real estate

This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: Are you seeing any bargains on the market still? My preference is not to deal with a fixer upper.

The usual knee jerk reaction is to hunt for the elusive foreclosure deal. At the time I’m writing this, there are seven foreclosure listings in Arlington. I used to sell foreclosures for the big banks, and I can tell you firsthand that they are not always the great values that consumers perceive them to be, especially when they turn into bidding wars. You should also take into consideration that many have not been maintained very well.

From my vantage point, homeowners who purchased new construction in 2012 saw very lucrative gains. Two new townhome neighborhoods that come to mind: Mosaic in Merrifield and MetroWest near Vienna metro station.

In an inclining market, the key is getting in early. The developers have a lot of homes to sell in these neighborhoods and they start off their sales, priced to be very competitive with resale inventory. Then they often begin steadily increasing prices throughout the remainder of their sales cycle. I have clients who purchased early in the two neighborhoods I mentioned, who saw nearly double digit percentage appreciation last year. I’m basing this off of the difference between what they purchased their homes for and what they are selling / appraising for today.

This an Arlington based website so I won’t go into much detail about these communities, which are located in Fairfax County. I do however, expect even greater demand (and appreciation) when similar neighborhoods become available in Arlington County this next year.

There is a construction site that recently broke ground in Ballston that looks interesting. It is a townhome development by local builder, Madison Homes.  It will consist of 28 new homes and will be called Ballston Park. If they deliver a good value and have initial housing options in the $600-$800k range, I expect that they will do very well.

I’m also keeping an eye out for the 44 townhome development that will occupy a portion of the 5-acres that was formerly a Rosenthal Jeep dealership at 3400 Columbia Pike. I hope to see these initially priced in the $500-700k range.

It would be nice to see some of the rental buildings that were originally slated to be condos, convert back to condos. Two prospects that would not surprise me at all are The Joule in Ballston and Zoso Flats in Clarendon. There is a huge shortage of newer condos along the Orange Line and I would expect to see people line up for either of these buildings, if priced well.

There is also a chance that JBG will decide to sell Sedona or Slate as a condo. They are 12 and 14 story residential buildings being constructed three blocks from Rosslyn metro station with 12,000 square feet of retail on the ground floors. As of right now the word on the street is that they will both be rentals, but I am sure they are exploring the possibility of going condo with one of them. JBG is planning to sell 25 townhomes as part of this development, which I am guessing will be offered in the luxury price range.

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This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: We are purchasing a home in Arlington and want to know what we should be able to ask the sellers to fix as a result of the home inspection.

There isn’t a set standard when it comes to asking for repairs. However, I can provide some tips that may help you decide for yourself.

If you are buying new construction, I highly recommend a home inspection even though many buyers will forgo this step in the home buying process. In my experience, builders are willing to take care of any reasonable request. It is your opportunity to get the home as close to perfect as possible. Even the smallest cosmetic blemishes are fair game. If the builder thinks you are taking your requests too far, I’m sure he or she will let you know.

When it comes to resale properties, things changed a little bit in 2012. The standard purchase contract was updated and paragraph 7 was modified. Previously it required that the following items be in normal working order at the time of settlement:

• heating
• air-conditioning
• plumbing
• electrical
• appliances
• smoke detectors

There is no longer this minimum standard unless you add it to the contract yourself. More pressure is placed on the home inspection and your ability to convince the seller that he or she should agree to your requests.

Many sellers think their home is in perfect condition so it is never easy to convince them that they should pony up for repairs on a home they are soon leaving. It will help your cause if your inspection report contains the following:

• Well written descriptions of the issues found.
• A typed report that is easy to read and share.
• Photos of the issues found.

You should prioritize your list. If there are items you are planning to replace anyway or don’t mind fixing yourself, put them at the bottom of your priority list. I find that sellers are much more reasonable when they feel that you are also being reasonable with your requests. Sometimes this means focusing only on the major concerns.

Additional Tips:

• If you have concerns about items that are cosmetic, include them in the initial contract as an addendum.
• You are going to have a hard time convincing a seller to replace an item that is at the end of its estimated life, but working properly. You may want to consider purchasing a home warranty to cover these types of items if they fail within the next year.

Also take into consideration that if the seller makes the repairs, they are likely to do so at the least possible expense.  You may want to ask for a credit so that you can have more control over the quality of repairs. If you go this route, be sure to check with your lender first to be sure they will allow a closing cost credit.

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This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: Can you please explain how an escalation clause works?

When there are multiple offers on a property and you are considering making an offer above the list price, it may be a good idea to use an escalation clause. The challenge when competing for a home is that you (usually) are not privy to what the other offers are. An escalation clause allows you to bid competitively with the other offers, without paying more than you need to.

Let’s use the example of a $500,000 listing.

• Mike offers $505,000
• Susie offers $490,000
• Bill offers $500,000 with an escalation to $507,000 in increments of $1000
• You offer $500,000 with an escalation to $510,000 in increments of $1000

Your offer will escalate to $1,000 above the next highest offer. In this example, your offer escalates to $508,000, which is $1000 above Bill’s max of $507,000. It works a lot like bidding on eBay.

Let’s try another example where you don’t use an escalation clause. Again the list price is $500,000.

• Mike offers $505,000
• Susie offers $490,000
• Bill offers $500,000 with an escalation to $507,000 in increments of $1000
• You offer $510,000

You are committing to paying $510,000 for the home regardless of what the other offers are. You could have possibly saved $2,000 by using the strategy in the first example.

How do you know what the other offers are? Usually they are not revealed until after the seller has made a decision. The sellers will complete the escalation addendum with the details of the next highest offer including the offered purchase price and total concessions. When representing a buyer, I will normally ask for the pages of the other contract that provide proof of the offer price and concessions.

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This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: I’m wondering if you know who is responsible for a collapsing retaining wall between two homes?

I have asked Arianna Gleckel to answer this question. She is a local Arlington-based attorney I highly regard.

The answer to your question may be as simple as finding and marking the property line. The property on which the retaining wall sits is responsible for maintaining the wall. If the wall is not on your property, you are not responsible for the upkeep, maintenance and repair of the retaining wall, even if it is for the benefit of your property. I would recommend getting a licensed surveyor to mark the property line for you along the retaining wall with stakes, and possibly having an engineer evaluate the structural condition of the wall and any remediation that may be needed, based on your description of its current condition. You also should check your deed description and plat to see if they clearly identify whether the retaining wall is on your property. If you have a fence installed already, there is a good chance that your fence abuts the property line and that the retaining wall is not on your property.

However, if the retaining wall straddles the property line, the answer may not be as simple. In Virginia, typically when a retaining wall has been constructed by a property owner to provide lateral support for the soil of a neighboring property, the owner of the neighboring property is not responsible for the upkeep of the retaining wall. So the answer would depend on which property is getting the support from the wall.

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This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: Are you seeing competition for homes in Arlington? If so, what is the best way to win?

I am seeing more competition for homes in Arlington than I expected to see this year. Unless housing supply begins to catch up with demand for certain types of homes in Arlington, this trend is likely to continue.

The most obvious variable in a purchase contract is price, but nobody wants to pay more than they need to. It would be nice if we knew exactly what others have offered, but the listing agent is not allowed to share this information unless he or she has written consent from the seller to do so. Most sellers don’t feel the need to share this information so you are usually going to be in the dark about the amount of other offers.

You can, however, include an escalation clause with your contract. An escalation clause allows you to start with a certain price while allowing your offer price to escalate in predetermined increments until it gets to a maximum or beats the other offers. For example, you could write your offer for $500,000 with an escalation to $510,000 in $1,000 increments. If the other highest offer is $505,000 your offer would escalate to $506,000. That does not mean you automatically win the contract. In fact, I have seen plenty of situation where the person offering $505,000 (in this example) wins the contract.

You have to keep in mind that there are many other criteria being considered in an offer beyond price. Below are seven items you can use to strengthen an offer for little or no cost. You may also want to consider these seven items to strengthen your negotiation position even if you are the only one writing an offer on the home you want.

1) Earnest Money Deposit (EMD)

In Arlington, we are usually able to get away with an EMD equal to about 1% of the purchase price. Sellers prefer to see more because it makes them feel as though you are more committed to the purchase. Assuming you fulfill your obligations under the contract, this money is credited back to you at settlement. Therefore, why not increase the EMD amount to strengthen your offer? Talk to your Realtor about a percentage that makes sense for your situation.

2) Appraisal Contingency

Most contracts request 21 days or more for the appraisal contingency. The regional contract even suggests that 21 days is typical. Sellers prefer for this contingency to be as short as possible so they know the outcome sooner than later. Let me share a secret, most lenders can get an appraisal completed in 3 days if they need to. I guarantee you that mine can. Why not shorten the contingency period? Talk to your Realtor and lender to decide on a number of days that they can live up to.

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