Ask Eli

This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: How has Arlington’s single-family housing market performed in the first half of 2021?

Answer: The news has been full of stories and data about the explosion in real estate prices and intense competition for single-family homes across the country. Arlington has been no exception.

This week, we’ll take a look at some charts and data that highlight what we’ve experienced so far in 2021 for single-family homes (SFH) in Arlington.

Overview: Prices Up, Listing Activity Up, Inventory Down

The year-over-year median price for SFHs increased 8.6% in Q1 and 20.6% in Q2 (remember Q2 2020 had end-to-end strict COVID lockdowns) with both quarters exceeding a median price over $1.1M — the first time that has happened in any quarter in Arlington. If you want to skip 2020 because of COVID, Q1/Q2 median prices in 2021 were up 17.4% and 21.1%, respectively, compared to 2019 median prices.

After back-to-back years of below-average listing volume, the number of SFHs listed for sale in the first half of 2021 exceeded 900 homes for the first time since 2017 and ended up well above the 10-year first half average of approximately 860 homes listed for sale during the first half.

Despite strong listing volume, active inventory hit a 10+ year low due to demand outpacing new supply. We finished Q2 with 1.3 months of supply — about twice as high as Loudoun County, which is struggling tremendously with inventory levels.

Bye-Bye Affordability

Of the six ZIP codes with enough SFH supply to generate reliable data (22206, 22209 and 22213 don’t have enough SFH sales), only one had an average sold price below $1M, compared to four in 2019!

One of my biggest takeaways from the 2021 market so far is just how quickly prices have increased in the least expensive neighborhoods. The two ZIP codes with the lowest average SFH price, 22203 and 22204, increased by 16.8% and 20.7%, respectively, from the first half of 2020, while the four most expensive saw increases ranging from 0.4% to 8.8%.

In 2020, the average home in 22201 (most expensive ZIP code) was 95% more expensive than the average home in 22204 (least expensive ZIP code). In 2021, the gap closed quickly with the average 22201 home being 62% more expensive than the 22204 average.

Price Distributions Skew High

While the largest volume of sales still falls in a sub-$1M range, the price distribution in Arlington skews high. Despite the high average/median prices, Arlington doesn’t have much of an ultra high-end market, with just three sales over $3M and just two SFH sales over $3.5M in the last five years.

Prior to this year, the percentage of sales under $800K was always greater than the percentage of sales over $1.5M. In the first half of 2021, not only were there a higher percentage of sales over $1.5M but the number of sales over $1.5M nearly doubled the number of sales under $800K!

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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: Does it matter which lender/mortgage company I choose when I purchase a home?

Answer: Choosing a good lender is one of the most important decisions you make during the home buying process. In a competitive market like we’re in now, choosing the right lender goes beyond a low interest rate and access to good loan products; it can be the difference between having your offer accepted or passed over.

Stronger Offers

Better Pre-Approval: When I review offers on behalf of a seller, I put a lot of value in the quality of the lender/bank who wrote the pre-approval letter for the buyer. A lender who has taken the time to review credit and financial documents, and to get a thorough understanding of the buyer, means the risk of financing falling through is much lower than with lenders who generate pre-approvals based on a short form with inputs from the buyer, without verification.

Most agents representing a seller will contact the lender on the pre-approval letter to ensure they are responsive, personally familiar with the buyer’s financial qualifications and confident in closing based on the contract terms (price, settlement timeline, etc.). Having a lender on your side who will answer the phone and understands the importance of this communication can make all the difference in a competitive market.

Close Faster: Online lenders, larger banks and credit unions often have difficulty closing in less than 35 to 45 days, but a good lender can often settle in less than three weeks. If you find yourself competing for a property, working with a lender who can close quickly will significantly increase the probability of your offer being chosen compared to a lender who needs at least five weeks.

Don’t Miss Settlement

Good lenders do not miss the settlement date. Their reputation and business rely on it. If you miss the contracted settlement date, you’re (usually) in default and expose yourself to risks including losing the Earnest Money Deposit, incurring the seller’s carrying costs or having the contract voided by the seller.

A good question to ask your lender is where their staff works. There are quite a few people involved in getting your loan approved including the loan officer, processor and underwriters. Lenders with a history of missing settlement deadlines often have staff working in different locations that don’t regularly work together. If your lender works in the same physical office as those people, that’s a good indication that they can handle issues efficiently and have a higher probability of meeting the settlement date.

Don’t Get Duped (Interest Rate vs. APR)

Be careful when you’re comparing interest rates, especially online rates. Make sure you’re comparing the Annual Percentage Rate (APR), not the interest rate. Many lenders advertise lower rates by including points (you pay cash upfront for a lower rate) or they charge higher fees. The APR is a measure of the total cost of the loan, including points, fees, and interest rate and allows for an apples-to-apples comparison.

Additionally, the advertised rates are often based on the ideal borrower profile and loan amounts. A true rate quote requires the lender to have your credit information, debts, income, purchase price and down payment. Even with that information, I’ve seen lenders quote low rates to capture a buyer’s attention and then increase the rate/fees once it comes time to lock everything in. Be careful and ask questions.

Reliable Pre-Approvals

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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: Can you explain what mortgage insurance is and if there’s any way to get rid of it?

Answer:

What is Mortgage Insurance?

Mortgage insurance is an additional monthly or upfront fee added to a mortgage, usually set at .1% to 1% of the loan amount, offered by either the government or private insurance companies to enable lenders to offer down payments below 20%. Mortgage insurance covers lenders for losses up to a certain amount if a borrower defaults on their mortgage.

Note: There are some sub-20% down payment products on the market for high-earning, high-credit borrowers that do not require mortgage insurance.

There are two types of mortgage insurance available:

1. FHA mortgage insurance: FHA is a government program, which requires a down payment of as little as 3.5% of the sales price, and mortgage insurance is required on FHA mortgages, regardless of the amount of down payment.
2. Conventional mortgage insurance: Conventional mortgages are home loans that are not insured or guaranteed by the government, as in the case of the FHA mortgage example. Many conventional loans are sold to Fannie Mae or Freddie Mac and thus follow these entities’ “conforming” guidelines.

Conventional or private mortgage insurance enables lenders to offer conventional loans with a minimum down payment as low as 3.0% to 5.0%. Most 3.0% down conventional mortgages are restricted to low-to-moderate income borrowers.

How is the Fee Determined?

The cost of mortgage insurance will vary greatly, depending upon several factors:

• The amount of the down payment
• The qualifications of the borrower like credit score and debt-to-income ratio
• Whether the mortgage is an FHA or conventional loan
• The type of the mortgage such as a 30-year or 15-year loan

Mortgage Insurance Can Be Removed

If you have a conventional loan (not FHA), you can request that your mortgage insurance premium be removed from your payments once your equity reaches or exceeds 20% (loan-to-value/LTV is 80% or less). This can be a result of a natural equity increase through your monthly payments and/or through appreciating home value.

To qualify, you cannot have a late payment in the last two years, and if you are making your case based on a higher market value of your home, the loan servicer will require a new appraisal (cost is usually around $500).

For conventional loans, your mortgage insurance is automatically removed once your LTV reaches 78% (equity reaches 22%) or you reach the midway point in your loan (15 years into a 30-year loan). Prior to hitting a 78% LTV, it is up to your loan servicer to decide whether to approve the removal of your mortgage insurance payment.

Key Takeaway

Given how much townhomes and single-family homes have appreciated recently, if you have mortgage insurance and have not made a late payment in the last two years, it’s a good idea to contact your loan servicer about having your home reappraised to see if you now have 22% or more equity and qualify for automatic removal or have 20% to 21.99% equity and can apply for early removal.

If you’d like to discuss buying, selling, investing or renting, don’t hesitate to reach out to me at [email protected].

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at 703-539-2529.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. 703)-390-9460.

This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: How often do condo associations and HOA/POAs need to conduct a reserve study?

Answer:

Virginia Requires New Studies Every Five Years

In light of the recent condo tragedy in Miami, I thought it would be a good time to remind everybody that Virginia requires condominium associations and homeowner/property owner associations to conduct a new reserve study at least once every five years.

In addition to providing valuable financial/budget guidance, reserve studies are also an important way to ensure your building/community remains in safe working order and structurally sound.

What is the Purpose of a Reserve Study?

During the Study, an engineer, or team of engineers, will inspect all common elements of the building/community to provide an assessment of current condition, useful life expectancy and projected cost of repair/replacement. A building inspection includes everything from the elevators and foundation to the hallway carpet.

After the inspection, the study team will provide a detailed report of their findings and an assessment of the future financial needs of the association over the next 30 years to maintain and replace the common elements of the building/community.

In most cases, these annual financial needs are analyzed against the current reserve balance (the association’s savings to pay for common maintenance and replacement costs) and the current reserve contribution amounts to determine if adjustments need to be made to the contribution levels in future budgets. Accelerating savings for an under-funded reserve is one of the most common reasons associations increase dues. If the funding requirement is high enough and the repair/replacement needs are urgent, that is when associations will consider charging a special assessment to fund the reserves immediately.

Don’t Forget About Presentation

I have reviewed tons of reserve study reports over the years, and there is a wide range in quality. In my opinion, a quality report should not only be incredibly detailed in the inspection findings but also as detailed in the presentation of the financial projections/recommendations. It’s also critical that this information be presented in an organized and easily understood format, which is not an easy feat when dealing so much information. If you are helping your association choose a company to lead the reserve study, don’t forget to review reports they’ve produced for other communities so you can see how well they present their findings.

Important for New Buyers, Too

In addition to reserve studies being important for building maintenance and budgeting, every new buyer into your community will receive a copy of the reserve study (along with other association documents) once they’re under contract. They have a three-day review period in which they can void the contract for a refund of their deposit. So having a current and easily understood reserve study report is also a critical part of keeping buyers under contract and the resale market in your community from under-performing.

If you’d like to discuss buying, selling, investing or renting, don’t hesitate to reach out to me at [email protected].

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at 703-539-2529.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. 703)-390-9460.

This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: Have you noticed a change in the real estate market lately?

Answer:

Summer Slowdown is Normal, Likely More Pronounced in 2021

It is normal for the real estate market to slow down as we transition from the intensity of the spring market into the summer market and we (myself, my colleagues and lenders I’ve spoken to) have seen that shift over the past few weeks.

I don’t think we are anywhere close to experiencing a market correction, but I do think the change in market conditions from the spring market (which really began in January/February 2021) to the summer market will be more pronounced this year because of COVID.

Buyers More Distracted by Travel/Events

Now that most of our buying population is vaccinated and businesses/events are open, buyers’ attention is finally being focused on trips, events, and visiting friends and family rather than solely on their home search. Diversions are usually highest in the summer and around the holidays, thus historically slower markets, but this summer and holiday season will be met with an unusually high number of distractions for buyers. (That’s a good thing!)

Asking Prices Catching Up

Another factor in the shift in this summer’s market is that asking prices are finally starting to catch up, in many cases, to actual market values. During the first 3-4+ months of 2021, the sales data (sold prices) wasn’t there or wasn’t enough to give sellers the confidence to increase their asking prices 5-10%+ over 2019-2020 prices, which is why we’ve seen such extreme price escalations this year. Now that asking prices are falling more in line with what the market is willing to pay (based on my experience over the past 4-8 weeks), the number of offers and wild escalations should subside.

What Likely Will/Will Not Happen

Homeowners planning to sell should not worry that the bottom is falling out of the market, but expectations should change compared to previous months. Here’s what I think the shift will and will not look like:

• WILL result in fewer total offers on competitive homes
• WILL result in fewer properties selling within the first week
• WILL result in buyers negotiating better/more contingencies
• WILL result in less extreme price escalations
• WILL result in fewer homes listed for sale (likely a 20-30% drop compared to March-May)
• WILL NOT result in prices falling (prices should stabilize)
• WILL NOT result in a buyer’s market

Spring vs. Summer, 2016-2019

Let’s take a look at how the Arlington real estate market shifted from spring to summer from 2016-2019 to give some historical perspective. I did not include 2020 because it will always be an outlier that provides little value for historical trends/context. I looked at four data points that I use to measure market conditions:

1. Percentage of homes that went under contract within one week of being listed
2. Percentage of homes that sold for at or above the original asking price
3. Average sold price compared to the original asking price
4. Number of homes listed for sale

Here is a summary of findings from the charts shared below:

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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: How does Arlington’s housing market compare to what you’re seeing in Fairfax and Loudoun counties?

Answer: The Arlington single-family home (SFH) market has been competitive, and prices have increased, but the shift hasn’t been nearly as dramatic as what we’ve seen farther west in Fairfax County and Loudoun County.

The Arlington condo market has improved from the end of 2020/early 2021, and prices seem to be coming back, but inventory levels are still much higher than they were in the years preceding the Amazon HQ2 announcement.

Listing Activity up in Arlington, Normal in Fairfax and Loudoun

The number of SFH listings in Arlington this spring is up noticeably compared to prior years, but the biggest story continues to be the amount of condos being listed for sale. I previously wrote about the historical volume of condo listings we had last fall, and that trend has continued through this spring with the total number of condos listed for sale from March to May significantly higher than any other spring market in the last 10+ years.

The number of SFH listings in Fairfax County and Loudoun County have been consistent with past spring markets, down slightly compared to 2018 and 2019.

Demand Meets or Exceeds New Supply, Except Condos

Despite higher-than-average listing activity in Arlington, the SFH inventory levels remain very low because there is enough demand to absorb the extra supply. SFH inventory has remained at about one month of supply throughout 2021.

Condo demand has not met the higher-than-average listing activity, and condo inventory has steadily increased through the spring after dropping (and flattening) from five-year highs this winter. The Arlington condo market has settled at around 2.5 months of supply for the last six months, which represents a market that is more favorable to sellers than buyers but still a significant shift from the post-Amazon HQ2 market with two to three weeks of supply for about 18 months.

Demand in Fairfax County and Loudoun County has been exceptionally high, and inventory levels remain dangerously low with just two to three weeks of supply for nearly the last eight months.

Prices Are up (Of Course)

Prices for SFHs in Arlington are up, with the median price of a SFH in Arlington exceeding $1.2 million for the first time ever in May. While the prices in Arlington are up noticeably, it’s nothing compared to the massive appreciation seen in Fairfax County and Loudoun County over the last four months where we’ve seen up to 15-20% year-over-year increases in prices throughout both markets.

Condo prices have increased from late 2020/early 2021 and seem to be settling in a bit below pre-pandemic numbers. I didn’t include a chart for condo prices because there’s too much variability, and it doesn’t provide much value.

Escalations Over Ask Are The Norm, Likely to Change Soon

This spring, the average SFH in all three markets has closed for 3-4.5% over the original asking price. I expect this number to come down over the next few months as asking prices catch up with what the market is willing to pay and the attention/priorities of buyers starts to shift to other things like travel, events, and seeing family and friends.

If you’d like to discuss buying, selling, investing or renting, don’t hesitate to reach out to me at [email protected].

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at 703-539-2529.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. 703)-390-9460.

This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: What are the different ways of structuring a Home Inspection Contingency, and how do they affect the odds of my offer being accepted?

Answer:

Last Week’s $1,000 Donation Poll

Before I jump into today’s column, I want to announce that based on last week’s vote, our team donated $1,000 to the Fisher House Foundation on behalf of the ARLnow community in honor of Memorial Day. Fisher House Foundation builds comfort homes where military and veteran families can stay free of charge while a loved one is in the hospital. Thank you to everybody who voted and commented with feedback about the various charities.

Home Inspection Contingency Overview

Not only is this market pushing buyers to offer well over asking price, but it’s also pushing them to take on a lot of risk by reducing or eliminating the protections offered by standard contingencies: Inspection, Financing and Appraisal Contingencies are the “Big Three.”

Of the “Big Three” contingencies, the Home Inspection Contingency represents the most risk to a seller because it gives the buyer a nearly unilateral option of voiding and/or the ability to request seller repairs or seller credits based on the findings of the inspection. Thus, buyers who reduce or eliminate the risk of a Home Inspection Contingency to a seller are viewed much more favorably than buyers who do not.

A home inspection is when a buyer hires a licensed home inspector to provide a report on the condition of a home. They examine and test things like appliances, the roof, water drainage and the electrical system to help buyers understand what they’re buying. Depending on the size and age of a property, inspections generally cost anywhere from $300 to $800+ before common add-ons like radon tests and chimney inspections.

If you’re buying a home, there are a few different ways of approaching the home inspection.

Home Inspection with Right to Void or Negotiate Repairs and/or Credits

This option is most favorable for buyers and least favorable to sellers because it allows the buyer to void the contract (and get their Earnest Money Deposit back) if they don’t like the results of the inspection (or even if they just get cold feet) and also allows buyers to make any requests they want for seller repairs or seller credits.

If a buyer decides to void, there’s nothing the seller can do, as long as the Notice to Void is issued within the proper window of time. Buyers can make any requests they want of the Seller for repairs and credits, but the seller can also negotiate or reject whatever requests they want. If the buyer and seller are unable to reach an agreement on repairs and/or credits within a specified number of days, the buyer has the option of accepting the Seller’s latest offer for repairs and/or credits or voiding the contract.

Most people would consider this the standard/default type of inspection, but in hot markets like we’re experiencing now, this structure is much less common.

Home Inspection with Right to Void Only

Also known as a Pass/Fail inspection. This option is less favorable to buyers and thus, better for sellers. In this scenario, buyers retain their ability to void the contract after doing the home inspection but give up the negotiation period to request repairs or credits from the seller.

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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Thank you to all who have served and to their families who have sacrificed or lost loved ones for our freedom. I hope you and yours had a special Memorial Day weekend back with friends and family to celebrate our country.

The Eli Residential Group will be making a $1,000 donation to one of three veteran/military nonprofits. Please vote below and the charity with the most votes will be chosen for the donation.

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at 703-539-2529.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. 703)-390-9460.

This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: In your last article you mentioned Bright MLS a few times, can you explain what that is?

Answer: If you’re buying or selling a home, you may hear the term “MLS” or “Bright” used a lot. The simplest way I describe it to people is that the MLS, short for Multiple Listing Service, is the real estate industry’s database(s) of record for property sales. There are hundreds of regional and local MLS’s across the country.

Bright (MLS) is the name of our regional MLS and is also the largest in the country. Prior to 2017 it was called MRIS (Metropolitan Regional Information Systems), but in 2017 it was rebranded to Bright after a merger with eight other regional MLS’s mostly from Pennsylvania, New Jersey and Delaware.

From a 2017 press release, the recently formed Bright MLS managed the records for about 250,000 annual transactions and $85 Billion in annual real estate sales. These numbers are likely higher now.

What is the MLS (Multiple Listing Service)?

The MLS is a real estate information exchange platform and database created by cooperating residential real estate brokerages to improve the efficiency of their real estate market. As a privately created and managed organization, each MLS is primarily funded through the dues of the brokerages and agents within the market it serves. There are hundreds of MLS’s across the country and each operates under its own direction and rules and regulations.

The information you find on consumer-facing websites like Zillow, Realtor.com and Homesnap comes from various MLS’s and each MLS has the right to negotiate its own relationship (syndication agreements) with these sites and determine what information is made available.

Without the MLS concept, we would have an extremely fragmented industry that would make it difficult for buyers to ensure they are seeing most/all of what is for sale within their sub-market, and it would be much more difficult for sellers to get top dollar because they would not have access to the entire buyer market.

What is Bright MLS?

Bright is the MLS that serves our region including most major markets or 100% of markets in Virginia, Washington D.C., Maryland, Pennsylvania, New Jersey, West Virginia and Delaware. It’s the largest MLS in the country by size and geographic area.

The Executive Committee and Board of Directors are made up of representatives from the region’s major brokerages and directs the business of Bright, which has developed into a full-blown software, services and technology company. Bright has adopted a strict set of rules and regulations to provide data uniformity and ensure fair play such as restrictions on marketing properties for sale that are not entered into the MLS, as discussed in last week’s article.

Your interaction with Bright MLS is likely to come from listings that your real estate agent sends you directly from the system, but you are also indirectly interacting with Bright whenever you search a third-party real estate site like Zillow because Zillow pulls its listing information from Bright (and other MLS systems across the country).

While at times frustrating for brokerages, agents and consumers, there is a tremendous net benefit to the MLS structure by combining home sale data into one database with a common set of requirements and rules of engagement. This allows the entire industry to function much more efficiently than it did prior to the MLS concept and since Zillow and other consumer-facing sites began aggregating listing information for public use, it has taken away the “gatekeeper” role real estate agents, to the benefit of consumers and, I would argue, real estate agents.

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at 703-539-2529.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. 703)-390-9460.

This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Enjoy!

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 ever 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 versus 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.

If you’d like a question answered in my weekly column or to set up an in-person meeting to discuss local Real Estate, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at 703-539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. 703-390-9460.