I am seeing out there, these are the neighborhoods with the most action along the Orange Line, broken down by condo, townhouse and single family house:

Condo – Clarendon 1021 (1021 N. Garfield St.)

Clarendon 1021 is one of the largest condominiums on the Orange Line with 417 homes.  Therefore it also tends to have the most homes available, which works to its advantage during an inventory drought like this one.  Four homes have already sold so far this year and eight more are under contract.

The biggest attraction to Clarendon 1021 is the location.  Walk out the front door and you are within two blocks of Clarendon Metro.  You’re within easy walking distance of Arlington’s most popular bars and restaurants.  Within the same radius are a number of conveniences including shopping, groceries, fitness facilities, banks, car/bike share, drugstore,  etc.  Because of its size, Clarendon 1021 is able to offer a full array of amenities (including rooftop pool and 24×7 front desk) while keeping condo fees relatively low.

Other popular options along the Orange Line are The Phoenix, Station Square, Liberty Center and Wooster & Mercer Lofts.  I would also keep an eye on the Courthouse area.  There is a lot of new retail space being developed, which will include new shopping and dining options.  I expect the Courthouse area to become a great second choice to Clarendon.

Townhome – Clarendon Park (near Fillmore and 11th)

Clarendon Park shares a similar location to Clarendon 1021.  You may find bigger, newer and more extravagant townhomes along the Orange Line, but none with such a sought after a location.  Already this year, we have seen sales in this neighborhood escalate from $26,000 to $68,000 over list price.  Only the smallest model seems to have any trouble selling quickly.

Clarendon Park offers street and park views.  The most popular homes have large front porches that face the park.  Typical of urban style townhomes, they include a rooftop terrace in lieu of a yard.

Clarendon Park is a great option if a central location is important to you.

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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. Please submit follow-up questions in the comments section or via email.

Question: I’ve heard that the Arlington real estate market it is in full rebound.  Is that the case for the entire Arlington market or just certain price ranges or types of homes? 

Personally, I’ve been experiencing a high amount of activity in every segment of the Arlington real estate market since the start of 2013.  In order to answer your question I am going to dissect the actual sales data from the local MLS for the first quarter of 2013.

First I am going to break down the various price points by the number of sales that occurred, average days on market (DOM) and the average list price to sales price ratio.

Some observations based on this data:

• The heaviest concentration of sales lie below $700,000. This is not a surprise.  This is the portion of the market that is affordable to the greatest number of home buyers in Arlington.
• The price ranges with the fewest average days on market are $300,000-$400,000 and $600,000-$700,000.  These two price ranges are the “sweet spots” for newer 1 and 2 bedroom condos along the Orange Line.  It’s a portion of the market that is on fire right now.
• It’s amazing to me that the average sales price to list price ratio is above 99% for homes between $300,000 and $800,000.  If you are entering the market as a buyer, set your expectations accordingly.

A common misconception among people new to Arlington real estate is that 1 bedroom condos are going to be a lot harder to sell than 2 bedroom condos.  This simply is not the case. It’s true that more people would prefer 2 bedrooms, but fewer people can afford them.  The result is that they both do pretty well.

• You can see that 1 bedrooms just barely edge out 2 bedrooms on the number of sales.  I think this delta could be larger, but there are simply not enough 1 bedroom condos on the market to satisfy demand right now.
• 1 Bedroom condos are selling a little quicker on average, but the sales price to list price ratios are almost identical.

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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. Please submit follow-up questions in the comments section or via email.

Question:  I recently made an inquiry with a realtor and they asked me to sign an exclusive buyer’s agreement before putting in an offer. I am curious if that is a standard practice with your company as well. While I am not “actively” looking at properties, I do want to have the ability to put in an offer for a property.

Previously, we were only required to have an exclusive agreement in place when working with sellers. Individual agents and firms were free to set their only policies regarding exclusive buyer agreements. On July 1, 2012, the Virginia Agency Law was revised, now requiring all Virginia real estate agents and brokers working with a home buyer to have an exclusive buyer’s agreement in place.

We are not supposed to show homes, write contracts or otherwise act as a real estate agent on your behalf without having such an agreement in place. I’m quite certain that the intention of the agency law changes are to protect consumers. Three primary protections the agreement provides to home buyers are included in the Broker’s Duties paragraph:

1. The agent/broker must disclose to the purchaser all material facts related to the property or concerning the transaction of which they have actual knowledge.
2. The agent/broker must maintain the confidentiality of all personal and financial information and other matters identified as confidential by the purchaser.
3. The agent/broker must account for in a timely manner all money and property received in which the purchaser has or may have an interest.

Agents / brokers also agree to comply with fair housing laws.

The primary duty of the purchaser is to work exclusively with the broker during the terms of the agreement.

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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. Please submit follow-up questions in the comments section or via email.

Question: I’m planning to purchase a home in Arlington this spring and have heard stories about how crazy the market is getting. I’ve read about people waiving their appraisal contingency in markets like this. Can you explain how that works?

It’s important to first understand why someone would consider this strategy… residential appraisers primarily employ the sales comparison approach to determining a home’s value. This method is heavily reliant on past comparable sales. In situations where a home may sell for more than the recent sales prices of comparable homes (i.e. due to competition from multiple offers), the property may appraise for less than the agreed upon sales price.

If an appraisal comes in low, we usually use it as leverage to try and negotiate a lower sales price. It isn’t exactly fair to the seller because they agreed to a higher price at the onset, but sometimes it is necessary for a buyer to be able to continue with the purchase. Therefore, you can see how waiving the appraisal contingency up front would strengthen an offer by relieving the seller of having to worry about whether a contract they are considering will appraise for the agreed upon purchase price or not.

From a purchaser’s perspective, waiving the appraisal contingency could result in a situation that requires more funds than initially expected, change the loan terms (i.e. monthly payments could be more expensive) or even cause the contract to be in default if the purchaser is unable to proceed with the purchase.

Based on the loan program you use, the lender will require a minimum amount of equity on your part. In turn, they are only willing to finance the balance of that equity. For instance, if your loan requires a minimum of 20% owner equity, it will lend up to 80% of the lower between purchase price or appraisal value. If you are stretching financially to meet the minimum requirement of your loan program then waiving the appraisal contingency is not an option for you.

If you are putting down a lot more money than is required by your loan program, then waiving all or a portion of the appraisal, contingency may be an option, one you could consider very carefully. In this situation it might affect your down-payment or monthly payments. However, it eliminates your leverage to try and negotiate a lower purchase price if the appraisal comes in low.

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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: I keep hearing how much the Arlington real estate market has recovered, but our house has been sitting on the market for several months and we still don’t have any offers. Any advice you can provide is appreciated.

We’ve already hit a seller’s market surge in 2013 and it is barely February.  Almost every offer I have written in the last two months has been against competing contracts.  Yet, certain homes sit there collecting days-on-market.  You really can’t blame the market anymore.  It’s time to look at the items you have control over.

Price — Zillow, tax assessed values and comparable sales (“comps”) do not determine market value.  Comps play a big role in determining appraisal value and are often used when trying to predict market value, but the open market is what determines market value.  In case it needs to be said… what you owe, paid or would like to make on your home, does not influence market value either.

If people are not coming to see your home then it is usually a good indication that you priced your home higher than what the market is willing to consider.  In Arlington you should expect at least one showing per day on average.  That number should be substantially higher for homes along the Orange Line.

Waiting is not going to help.  If you have over-priced your home, address the issue as early as possible.

Days-On-Market (DOM) — The higher your DOM, the lower the perceived value will be of your home.  Potential buyers begin to wonder what’s wrong with the home.  They wonder why everyone else has passed it by.  They also begin wondering how low they can get you to come down on price.  This is why it is important to put your best foot forward as early in the listing process as possible.

If the damage has already been done and you have already racked up a large number of DOM then you need to implement a new strategy.  Your strategy should take into consideration the feedback you have received from potential buyers and showing agents.  You may also want to interview other agents to gain a fresh perspective of how someone else would help you sell your home.

Another option is to take the home off the market for 90 days to reset your DOM in the MLS.  I can’t say I recommend this during the current market.

How it Shows — If your home is vacant and less than beautiful on its own, you may want to have it staged.  A good stager is synonymous with a miracle worker.  It will help divert attention away from every imperfection.  It also goes a long way towards helping the potential buyers envision how they would live there.

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