Ask Eli

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

Question: What is the likelihood that a lender will approve a loan for ~$500,000 for a first time buyer putting 10% down in a condo building that is approaching or over 50 percent units being rented out?

Answer: This question gives me another opportunity to bring in an industry expert: loan officer Jake Ryon of First Home Mortgage (NMLS #993471). Below, Jake debunks the common myth about rental ratios in condo buildings and introduces the factors that actually impact condo loans most frequently.

MYTH: Buyers Can’t Qualify For Condo Loans If More Than 50 percent of Units Are Rented

One of the most common myths that exists in the industry is that buyers cannot get a loan if more than 50 percent of units are being rented out in a condo building.

TRUTH: Most Homeowners Can Qualify For Condo Loans Regardless Of Rental Ratio

The percentage of units rented in a condo building (aka investor ratio or owner occupancy ratio) has no impact on loans for borrowers that are purchasing or refinancing their primary residence or second home.  If the borrow is an investor seeking a conventional loan, the building must have at least 50 percent of the units occupied by owners (not rented).  FHA’s requirement is the same but does not apply to second homes.  While condo associations may elect to self-impose a rental cap, as it stands now with Fannie Mae and Freddie Mac, it currently doesn’t impact borrowers who are purchasing or refinancing their primary residence or second home.

What Does Impact Loans On Condo Buildings?

1. Commercial/Non-Residential Square Footage: Currently, Fannie and Freddie cap the total commercial/non-residential square footage in a building at 25 percent of the total space, up from 20 percent a few years ago.  Your lender may be able to obtain a project waiver directly from Fannie Mae if the commercial/non-residential square footage exceeds the 25 percent cap.  I was recently able to obtain a waiver for a five unit project that has 38 percent commercial space (in D.C.) because we were able to show it was common in the area, didn’t impact marketability and were able to provide several comps with similar square footage of commercial/non-residential space.
2. Single Entity Ownership: The maximum number of units owned by one entity can’t exceed 10 percent of the units in the project per Fannie and Freddie guidelines.  If it is a 2-4 unit project (rare in Arlington, very common in DC), no entity can own more than one unit.  Both Fannie and Freddie do allow one entity to own two units in a project with 5-20 units.  A project waiver may be possible from Fannie Mae if a single entity owns greater than 10 percent.
3. Delinquency: Fannie and Freddie do not allow more than 15 percent of the units in the Association to be > 60 days delinquent on the payment of their monthly assessments for the project to be warrantable (approved for loans).  A project waiver may be possible with Fannie Mae if the delinquency rate is slightly higher than 15 percent.
4. Budget: Fannie and Freddie require the Association’s current year adopted budget to include a minimum of 10 percent of the annual monthly assessments to go towards the reserve fund.  If the budget does not document the required 10 percent, a current reserve study that supports the Association’s current level of contribution may be acceptable.

If you have any questions about condo warrantability or anything else loan-related, Jake Ryon can be reached at [email protected], 202-448-0873 or online. He is located at 1015 15th Street NW Suite #375 Washington DC 20005.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at http://www.RealtyDCMetro.com.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, 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 Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: I’m planning to sell my single family home in North Arlington this year and it seems that in my neighborhood, homes with great landscaping sell for top dollar. Our sale price justifies an investment in our lot, so I’m curious what the Arlington home-buyer demand from landscaping and if there are certain types of landscaping that offer the best Return on Investment.

Answer: Every spring I get a lot of landscaping questions and like to bring in my friend Jeff Minnich of Jeff Minnich Garden Designs to update Arlingtonians on what homeowners are doing in their yards and provide cost-effective tips for investing in your exterior for resale. If you’d like to continue the conversation with Jeff, you can reach him at [email protected] or 703-525-4540.

Enjoy Jeff’s expert response to this week’s question:

In Arlington, homeowners take great pride in their gardens. Our temperate climate is such that we can enjoy our gardens for the majority of the year. Over the last 15 years, there has been a trend toward extending the interior living space seamlessly into the outdoor living space–outdoor rooms, kitchens, fire pits, play areas, fencing, to name a few.  The desirability of a well-designed garden space is a solid investment, and attractive to potential Arlington homebuyers.

Most people involved in the landscape industry have seen a surge in business the last few years, as the economy recovers. This year is particularly busy.

There are really two kinds of investment in a home and garden: doing what will bring pleasure, enjoyment, and ease to day-to-day life in the home; and doing what might add value to the property, if resale is in the cards.

When preparing to sell a home in Arlington, it is important to remember that many buyers have the means and desire to put their own personal stamps on their new homes and gardens. Therefore, I always recommend concentrating on safety items, tidiness, and color.

Fix that uneven sidewalk or replace rotten wood on the deck. Fix gates. Replace the burnt out bulbs in your outdoor lighting system (lots of potential buyers drive by and have a look at night, too). Have the windows cleaned and check the exterior paint job, particularly the front door (yes, these items are part of the outdoor landscape, too). Power wash the house, sidewalks, patio, deck, driveway…make sure your hardscapes sparkle.

Weed, re-edge and mulch the planting beds. Remove old/dead shrubs and trim existing ones. Look up into your trees–does a tree or branch look dead or precarious? Have a tree professional look at it. Potential homebuyers do notice these things. Cut the grass and make sure your lawn is not full of blooming dandelions! This one item can be a big turn-off.

Finally, finish the job by adding some flowers to windowboxes, pots, and beds. Remember, you cannot take back that first impression–the outside of your home is the first thing potential buyers see before walking through the front door, and it can often make or break a sale.

(more…)

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

Question: The best time for me to purchase a home is over the next few months, but I’ve heard from friends that the spring is highly competitive. Do you have any tips for being more competitive in the spring market without overpaying?

Answer: In a couple of weeks I’ll publish a summary of real estate data for the first quarter of 2017 in Arlington, but I can tell you that this year is off to an explosive start and the “spring market” started early. Warmer weather brings more buyers to the market and more competition over our limited housing inventory. Here are some tips on how you can improve your chances submitting a winning offer without exposing yourself to unnecessary risk or overpaying:

Take Your Time, Do Your Homework

I always tell clients that a home has two values — market value and personal value. Personal value will drive how you structure your offer and what you’re willing to pay relative to market value. Hopefully you’ve spent time over the last couple of months sharpening your criteria and understanding how it fits within your budget. If you’ve put in the right prep work upfront, you’ll be able to recognize personal value quickly and make strong offers with confidence.

Settle Faster

One way to make your offer stand out is by settling in three weeks instead of the more common 30-40 days. The settlement period is the time between the contract being signed (ratification) and the home purchase. It’s dictated by the time your lender needs to prepare your loan, so talk to your lender early on about ways to reduce your settlement period. Most sellers want to close on a property as soon as possible.

Contingencies

Most offers in Arlington include contingencies (protective terms for a buyer) for financing, appraisal and a home inspection. The shorter you can make each contingency, the more attractive your offer will look to a seller. Talk to your lender about how long they need for the financing and appraisal contingencies and don’t add unnecessary time to them.  Home inspections are valuable steps in the buying process, but also carry significant risk to the seller.

There are a number of ways to improve the “normal” 7-10 home inspection contingency to make your offer more attractive such as reducing the length of the contingency to five days with a short negotiation period, using a Pass/Fail contingency by removing the right to negotiate, making the inspection for informational purposes by removing the contingency all together (do not make this decision without considerable discussion), or getting approval from the seller to conduct a pre-inspection before making your offer.

Seller Preferences

Before making your offer, find out if the seller has any preferred terms such as a post-settlement occupancy (aka rent-back), home purchase contingency, or timing of settlement (Virginia loans should close end of month).

Watch Days on Market

The number of days a property has been on the market will help you decide how to structure your offer. You should be prepared to make your strongest offer within the first week of a listing and adjust your terms with each week a property sits.

The spring market can be a great time for buyers who are prepared for the additional competition because you’ll see a significant increase in inventory, so that illusive two bedroom + den or half-acre yard with a deck is more likely to appear. If you’re not prepared to make a strong offer, the spring can be frustrating and defeating because you may watch your dream home(s) go to other buyers who have made smarter, but not necessarily higher, offers.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at http://www.RealtyDCMetro.com.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, 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 Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: I’m considering purchasing a new construction home in Arlington or a nearby neighborhood and have been meeting with a number of local builders to research my options. I’ve heard from quite a few that purchasing a new home often results in instant equity because they often get appraised for at least $100,000 more than the purchase price. Do you think that the higher appraisal value is an accurate reflection on the resale value of these homes?

Answer: Over the past decade, variations of large Craftsman and Arts & Crafts style homes have been replacing older homes across Arlington and Northern Virginia. Local builders have figured out a standard exterior aesthetic and interior design that buyers are willing to pay a premium for, so most new homes over the last ten years have a similar look and layout. Savvy buyers have started to question how these homes will do when they come back onto the market for resale.

Due to the fact that most buyers of $1M+ new homes plan to raise families in them for a long time, we won’t see a lot of these homes resold for a while. My guess is that we’re about 5-10 years away from really being able to answer this question, but by opening up the dataset to Arlington, McLean and Vienna, I was able to come up with enough data points to begin looking at the resale value of new homes in Northern Virginia.

The 106 data points I pulled together are for new homes built from 2007 on and resold once after the original purchase in Arlington, McLean and Vienna. I removed any foreclosures or short sales. For purposes of this analysis, I think it’s better to look at resale in all three markets combined rather than split them up and draw assumptions from minimal data.

• On average, new homes resold for $45,585 more than what they were purchased for with an original average purchase price of $1.46M (~3 percent gain)
• Of the 106 total data points 42 were sold within 3 years, 50 sold within 4-6 years, and 14 sold within 7-9 years
• Homes that sold within 7-9 years of original purchase fared the worse with 57 percent (8 of 14) selling at a loss
• Homes sold within 4-6 years have done the best, with 80 percent (40 of 50) selling for more than the purchase price
• Two thirds of homes sold within 1-3 years sold for a gain
• Of the 30 homes sold for a loss, the average loss was nearly $120,000
• Of the 74 homes that sold for a gain, the average gain was nearly $114,000
• Two homes resold for the same price they were purchased
• 21 homes sold after three years of ownership and 18 sold after five years of ownership, these were the two most common times between sales
• The biggest loss was nearly $665,000 and the biggest gain was nearly $400,000

It’s tough to draw any specific conclusions from this data because we’re still so early in the resale cycle for this type of new homes, but I thought it’d be fun to take a peak behind the current a bit early because it’s such a common question.

The important takeaway is that a good investment in a new home in Northern Virginia is more about making the right decision for you and your family than it is obsessing over the numbers. If you take your time, learn the market and understand the difference between builders you will put yourself in a much better position to end up on the “gains” side of the data when it’s time to resell.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at http://www.RealtyDCMetro.com.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, 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 Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: I’ve been renting my unit at the 1800 Wilson condos in the Rosslyn/Courthouse area for the last five years and am wondering why I used to get more rent five years ago than I do today, despite keeping the unit in great condition for each renter. Any ideas?

Answer: You may have heard that over the last five to six years, the rental market has hit all-time highs across the country, so it makes sense that you’d expect your rental income to increase. However, the increased rental demand and previously undersupplied luxury rental market in Rosslyn got the attention of some major developers, who recently built larger luxury rental buildings nearby.

Developer vs. Landlord

Landlords at 1800 Wilson and the neighboring Rosslyn/Courthouse condo buildings took a hit on rental income starting in 2013 as luxury apartment buildings Slate|Sedona, 19Nineteen Clarendon, and 2001 Clarendon added nearly 850 units to an undersupplied Rosslyn/Courthouse rental market, while offering deep discounts to new tenants in the range of one to two free months of rent (standard for new apartment buildings).

In the last year or two, each of the buildings have finished their initial leasing cycle and the incentives have expired at all three, so 1800 Wilson and other landlords in Rosslyn and Courthouse should see a small increase in rental rates.

Don’t expect a huge jump because rental supply is substantially higher now and Central Place, above the Rosslyn Metro station, just started leasing 377 luxury units. However, many of these apartments are in the ultra-luxury market and cater to a different renter than those looking at 1800 Wilson and similar buildings in the area.

Rental Trends

I built a table of rental trends in condo buildings in Rosslyn & Courthouse with comparable 1BR/1BA and 2BR/2BA units. I limited data to 1BR units w/ 650-850sqft and 2BR units w/ 900-1,350sqft to reflect the majority of 1BR and 2BR units at 1800 Wilson. “Avg Discount From Ask” is the average difference between final rental rate and original asking rental asking price.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at http://www.RealtyDCMetro.com.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, 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 Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: We’re a family of four, with two school age children, and considering having my parents move in with us soon. What sort of multigenerational options do you see in Arlington and how frequently do they come on the market?

Answer: The demand for multi-generational living has increased substantially nationwide over the last few years and most experts and builders expect that trend to continue. Multi-gen living is generally defined as parents living with their adult children, and their children (grandchildren). The most common multigenerational housing requests I get are for families seeking a full bedroom and bathroom on the main level and occasionally for a full second master bedroom with private bath, on any level.

Main-Level Bedrooms/Suites

Main-level bedrooms and/or master suites are increasing in popularity with homeowners and local builders because the rooms can be used for permanent multi-gen living or guests with physical limitations, but also convert easily to offices, playrooms, and libraries. The data below is current as of Friday, March 10, 2017 in Arlington, Virginia for detached homes sold with a full main-level bedroom and bathroom, not including one-level homes (e.g. ramblers and ranchers) or foreclosures/short-sales.

• The average days on market is consistent with what you see for all detached homes in Arlington, but averaging about 1 percent more of a discount from the original asking price, suggesting sellers are either overvaluing a main-level BR/BA or there isn’t enough buyer demand
• The average sale price reflects pricing in the most expensive Arlington zip codes for detached homes because about half of the 1,235 sold are from 22207 and 22205
• In 2016, homes with a main-level full BR/BA made up nearly 14 percent of all detached home sales and 11.5 percent of new construction sales.

Second Master Suite

Here’s a look at the much less popular, much harder to find, second master suite in detached Arlington homes. Data is current as of Monday, March 13, 2017 and does not include foreclosures or short sales.

• The demand for a second master bedroom is clearly low with average days on market and the percent discount from asking price well above the market average for detached home
• Homes with a second master suite are much larger than homes with main level BR/BA, averaging about 1 more full bedroom and bathroom
• Over half of the homes sold with a second master suite were in 22207 or 22205

Aging In Place Follow-up

In January I wrote about aging in place in Arlington and got some great responses from readers about the concept of Universal Design guidelines for updating/building a home to accommodate aging in place and programs like the Arlington Neighborhood Village. Thank you to the readers who provided that feedback!

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at http://www.RealtyDCMetro.com.  

Eli Tucker is a licensed Realtor in Virginia, Washington DC, 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 Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: After reading your article two weeks ago about remodeling before selling a property, I was wondering what your thoughts are on remodeling our rental property. It’s a 1BR + den a couple blocks from the Virginia Square metro with a perfectly functional bathroom and kitchen, but about 15 years old.

Answer: A couple of weeks ago, I warned about spending money on major remodeling projects before selling your home and you should be equally cautious about making major updates to a rental property. In your case, it doesn’t sound like spending $15,000+ remodeling the bathroom and kitchen is a good investment at this time. Here are some of the questions/factors you should consider:

Payback Period

How long will it take to break-even on your remodeling expenses based on projected increase in rent? A moderate remodeling of your bathroom and kitchen is likely to increase the amount you can rent your unit by $150-$200/month (this is case-by-case), meaning your pay-back period is likely 10+ years. Keep in mind that the market value of your updates will depreciate annually and usually at a faster pace under the wear and tear of a rental unit.

Tenant Profile

The ROI of remodeling is heavily based on the type of tenant you’re most likely to have. Your tenants will most likely place more value in convenience, affordability, and functionality than they do aesthetics and upgraded finishes/appliances. As the tenant profile shifts towards families and higher-end properties, the ROI of upgrades increases.

Length of Stay

The less time a tenant plans to stay in a property, the less concerned they’ll be with updates, but tenants planning to stay for three or more years will consider their rental to be more of a home and place great value in an updated kitchen and bathrooms. As the tenant profile shifts to longer rental periods, the better the ROI on remodeling. In your case, the tenant profile is more likely to stay for 12-24 months, diminishing the value of remodeling.

Tax Write-Offs

According to Joseph Aiken, CPA with Aiken & Company, the current tax code considers any capital expenditures on remodeling to be depreciable assets, meaning you can’t write off the cost of your remodeling in the year you spent the money, rather deduct it over a 27.5 year depreciation schedule.

My advice for investing in a rental property is similar to investing in pre-sale improvements. Fresh paint, quality floors, lighting, and a deep clean go a long way on a rental property without breaking the bank and can usually be written off as maintenance expenses on your taxes. Check out IRS Publication 527 for tax details on rental properties.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at http://www.RealtyDCMetro.com.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, 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 Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: We are buying and selling a home simultaneously and our lender has provided us with a few options to qualify for the purchase without making our offer contingent on the sale of our current home. Do you have any tips for choosing which mortgage product is best for us?

Answer: Buying and selling a home at the same time can be a complex transaction logistically and financially. I explored the seller side of home sale contingencies in October, but here I’ll share advice I give buyers who face difficult financing decisions. Tip of the day: it’s not just about getting the lowest interest rate.

Weigh Your Options

Selling your home before making a purchase may afford you the best loan options, but it doesn’t always make sense for buyers:

• It weakens your negotiation position on pricing (you’ll pay more) and your ability to compete for new listings
• You weaken your position on the sale side, with more pressure accept an offer quickly
• For many families with children and/or pets, selling your home while living there is a logistical nightmare

Mortgage Solutions

Certain lenders have a wide range of loan products to help buyers with limited cash reserves for a down payment, but substantial equity in their homes, qualify for a home purchase without a home sale contingency. The options include a Home Equity Line of Credit (HELOC), a second trust loan in which a large portion of your down payment comes from a second interest-only loan, and bridge loans (less common). Each of these options come with different short and long-term costs, so it can be difficult to decide what is best for you and your family.

Get A Professional Opinion

Most real estate transactions involve three professionals – your agent, your lender, and your title company, but when you’re faced with complex financial decisions, I highly recommend using a Financial Consultant to help you determine which financing option suits you. Your lender can explain the cost, pros/cons, and time constraints of each loan option and your agent can explain how different types of loans and contingencies will impact your transaction, but a good Financial Consultant will be able to help you determine the best way to leverage cash, debt, and tax write-offs to maximize your financial position.

Financial Consultants should do more than help you pick mutual funds for your retirement accounts and act as an expert sounding board when you’re facing major life decisions, like how to finance your home purchase. They can build models and run scenarios within the context of your personal savings/investment plan to help you make your decision. Although an experienced advisor can provide great advice with limited knowledge of your personal finances, you’ll get the most from somebody who has a complete picture of your finances and goals, so engage a professional early, if you haven’t already.

If you’re looking for a recommendation, Carl Grund (CFP, CPWA, AIF) with Signature Financial Parners has helped multiple clients of mine with difficult real estate decisions and is a local Arlingtonian. Feel free to contact him at [email protected] or 703-287-7128 for immediate or future advice.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at http://www.RealtyDCMetro.com.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, 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 Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: I’m preparing to sell my home this year and wondering if remodeling the 1990s kitchen and bathrooms will improve the resale value and help me sell faster or if I should leave it as-is. Is there a good way to decide which option is best?

Answer: Yes, remodeling your 1990s kitchen and bathroom will improve the resale value and probably help the home sell faster, but that’s not the right question to ask. The question you need answered is what updates will create a positive Return on Investment (ROI), meaning that every dollar you spend on updates results in an increase in expected sale price of at least one dollar. For many sellers, this is the most valuable advice your real estate agent can provide.

Avoid Most Remodeling Projects

Simply put, most remodeling projects do not return a positive ROI for homeowners. A number of large companies including Zillow and Remodeling Magazine have conducted extensive studies and determined that most large-scale remodeling projects like bathrooms, kitchens, roofs, additions, etc only return about 50-80 percent of their cost on the resale market. Remodeling Magazine updates their Cost vs. Value statistics every year using regional data and has a great report specific to the DC Metro area.

No Simple Answer…

• There’s no easy answer to this question without being in the house, meeting with the owners, and knowing the local market. Here are some questions that need to be considered:
• Who is the most likely buyer? Are they likely to have cash on-hand to make updates themselves?
• Can the home be considered move-in ready in its current state?
• Is the home suffering from functional obsolescence or just requires a quick facelift?
• In as-is condition, does the home and pricing appeal to an investor?
• How has the market reacted to homes in similar as-is condition, in similar condition with minor updates, and in similar condition with major updates/remodeling?
• How much similar inventory is there (current and projected) at each level of updates (as-is, minor, major)?
• What are your (homeowner) sales priorities, timeline, and pre-sale cash on-hand?
• Is it easy for a buyer to envision an updated version of your home?

…But I’ll Try

Here are some tips and principles I find myself using most-often when advising homeowners on pre-sale updates:

• Flooring (replace/refinish), paint (walls, trim, doors), de-cluttering, and staging are affordable for most homeowners and almost always result in a positive ROI and in some cases new, matching kitchen appliances are positive ROI investments
• There are a lot of little things you can do to improve curb appeal (e.g. power washing and mulching) and interior appeal (e.g. new outlet plates and door knobs) that make a big difference
• Updates should be done in groups/tiers, not one-offs, so that your investment is coordinated and within budget. In other words, if you commit to doing one update, you need to commit to other similar updates in order to get a positive ROI. For example, it doesn’t make sense to replace flooring if you’re not committed to de-cluttering or to remodel a master bathroom and leave your 30 year old kitchen untouched.
• If you’re planning to live in your home for a few years after remodeling so that you benefit from the updates, then a 60-80% ROI may be an acceptable return. In this case, visit a few local new homes or builder design centers to see what today’s buyers like and try to replicate it to maximize the ROI when you do sell.

Strategically investing in pre-listing updates should be a well thought out process with different options priced out next to projected impact to sale price and speed of sale. For many homeowners, this process can take upwards of 3-6 months from planning through project completion before being ready to sell, so start early and invest wisely! Feel free to reach out to me at [email protected] or (703) 539-2529 if you’re thinking about selling your home and want an opinion on the most effective way of investing in pre-listing updates!

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at http://www.RealtyDCMetro.com.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, 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 Rosslyn resident. Please submit your questions to him via email for response in future columns. 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. One of the initial differentiators is whether your lender runs credit and collects your documents up-front (W-2s, income verification, bank statements, etc) or just asks questions about your income and debt. This early effort drives most of the following reasons a good lender is able to make such a big difference:

Stronger Offers

Better Pre-Approval: When I review offers on a listing, I put a lot of value in the quality of the lender who wrote the pre-approval letter for the buyer. I also call the lender to 1) make sure they’re responsive 2) ask them what information/documents they reviewed and 3) about the financial strength of the buyer. Approval letters from unreliable lenders or lenders who haven’t reviewed a full set of documents pose a moderate risk of not closing, which weakens the offer.

Close Faster: Online lenders and larger banks have difficulty closing in less than 35-45 days, but a good lender can close in less than three weeks. If you find yourself competing for a property, working with a lender who can close faster than the offers you’re competing against will significantly increase the probability of your offer being chosen. I’ve represented buyers and sellers where the chosen offer isn’t the highest sale price, but the strongest overall offer, often attributed to the quality of the lender and their ability to close faster.

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 loss of Earnest Money Deposit 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 all of those people, that’s a good indication that they can handle issues efficiently and have a high probability of meeting the settlement date.

Don’t Get Duped (Rate vs APR)

Be careful when you’re comparing interest rates, especially online rates. First, 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 up-front 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. Second, it’s important to note that conforming loans (loan amounts of $636,150 or less), which are backed by Fannie Mae and Freddie Mac, typically have very little variation in rates because they usually follow similar Fannie and Freddie guidelines and market pricing. The biggest differences in rates are on non-conforming loan amounts (over $636,150) and in special programs like Doctor or Attorney loans.

Reliable Pre-Approvals

A reliable pre-approval gives you the confidence that you’ll qualify for the loan you’re applying for. Weak pre-approval letters lead to surprises during the loan application process, which can lead to rejection letters or delays. The last thing you want is to find out you don’t qualify after you’ve spent money on a home inspection, appraisal, and started packing for a move that may not happen. Reviewing all of your documents early also gives you and your lender time to fix credit scores, debt ratios, and other issues to increase your purchasing power or improve your interest rates.

Loan Consultant

In most cases, buyers should be considering multiple loan products and finding the best fit. This is particularly true if you’re buying and selling a property and would like to purchase without a home sale contingency, if you’re exploring low down payment options, or if you’re planning to own the property for less than 10 years and can benefit from the lower rates of an Adjustable Rate Mortgage (ARM). A good lender will have access to a wide range of great products, including Doctor and Attorney programs, and be able to advise you on the type of loan that nets you the best long-term results.

If you’re considering buying or in the process of talking to lenders, I’d be happy to make some recommendations based on your financial situation, type of purchase, and goals. Feel free to reach out to me at [email protected].

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at http://www.RealtyDCMetro.com.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, 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 Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: Does the winter impact all housing types equally or do certain types of homes fare worse during the cold season?

Answer: I have always held the theory that suburban homes with yards, trees, and plant life are impacted more when leaves/plants die in November than homes without any private/nearby trees and plant life (e.g. condos). This week, I decided to test my hypothesis by comparing sales statistics between single family homes in the 22207 zip code, the area of Arlington with the most tree/plant growth, with the sales statistics for condos in the 22201 zip code, where tree canopy and plant growth isn’t a major factor for buyers.

For my hypothesis to hold true, we would see the usual increase in days on market and discounts from asking price during the colder months across both sets of data, but a higher variation from the mean for the single family homes.

Summary of the data set:

• The data is broken down by properties listed in November – February and April – September because I wanted to target properties listed during leafy/bare months (note, I removed properties listed in March and October)
• Single family sales in 22207 date back to 2010 to arrive at 882 data points
• Condo sales in 22201 dates back to 2014 to arrive at 862 data points
• I removed extremes including properties that took 200+ days to sell and properties that sold at a discount of 15% or more because these would suggest their difficulty selling had nothing to do with seasonality
• I didn’t include new construction in the single family data
• Single family lot size had to be at least two tenths of an acre

Split Findings

Using the two main data points of days on market and percent discount of sold price from original list price, the data suggests that my hypothesis is incorrect and all types of property are impacted similarly by seasonality, regardless of how much tree/plant growth there is on and near the property.

However, I also attempted to measure how sellers were pricing their homes during each time of year by calculating the percent difference between the original list price and previous year’s tax assessment. I figure that this is the most accurate way to gauge asking price relative to market price across a large set of data. Under this assumption, I drew a different conclusion that the only thing keeping seasonal sales of single-family homes with tree/plant growth consistent with condos is that sellers underpriced their homes from Nov-Feb (or overpriced Apr-Sept) whereas condo pricing remains slightly more consistent through out the year. In other words, if homes sold Nov-Feb, featuring tree/plant growth, were priced the same as they are during leafy months, there would be a sharper increase in days on market and larger discounts, proving my hypothesis correct.

Another factor in drawing any conclusions from these numbers is how much the housing supply varies by season. With substantially fewer homes listed during the colder months, homes on the market at that time face much less competition, thereby helping to offset the negative impact of bare trees/plants, colder temperatures, and less daylight. However, this also seems to impact all housing types equally.

Using Real Estate Data

Data like this can help buyers and sellers make more informed decisions, but you should be cautious of how much influence you allow it to have. Unlike other data-heavy industries like the stock market and marketing, localized real estate data is full of anomalies, missing data, and misrepresented data making it challenging to draw reliable conclusions and necessary for the person analyzing the data to understand the local market as well as the strengths/weaknesses of certain data elements. I’m clearly a proponent for incorporating customized data into real estate decisions when applicable, but for those of you in data-dependent industries, keep in mind that your weighting factor for real estate data should be less than you’re used to.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at http://www.RealtyDCMetro.com.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.