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. Enjoy!

Question: We’re looking for a house that needs to be completely remodeled, but want to make sure it has good bones. Do you have any tips on things to look for?

Answer: When I’m looking for a house with “good bones” I’m looking for a structurally sound house that offers a good canvass for updating to today’s standards. I’m cheating a bit this week and using a recent article written by Stephanie Dickens of BOWA, a local design-build firm that specializes in luxury renovations from kitchens to whole-home remodels.

Below are some of the best tips from BOWA as well as some of my own:

Level Floors

A nice, level floor indicates good structural support. If you look up to where the ceiling and the wall meet, the corner crease should be fairly straight. If it looks wavy or dips down in the middle, the floor joists above are sagging and may need reinforcement.

You can also check for sagging or tilting by measuring the ceiling height at various points in the room. Some variation is normal, but it should not be off by more than 1″ at any point.

Jump Around! (Jump Up, Jump Up, And Get Down!)

Now that you have House of Pain stuck in your head… Stand on your tiptoes then drop down hard on your heels. Do this at various points in the house to test the deflection in different areas. All wood framed floors are going to have some deflection, but you don’t want it to feel like your jumping on a trampoline. Too much bounce is an indicator of insufficient structural support.

Know Your Cracks

Sometimes structural issues reveal themselves in unexpected ways. Something as small as a crack in the drywall could be sign of larger structural issues. Straight, hairline cracks above openings or at joints, like the one pictured below to the left, are nothing to be alarmed about.

If you see jagged, diagonal cracks that are wider than 1/8″, like the one below to the right, the house may have settlement issues or insufficient framing.

Water Management

Water is a home’s worst enemy and poor water management can lead to water pooling against a home and getting into the cracks of the foundation, which can lead to structural deterioration over time. A musty smelling basement is a sign of poor water management. Look at where gutters drain — I often find that they’re dropping water right next to the house instead of sending it away.

Look at the grading (slope of the yard) and if water is running towards the house, look for drainage systems. Sump pumps are nice, but they should be connected to a battery back-up in case power goes out.

Young At Heart

A house with newer core systems is not just a sign of good maintenance, but it’s a huge money-saver in renovations. Check on the age of the windows, roof, HVAC, water heater, plumbing, electrical and main sewer/water lines. Any of these systems that are in the first half of their expected useful lifespan add tremendous value.

If you’re looking for a home with good bones that offers an efficient remodeling opportunity, feel free to reach out to me at [email protected] to schedule some time to speak with me. Once you’ve found that home, or if you’d like to make updates to your current home, reach out to BOWA’s Caroline Goree at [email protected] if you’re looking for high-end design and remodeling services.

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 D.C., and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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: What do you think about the iBuying trend in real estate? Have you seen an impact in Arlington?

Answer: iBuying offers homeowners a way to sell their home quickly without going to market, using a price generated by an Automated Valuation Model (AVM) like Zillow’s Zestimates. The big players are Opendoor, Offerpad, and Zillow but recently some well-known brokerages have joined the party including Redfin and Keller Williams.

At this time, none of the main players are offering iBuying in Arlington or the D.C. Metro area. Currently, the largest iBuying market in the country is Phoenix with about 6% of transactions going through an iBuyer (half of those are with Opendoor).

How It Works

The process of iBuying is similar for each company and looks something like this:

1. Homeowner submits a request for an offer and provides some basic information about their home (bedrooms, square footage, etc.)
2. iBuyer makes an initial offer on the home based on their AVM pricing algorithm
3. If the owner likes the price, the iBuyer conducts a property inspection to determine condition and cost of repairs
4. iBuyer makes a final offer given the property condition
5. Owner can accept and close usually within 10-14 days

Advantages

• Sell quickly
• Sell as-is
• No showings
• No repairs or improvements
• No contingencies that cause contract to void
• No cost to get an offer

Disadvantages

• Sale price likely below market value
• “Service fees” usually range from 7-10% of the sale price, well above most commissions when using an agent
• Still pay your normal closing costs (taxes, title fees, etc.)
• iBuyers not operating in most metro areas

When Does An iBuyer Make Sense?

There are all sorts of reasons a homeowner may value speed and convenience over price so iBuying exists for that market, but it should remain only a small percentage of the overall real estate transaction market. iBuying won’t always be the best option for somebody looking for speed and convenience, but with no cost and little effort to get an offer, it makes sense to at least see what an iBuyer is willing to pay.

If you’re in a market where iBuying exists (or when it eventually comes to Arlington), why wouldn’t you request an instant offer from an iBuyer and compare it to what your real estate agent thinks you can get on market? I know a broker in Texas who got more for his house from an iBuyer than he could get on the market because the AVM pricing algorithm over-valued his house.

Will iBuying Last?

I’m not sure how iBuyers will survive an economic downturn when they’re sitting on a huge amount of inventory that’s worth less than they paid for it. It’s a great business model in a hot market, but potentially devastating when the market turns.

Another flaw I see in the current model is that homeowners (like the broker in Texas I mentioned earlier) can take advantage of the process. An owner who does their homework, meeting with agents and getting iBuyer offers, will most likely only choose the iBuyer if they’re over-paying. That’s great for owners who can take advantage of it, but I’m not sure how that can be a sustainable business model.

An additional drawback is that iBuyers generally charge a fee of 7-10% of the purchase price, which is mostly attributed to the risks associated with buying based on an algorithm and a basic property inspection. If iBuyers can figure out how to reduce risk enough to cut this fee in half and sustain themselves through downturns, things will get interesting for the real estate industry.

There have always been brokers and investors who specialize in “buy now” or instant offer programs, but what makes iBuying unique is the implementation of technology to determine pricing and to make the process more convenient, as well as the scale of operations.

I think the longer-term solution is something that blends the convenience and scale of a well-funded tech company with the market knowledge of a local agent.

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 D.C., and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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: Given the recent appreciation in real estate values, are you seeing more homes appraise for less than the sale price?

Answer: As we saw in last week’s column, the Arlington real estate market has appreciated rapidly over the last six months which increases the chances that an Appraiser cannot find past sales to support the price the buyer and seller have agreed to, thus increasing the amount of low appraisals in Arlington over the last six months (unfortunately there’s no data to back that up so it’s based on what I’ve seen and heard in the market).

Generally, appraisal values lag behind actual market appreciation by a few months.

Banks Often Require Appraisals

If a buyer is getting a mortgage, the bank almost always requires a third-party appraisal to assess the property’s market value. While one can easily make the argument that the price the buyer and seller have agreed to is the market value, banks don’t look at it that way, hence the third-party appraisal.

Appraisals are largely based on comparable home sales over the last six months. It’s a common myth that Appraisers can only use sales from the last six months, but more recent sales are given more weight than sales 6+ months ago. Ultimately, it’s the Appraisers job to determine the market value of a home using the best available information.

Impact Of A Low Appraisal

If the appraised value comes in at or above the purchase price, all is good in the eyes of the bank so things continue as planned (note: a higher appraised value has no impact on your assessed value for tax purposes).

If the appraised value is lower than the purchase price, the bank usually requires you to negotiate a reduced sale price to match the appraised value or put more money down to cover the difference between the sale price and appraised value, multiplied by your loan-to-value (LTV) ratio. In some cases, you can also change the type of loan you’re using to satisfy the bank.

The easiest way to calculate LTV is subtract your down payment percentage from 100%. In other words, if you’re putting 20% down, your LTV is 80%. If there’s a $10,000 difference between the sale price and appraised value, you’ll usually be required to bring an extra $8,000 ($10,000*.8) to the table.

All of this can change depending on your loan program and down payment, so it’s important to understand the impact a low appraisal will have on your deal prior to making an offer.

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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. Enjoy!

Question: Our Board of Directors is planning for the 2020 budget and we’d like to get a sense of the market rates in Arlington, particularly in the Rosslyn-Ballston Corridor. What are the average condo fees in the Arlington area on a cost per square foot basis?

Answer: It’s that time of year for most Condo Associations — budget planning time! As a former Condo Board Treasurer, I understand the pressure you’re under to balance responsible spending and reserve contributions with resident expectations of low, stable fees. Let’s take a look at what condo fees are across Arlington…

Arlington Condo Fee Rates

Fees are generally set on an annual basis by dividing up the Association’s total budget, including reserve contributions, by the ownership percentage assigned to each unit. Ownership percentage is determined by the builder and can be found in the legal documents you received prior to purchase. In most cases, it’s determined either by the number of bedrooms or square feet.

On a square foot basis, the average condo fee in Arlington is $0.54/sq.ft. with a median fee of $0.53/sq. ft. Along the Rosslyn-Ballston Corridor the average jumps a bit to $0.57/sq. ft. and the median remains the same.

On a per bedroom basis:

Not All Fees Created Equal

Before you jump to any conclusions about the relative value of your condo fee, you need to consider what’s included. Amenities that require staffing and/or expensive maintenance like an attended front-desk, on-site management and pools add significantly to the budget. The value for those amenities is subjective.

Amenities that take up a significant amount of space within a building like large lobbies, party rooms, or rooftop gyms take away from the total unit count, thus increasing the ownership percentage of each unit.

There’s also a wide range of utilities included, or not, in a condo fee. Some fees include all utilities (water, sewer, trash, gas and electricity) while others may only include trash with the rest paid directly by each owner. Some fees even include internet and cable! These differences can change your monthly bottom-line between two condos by hundreds of dollars.

Another important consideration when analyzing condo fees is how well they’re being used to fund the reserves (the Association’s savings account for major repair or replacement work) and whether future planned/unplanned building expenses will require a fee increase or special assessment.

A well-funded reserve account usually means long-term fee stability and decreased chances of a special assessment. Associations should complete a new Reserve Study every five years to maintain a sufficient reserve balance and healthy building maintenance.

Other Thoughts On Condo Fees

Over the past couple of years I’ve written other condo fee related columns you might find helpful including A Case For Condo Fees, How Fees Impact Resale Value, and Finding Savings In Your Condo Budget.

While I have the attention of condo owners/Boards, I’ll also remind everybody that I’m organizing an info session on smoking bans in condos and to email me at [email protected] if you’re interested in joining.

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 D.C., and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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: What is customary to leave behind when we sell our house? Is there anything we have to leave or take?

Answer: The answer to this question varies by state/region so it’s important to understand what’s customary or required in your area. Throughout the entire DMV (D.C., Maryland, Virginia) it’s customary to leave/convey all appliances, anything fixed to the home (e.g. light and plumbing fixtures) and take electronics or anything not attached to the home (e.g. free-standing shelves).

Fortunately, the Northern Virginia sales contract has a section dedicated to what conveys, including a yes/no option for the 30+ items below:

Around here, it’s customary for the items listed above to convey if they’re present, so if you intend to take any of them with you, such a washer/dryer, you should be sure to let your Agent and potential buyers know ahead of time.

In addition to some of the obvious conveyances like landscaping, carpet and heating/cooling systems there are some not-so-obvious items that convey unless stated otherwise.

Those include light fixtures (chandeliers), attached shelving and wall mounts for electronics. The electronics (and wiring) themselves do not convey, so in practical terms — the TV comes with you but the wall-mount stays.

Other Tips/Grey Areas

You do not have to remove nails and other hardware used for hanging photos and other personal items. In fact, if you do remove them, you’ve technically changed the condition of the home and can be held responsible for patching and painting.

You are responsible for leaving the property “broom clean.” Broom clean is a bit of a grey area, but it surely means you do not have to hire a professional cleaning service or scrub the grout. Regardless of what the contract says, I always recommend sellers use an altered version of a common axiom and convey their home in the condition and cleanliness that they’d like a home to be conveyed to them.

You are also responsible for leaving the home “free and clear of trash and debris” which certainly means not leaving junk in the attic, clothes in the closet, or food in the refrigerator but it’s common (and generally appreciated) to leave behind extra matching paint, extra tiles or floor boards and other items used to for replacement or repair.

It’s generally a good idea to run these items by your buyer first, before leaving them behind, so you don’t get a call 30 minutes before   closing to haul away a bunch of stuff they don’t want.

Price and contingencies generally command all of the attention in contract negotiations, but ensuring you’ve accurately documented what conveys also deserves your attention to avoid a major disagreement in the last hour.

If you have any other questions about what’s customary when selling a home in Northern Virginia or the great D.C. Metro area, feel free to email me at [email protected].

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 D.C., and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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: Are you seeing a sharp increase in the asking prices of homes in Arlington, as reported by Realtor.com, since Amazon announced HQ2?

Answer: You guessed it, the national media is wrong about Arlington’s housing market (sort of). I don’t mean to jump on the Fake News bandwagon, but a few weeks ago Realtor.com ran a misleading article, that got a ton of coverage here, stating that the median asking price of homes in Arlington were up $110,000 or 17.3% from November 2018 to April 2019.

I was suspicious of their report because I’m not seeing that type of increase in the asking prices of homes across Arlington, so I dug into the numbers a bit more to understand why the data looks that way.

Technically, they weren’t wrong/lying but like most reports about local markets, they chose the version of the data with the biggest numbers to generate the most clicks and reposts without regard to whether it’s an accurate representation of our market.

The Truth Is In The Details

The reason the median price is up so much isn’t because owners are actually asking that much more for homes, it’s because the number of homes listed from January-May 2019 vs January-May 2018 for under $700k is down nearly 27% compared to a decrease of just over 9% for homes over $700k.

This has shifted the middle/median up substantially, but doesn’t actually indicate owners are asking more for their homes rather that there’s just less availability of homes under $700k.

For reference, the average listing price is up just 5.6%, to $782,156, in the first five months of 2019, a more accurate representation of the actual increase to asking prices.

The main reason for the drop-off in housing supply below $700k is the decrease in 1-2 BR condos, as detailed in the chart below:

To highlight how easy it is to manipulate housing data to show the opposite of what Realtor.com claims to be happening in our market, I looked at three sub-markets to compare how median price is changing within similar housing stock.

Looking at cross-sections of a local market with similar housing stock allows us to draw a more accurate picture of what’s actually happening, but even the chart below is misleading because it suggests asking prices are dropping this year, which isn’t true.

So What’s Actually Happening?

Over the last few months I have started to see asking prices increase. Occasionally I’ll see an asking price 15-20%+ higher than where it would’ve been last year, but mostly it seems asking prices for similar types of homes are up by 3-5% which is why you’re still seeing so many homes sell for above ask because most market values have increased by more than that (I’ve teed this one up perfectly for famed ARLnow commenter $4 Million to Heirs Annually).

Next month I’ll be working closely with Jeannette Chapman of George Mason University’s Fuller Institute to provide a detailed look at the Arlington housing market through the first half of 2019. I’m looking forward to collaborating with Jeannette on multiple columns to bring you more advanced market studies and opinions.

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 D.C., and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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: I’ve made a few offers on homes and am frustrated by the lack of negotiating I’m able to do. Are there things I can look for that are a sign that there’s room to negotiate price and terms?

Answer: Most buyers think that negotiating the terms of a home purchase is between them and the home owners, but in reality, most of the time you’re actually negotiating against other buyers. This is especially true when a home has been on the market for 30 days or less.

You can make a perfect case for why a home is worth less than the owner is asking, but if there are other buyers willing to pay more and offer better supporting terms, you don’t even get a participation trophy. If you’re dead-set on negotiating the price and maintaining favorable contingencies, the best thing to look at is the number of days a home has been on the market.

Historical data supports the following:

• If you want to purchase a home that has been on market for 10 days or less, you should be prepared to pay at or above the asking price.
• There is very little room to negotiate price in the first 30 days.
• Buyers gain negotiation leverage after a home has been listed for 30 days and it gets better each month after that.

The last three months of closed sales in Arlington shows the following:

• Buyers who purchased a home within 10 days of it being listed for sale negotiated 1% or more off the asking price on just 7.9% of transactions.

• Buyers who purchased a home within 10 days of it being listed for sale paid 5% or more over the asking price on 18.7% of transactions.

Use this data to make buying more strategic and less guesswork/frustration, but remember there is no hard rule that you can’t negotiate a price and terms from day 1 or that a seller is going to agree to discount their price after three months.

Remember that each transaction is unique in that both parties have their own set of priorities/circumstances, each house comes with its own unique strengths and flaws, and all it takes is one or two buyers being on vacation/busy for a deal to go from multiple escalating offers to one negotiable contract.

Take some time to understand underlying market trends and probabilities and apply those to each individual transaction based on the information that is unique to it.

If you’d like to meet to discuss how data can be used to develop your purchase strategy, you can email me at [email protected] to schedule a time to meet.

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 D.C., and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.