4 Tips for Surviving Condo Life

Also published on the Huffington Post.

Condo life. It’s, for the most part, a city thing. People who don’t want to be able to see their neighbors or who want to own land don’t understand those who choose to live in condos. Sometimes it’s not about choice but necessity.

Lots of people have condo horror stories. I once managed a condo building that was ripe with hilarious stories that you would not believe unless you were there. For example, it’s never good when the building’s most unstable resident comes into the management office to ask if there’s a rule prohibiting her from buying a gun. Or when the hoarders who live below or next to you keep their place in such poor condition that you become an expert at deploying rodent traps. Or when a domestic dispute between two ex-boyfriends of a woman who has since moved on to Bachelor #3, results in gunshots to a toilet tank that floods the entire tier of condos below it.

Whether you’re out hunting for a condo to buy or you already live in one, here are some tips that could greatly improve your quality of life.

1) Run for the Board - Not From It!
I know, this sounds like a horrifying suggestion - a volunteer job with no perks. But, there is incredible value in being part of the decision making body for the condo association. You get to protect your own investment. You can weigh in on matters of importance and make a real impact to both the quality of life in the building and your investment by making sure the proper things are fixed, repaired, addressed. And you can satisfy your gossip appetite for finding out all sorts of interesting tidbits.

2) Don’t Be a Jerk
It’s obvious from the second you see the condo for the first time that you will be living in very close quarters with many other people. Make no mistake about it - when someone breaks up with their significant other, when someone’s burning samosas (guilty!) when someone is out of town - you’re going to know about it. And, there’s going to come a time where you could use a neighbor’s help. Locked out and need a place to hang out until the locksmith arrives? Stuck at work and need a neighbor to walk your pup? Realize you’re out of eggs mid-recipe? (And flour, and sugar, and vanilla, and the cake pan. You know who you are.) The more friends you have in your building or community, the better. Some of these friendships can form the quality of your entire home life and last for years after you’ve moved out.

3) Take Care of the Manager and Maintenance Staff
You may live in a small building or it may be huge, but it is likely that you have someone who either sits in a management office in the lobby somewhere, or who shows up a couple times a week to clean and empty trash. Regardless of who that person is, show your appreciation for them. It doesn’t have to be monetary though that is nice. But, baking cookies one night? (With the ingredient list borrowed from your neighbor’s refrigerator?) Bake extra and drop off a plate in the office. Gestures like this are greatly appreciated. It’s best to be on the good side of everyone who is employed by the condo association. And regardless of the fact that yes, your monthly dues go toward paying their salary, never ever remind them of that. Forging a good relationship with the management can pay back in insurmountable ways. The managers will go out of their way to help you with things they won’t do for others. This is a nice place to be when your air conditioning gets clogged with dust and you need a repair right away or when you leave your iron on and realize only when you’re at work.

4) Make Friends with the Postal Carrier, Fed Ex and UPS.
If possible, of course. If you work all day and never see them, it’s understandable that you may not have the opportunity to say hello or hand them a plate of your fresh-baked cookies. But if you have a day off, or a sick day? Try to find them. Make sure they know your face because they certainly know your name, and what you buy, and how much you spend. A little goodwill here goes a long way. It could be the difference between finding your packages at your door and having to chase them down across the city to a distribution center.

I realize of course that for some reading this, you may be reminded of that old Seinfeld episode where they hang pictures in the lobby and give each other hugs and kisses, much to Jerry’s dismay. You don’t have to go that far, but when you realize that these relationships will greatly impact your experience living in the community, it’s worth the extra bit of effort.

 

5 Signs a Condo Association May Be in Trouble

Also published on the Huffington  Post

Condominiums. Not always everyone’s first pick for housing, however the combination of affordability and location usually make them an ideal choice for city dwellers, especially here in DC.

Many people don’t realize how communal condo living can be, particularly when it comes to finances. They think you just magically pay your condo fee, and everything is taken care of for you... but boy, are they wrong.

You’ll be sharing expenses with all your neighbors, which can end up being a horrible or wonderful experience.

Here are 5 warning signs that a condo association may be in trouble:

1. Low Reserves
Once you go under contract on a condo, you will get what’s called the resale package, which includes the financials and rules and bylaws for the association. You are typically granted a set period of time to review this package. Review timeframes vary by state so make sure you understand how much time you have.

Part of the resale package will include the Financial Statements (balance sheet, bank statements, profit/loss statements). If those don’t exist, RUN! If they do, check the operating and reserve account balances (basically, their savings accounts) and see if the amount they have is sufficient.

What’s a sufficient amount? Good question. There are general guidelines based on building type and size, amenities in the building and number of units. A small building with little common space and no elevator doesn’t need as much in reserves as a building with elevators, a fitness center or a pool. These big ticket items all require money to operate, and a lot of money to fix. Check to see if they have a recent reserve study. This is a third party report that inspects the common elements, estimates the rest of their useful life and their estimated repair value.

2. Condo Fee Too Low or Too High
People love to find out that a building has low condo fees, but this can sometimes be a bad sign. Sure, it’s possible that the building is exceptionally well run, and they have managed to keep fees low. But it’s important to check the reserves as mentioned above, and the profit/loss statement to make sure they aren’t overspending.

Also, in new construction, developers notoriously set up the condo association with very low fees to entice buyers. Those fees usually go up once the condo association starts running on its own. Why you may ask? The initial budget is set-up by the developer and they usually underestimate it and don’t account for reserve fund contributions.

What’s too high of a condo fee? Check other buildings that are similar in size, age and amenities. If one building has a condo fee that is double or triple the typical condo fee, it could be a sign that they are either building up reserves or they have a big project in the works.

3. Self-Managed
A self-managed building can definitely save on condo fees, but the mere fact that unit owners are functioning as volunteer management can create a host of problems. First, you don’t have professional management, which means they may not be filing the proper taxes, maintaining proper insurance, keeping meticulous accounting records or just not keeping up to date with maintenance. This has been a difficult conundrum for many small condominium associations. They either need to choose to raise fees high enough to compensate a management company or they have to be responsible enough to do it themselves.

4. Limits on Rentals
For most people, a condo makes a great first home. No yard, no roof, and no major maintenance issues that are solely on the owner to repair. Many buyers eventually envision themselves moving up to a bigger home, and often the idea of renting their current condo is appealing for many reasons - building equity while someone else “pays the mortgage” or building a real estate portfolio. Either way, having flexible renting rules ensures interest from a wide range of buyers when you sell. If there are rental caps, waiting lists or other intricate rules to be followed with respect to renting, buyers may pass the community by for one that is less strict. The less potential interest you have from buyers, the lower prices will stay.

5. Maintenance Items
Frayed hallway carpet, damaged common areas, broken elevators - they are all signs that a building or community needs some attention, but find out what is really going on there. Is it lackluster management who is just slow to act, or is it because money is tight? Either way, deferred maintenance you can see often means there is much more deferred maintenance you cannot see.

In the end, make sure to read through all of the documents provided to you and ask for the most recent condo association meeting minutes. You can find out a lot about the building by what happens at those meetings.

What's It Worth...To You

Also published on the Huffington Post

It seems like most real estate markets in the country are on fire right now, with homes flying off the market in days, sometimes hours. Sometimes they never even hit the market. It seems, according to agents around the country, that there is quite a demand in many cities. Of course DC is no exception.

Buyers inside the beltway are often conditioned to believe they have to throw caution to the wind and just bid that price up no matter what. I try to discourage my clients from getting caught up in the fury though. Just because an open house is well attended (okay, packed so tightly you can’t breathe) doesn’t mean there will be a dozen offers with huge escalations. Similarly, an open house can be dead and the home could somehow elicit multiple offers. Basically - make no assumptions.

I wrote several weeks ago about clients of mine who walked into an open house and were convinced by the listing agent that the house would go fast and they needed to write an offer right then and there - conveniently with the listing agent (to be fair, a member of their “team.”) As someone who has been doing this a while, I am simultaneously amused and sad. Amused because I can’t believe that “hurry before it’s too late” actually worked on someone and sad because it did, and clients allowed themselves to get sucked into an agent-engineered, non-existent bidding war. The house was on the market a couple weeks at that point. Isn’t the listing agent’s job to get the most money for their listing? Yes. And wouldn’t that happen if they waited a few days after the open house to collect multiple offers and play them against each other instead of giving one buyer an inside scoop? Yes. But sometimes buyers don’t see that - especially if they’re brand new to the game. They think somehow this person is looking out for them, and into the trap they go.

I urge everyone I work with to operate without fear, to take a deep breath and only proceed with a calm, level head. It doesn’t always work, but it doesn’t stop me from trying.

Recently I had clients who had to test the market and their desire to compete here when faced with a good house in a great location, priced about $200,000 too high. Seems the sellers overpaid 2 years back and are now trying to just break even. Markets don’t work like that unfortunately. In conversations with the listing agent, we each pointed to comparable sales that supported our respective client’s position. I was told the house was comparable to House X down the street, but I pointed out that house had a garage and 600 extra square feet. I used House Y for a comparable and was told that house was not in as nice condition as this one and the pictures were deceiving. Does any of this matter? Not really.

What matters is what the house is worth to a buyer. Not what the houses around it indicate its worth. Not what the seller paid 2 years ago. I had a listing that should have sold for $15,000 higher than it did, but timing, weather and other forces came into play to knock that price down below where I felt it should have been. And what mattered in that case was what it was worth to the buyer of the home - which ultimately then becomes the new “market price.”

So back to the house my clients were considering. The listing agent said they didn’t believe the right price was the list price but they felt, based on the comps that it was close, and didn’t my clients see that? I said, I think where we are right now is while there may be comps to support the price or something close to it, what my clients are operating with at this point is answering the question, “What is this house worth to us?” not, “What is this house worth?”

And that, should always be the question you answer in your house search. The listing price should be a starting point. The value to you as the buyer could be higher or lower than the list price. If there are other bidders who also want it and you don’t want to go above list price that’s totally fair. I personally would not and have never paid above list price on any home I’ve purchased. However, I am genetically hard-wired to feel like I got a deal on everything I buy. And if you don’t want to pay more than list price it just means it’s not worth that to you. And that is okay!

Don’t let yourself get sucked into the rabbit hole. There will be another house, there always is.

Finding Good Investments

Also published on the Huffington Post.

~~~~~

The real estate market in DC is fascinating on many levels. The market has yet to slow down, continuing to go up up and up long past the time the rest of us in the industry thought it would. But it’s the old story, rates are still historically low and the city is in such high demand now that housing supply is still so shockingly non-existent.

But what I think keeps us afloat here is that we have so many different types of buyers in this market. People buying their home, foreigners buying a pied-a-terre, investors looking to purchase and become landlords and investors looking to renovate and sell. The flavor of this game has changed quite a bit though in recent months. The days are long gone where there were great homes are waiting to be scooped up for under market value and rented at a premium. In fact, there are very few properties in the city where you could actually break even if you were planning to buy now to become a landlord. Housing has gotten so expensive here that the monthly outlay of mortgage to rent is, for the most part, on par.

The addition of Airbnb has also changed the market dynamic here as well. With continuing battles about how Airbnb fits into the economy (both locally and nationally) from a regulation standpoint, finding a good investment is difficult. Most condominiums have covenants that prevent a subletting situation, requiring that leases be a minimum of 6 months or in some cases, a year. And it’s rare to find an owner of a single family home who is financially secure enough between the purchase price and the unstable rentals of the vacation market to utilize the service. But DC has a special type of house that lends itself well to both being a primary residence and having investment potential for either a regular tenant or Airbnb. Enter, the row home.

Why is a row home an investment worth looking at further? Several reasons.

1. Increasing real estate prices: With the price of housing in DC on an upward trend, many buyers are looking for ways to make their money go further by finding properties with rental potential. With more people staying in the city instead of doing the classic cliché move to the suburbs, there are more and more clients asking for “rentable basements” on their wish list.

2. Convenience of finding tenants: with sites like Airbnb, VRBO and HomeAway it’s easy to find short term tenants for your property.

3. Tourists want to feel like a local: DC’s most popular neighborhoods like 14th Street corridor, U Street, Shaw, Bloomingdale and Capitol Hill have a distinct shortage of hotels. Tourists are increasingly seeking a “local experience” because of DC’s vibrant restaurant and arts scene. Not to mention the average hotel rate in DC in 2014 was $250/night*, much higher than the typical nightly rate of $75-150 on Airbnb, VRBO or HomeAway.

4. Lack of short term housing: DC also has a lack of short term housing, and we see these rental services filling that void. We’ve had clients sell their condo, then rent a basement on Airbnb for a few months while they shopped for their new home. Same goes for professionals in town on a short term assignment.

So what are we talking about in terms of financial upside?

Take this listing as an example:

A row home in one of the hottest neighborhoods - Bloomingdale: the estimated mortgage payment (Principal, Interest, Taxes & Insurance) with a 20% down-payment is $3,971. The basement could rent for $1,650/mo to a standard tenant or for $75-150 a night on Airbnb. That extra income could decrease your monthly payment by at least 58%! That’s a lot of extra cash to have access to, and a way to make city living incredibly lucrative. Another upside - if any of the potential Airbnb regulation comes to fruition (only allowing one rental at a time per host, host must be present at rental) then the row home certainly dodges those potential obstacles.

As with anything, there are always downsides to becoming a professional landlord. You will need to maintain the property, take care of issues that arise and make sure you have your business license and DCRA inspection. And definitely discuss the tax implications with an accountant.

Footnotes:

*http://www.statista.com/statistics/202406/average-daily-rate-of-hotels-in-washington-dc/

*Assumptions used when calculating payment: $6,124 annual property taxes; 3.875% interest rate; 20% down; $950 annual homeowners insurance.

 

Buyer Beware

Also published on the Huffington Post

The Spring Market starts at several different times. For some sellers chomping at the bit to list their home, that day is January 2. Holidays are over, it’s time to sell. For some buyers and sellers, it’s really after the Super Bowl. No more things occupying your Sundays? Why not go look at houses? And for the rest of the world, it’s when the weather breaks.

Sometimes I feel like part Realtor ® part weathergirl, but this business is definitely tied to the weather. It’s been cold but we’re hoping that little Groundhog was right and spring is on the way! Like, soon.

The litmus test I have thus far of this market is that it’s not only competitive still for buyers, it’s clearly also competitive for agents. There don’t seem to be as many people looking for homes as there were at this time last year, and the few people who are out there looking are getting sucked into vortexes. Allow me to explain.

We’ve had several buyers contact us to discuss the market and possibly buying at some point in late spring or summer, only to then go to an open house a few days later and end up writing an offer right there. I have to laugh because it’s the listing agent’s dream to have someone come in to an open house and just write an offer. How easy! How exciting! How....fast. But to know that several people have done this? It seems, suspect.

Upon further contact, I’m hearing the same story - and multiple times from different, unrelated people. “We walked into an open house, decided we loved it and the agent said it was going to go fast and we better move quick. So we decided we better get our offer in and they wrote it up right there.”

Uhhh.....seriously? I call it the Wedding Dress Debacle.

There's my beautiful "second choice" wedding dress.

There's my beautiful "second choice" wedding dress.

 

First, I’m a firm believer that people should not buy the first house the see any more than they should marry the first person they date or buy the first wedding dress they try on. (Yes, I did this, and yes, it was a beautiful dress but then I kept wondering if there was something better out there and then I couldn’t stop looking at wedding dresses.) But okay, maybe I just need to do more research than the average person with my major life decisions. And maybe I’m more of a “second guesser.” (Ask the hubs - he’ll say yes.)

Second, is it really that bad out there that agents are aggressively encouraging people to write offers right away and not even contact the agent they have representing them? It’s kind of an interesting situation, and I’m critical of other agents when I hear stories like this - multiple times now in a matter of weeks - because it’s not how it should be. Our job is to find people the right house, not to stick them into any house just to make the money and move on to the next deal. That’s not being aggressive, it’s being disingenuous and self-serving. But then, I’m not an agent who is all about lining my pocket. I don’t want people to have second thoughts, so I make sure we do our due diligence and that includes looking at any house that may be an option and ruling out before making a final decision. Just like finding a mate, and just like finding a wedding dress.

Because sometimes the excitement of a home, the perfection of the staging, and fear of someone else getting the house is enough to encourage someone to buy a home. And those are all the wrong reasons for doing so.

Fed Meeting This Week

Also published on the Huffington Post

It’s been the busiest December I’ve experienced. Typically, after Thanksgiving, the entire real estate industry packs it in for the season. Sellers are holding out to list until spring. Some buyers stick their toe back in the water after New Year’s, some holdout until Superbowl is over, and some wait for the winter to break. I fully expected to have the slowdown this year, but it has not let up. The calls and emails from new clients come in to our office daily. I still have a few closings before the year ends. And, well, it actually feels as busy as any spring might feel.

My assumption is that this is all tied interest rates. Many people who follow what the Federal Reserve does know two things at all times: When their next meeting is and that rates can go up at any point in time. That meeting? It’s December 16th.

What happens to DC’s market if rates begin their ascent upward this week? I answered that question in September for BBC, so if you want to take a look at that, it’s here.

Since the time of that interview, I’ve attended a few different industry meetings where this topic has been discussed. I still maintain what I said a few months ago - in competitive seller’s markets like DC, buyers may fear the interest rate hike, but it may be the best thing to happen to real estate in DC in a while. Hopefully that whole business of waiving contingencies like home inspections, appraisals and financing will become a thing of the past. A good home inspection may not reveal all of a property’s deficiencies, but it’s an excellent start and no one should have to give up that right.

If rates go up, prices should eventually stabilize a bit, at least if you believe in basic economics. It won’t be instant, but, perhaps then, we will move toward something resembling a balance.

So what about the people who recently purchased. This is always concerning because the fallout from 10 years ago where people paid top dollar just before the market turned, helped enable a serious lack of inventory for many years to follow. Sellers couldn’t sell because they had no equity in their homes. I’m fearful that 2007 could happen again, but, we do have several factors today that don’t resemble that time period.

  1. DC is hot. I’ve lived here 11 years and only in the last two years have friends from other parts of the country wanted to vacation here. This is pretty telling to me - we were uncool prior to all this radical development, and are bordering on something, well, maybe not necessarily cool but definitely exciting. We aren’t only about politics anymore.
  2. Money isn’t as easy to obtain as it was in the heyday of lending. I can recall hearing many stories of buyers earning low 5 figure salaries buying half million dollar houses - and walking away from the settlement table with cash! Lending is totally different now, and none of that occurs anymore. Unless you have a VA loan, you are required to have some sort of skin in the game. Whether that’s 5% or 20%, there will always be that much of a cushion for a price fluctuation before a buyer is underwater.
  3. Strollers! If you haven’t been mowed down by a stroller on a sidewalk, then you need to come out of your cave. There are more families staying in the city than ever before. The schools are better, some so improved they have massive waiting lists. When I moved into Dupont Circle 11 years ago, the neighborhood elementary school was in danger of being closed down. The other day, DC released a report that the city’s highest math scores came from that very school. That is improvement that community and parental involvement helped achieve. Schools don’t improve when caring parents jet out to the suburbs. They improve when parents pitch in and get involved - which is exactly what is happening in many schools in the city.

Because of the transient nature of some of the employment in this city, there will always be a contingent of people coming and going from DC. This will keep the market moving. But the factors mentioned above seem to point to less reason for people to leave unless transferred by their job. I realize this is uncharacteristically optimistic of me, but DC is probably enjoying a renaissance never seen before. People are more invested in this city than ever, and if they are well invested financially and don’t feel compelled to leave because of lackluster schools or amenities, but actually want to stay - hopefully this will be a market correction we can sail through.

Real Estate Industry Shakeup

Also published on the Huffington Post

Buying or selling a house? Get a real estate agent! At least, that’s what 88% of buyers and sellers did in 2014, according to the National Association of Realtors (NAR.)

As technology has evolved to improve the customer experience, chatter has followed that the real estate agent is going to go the way of dinosaurs and the travel agent. That is a scary thought. Or is it?

I’m involved in some transactions now that I wish I wasn’t. Not that I don’t want to see my clients get the house they want, but working with other agents who don’t do this as their full time job, don’t play by the rules, never answer their phone or return calls or emails - it’s a hassle. There’s a lot of agent-hate on the real estate message boards - everything from our compensation to our actual value-added is under attack. It’s hard not to take some of it personally, but then I realize, “No, I know exactly the type of agent they are talking about.”

I’m not going to bother defending our compensation. Yes, we’re paid well, but the majority of us work hard, sometimes for months or years without payment and so the commissions we enjoy have to level out to something manageable to live on. Besides, commissions are negotiable. Commissions the sellers agree to pay are set by the market, not some conspiracy of agent price collusion. You want to shop around for a lower commission? Do it. That’s the free market economy at work.

The NAR put out something called a “Danger Report.” In a nutshell, they outlined the biggest issues facing the real estate industry today. The #1 threat? Masses of incompetent and part-time agents who do just a few transactions a year, who poison the entire profession with their misdoings.

I decided to contact someone at one of the State Real Estate Boards. (I won’t say which one, but guess!) I asked what the Board thought of this report and why they didn’t implement stricter standards for obtaining a license since one of the requirements is “good moral character.” I went on to explain that court records for an agent I know indicate they are nothing remotely close to “good moral character.” (Money laundering, anyone? Jail time? Defrauding INS?) I received a large helping of apathy with a side of “get lost.” I responded and said, “So unpaid parking tickets would hold up my license but jail time wouldn’t. This system is broken.” No further response from the Board on that one.

The fact that good money can be made in the industry lures the opportunists. A 60 hour class, a test and the Board’s low standard for defining good moral character and you’ve got a license and can now profit off of people making the biggest investment of their lives. Seems wrong, doesn’t it? My Brokerage is lean and mean, and we recently discussed what we want to see in someone who is a new agent coming to our company. I maintain that all you need to be a real estate agent is common sense and a genuine love of real estate. If you have those two things, I can teach you the rest.

The problem though is that many people get into real estate for the money, not the love of the business. And when you don’t love your work, you won’t be good at it. When the money drives you, you won’t make good decisions for your clients. That’s dangerous. It’s dangerous for your clients, dangerous for you and dangerous for the integrity of our industry. Every bad agent out there makes it tougher for the rest of us to prove we’re not trying to hustle you and speed off to our next closing in our Tesla.

So, all these problems, where’s the solution? I have it. It won’t be popular but it would weed everyone out who doesn’t deserve to be in the industry and it would ensure that everyone left would be better at their job even if they are already excellent at it right now. The incompetents wouldn’t survive and the people who really love it and want to do it would benefit tremendously. What is it? More education and higher dues.

This should be hard! Getting a license to assist buyers and sellers in real estate should require at least the equivalent of a semester of college level courses. The class topics could be History of Real Estate, Contracts, Customer Service, Fair Housing, all the things now crammed into 60 hours but spread into a 15 credit semester of school - at a real college, with real tuition, not a school run by someone doing it to make some extra cash. Plenty of the “schools” out there are suspect at best, and downright scary at worst. People who have lost their real estate license for doing very bad things can still somehow teach Continuing Ed and Licensing classes - how is that even allowed?

I also think that if our dues were higher it would weed a lot of the people on the fringes out. The local associations could offset it by requiring a certain level of production, then refunding part of the dues or roll it as a credit for the following year.

So, I agree. The Industry is ripe for a shakeup. Instead of the powers that be on the State Real Estate Boards and the NAR waiting to see what’s next, they should grab hold of this and fix it with some serious requirements for our profession - before we’re all out of jobs.

First Time Buyer Advice

Also published on the Huffington Post

The Real Estate Market continues at a hectic pace as we get into spring here in DC. From January until the end of spring, we receive a lot of first time buyer inquiries. This is excellent news that the market hasn’t scared them off, and it’s also important that first time buyers continue to jump into the market to keep the Real Estate Cycle of Life moving. Interestingly, many, if not all of these buyers, have the same basic inquiries and market perceptions.

In any market, whether it is DC or another city, the market value of real estate directly corresponds to location and property condition. This means that it’s highly unlikely (read: impossible) that you will find a foreclosure or diamond in the rough in an area that is sought after. In DC, areas near metro and retail are all high in demand. This means, unfortunately, that there just won’t be a $200,000 condo overlooking Logan Circle, nor would there be a $500,000 single family home in AU Park where the schools are in high demand.

Let’s review the most heard comments on a buyer’s wish list:

I’d like to be in an “up and coming area” that will “increase in value.”
We hear this so often that it almost seems funny. There isn’t an up and coming area in DC any longer. When places are up and coming, the majority of buyers are reluctant to live there because “up and coming” usually comes along with a lot of downsides: poor housing stock, crime, unsavory neighborhood situations. Also, for any agent to predict an up and coming area and/or a promised value increase is reckless as far as I’m concerned. We do not have crystal balls. We can tell you where the movement of buyers seems to be headed, but we can’t make any guarantees. And we can tell you what property values have done in the past but no one can predict the future.

Walkable
There are definitely areas that are walkable. I find most of the city to be walkable. But what it’s walkable TO is another factor entirely. See #3.

Near restaurants and stores
DC is not a city like New York. We have areas here which are residential only and areas which are mixed use. Unlike New York, there isn’t a restaurant on every block here. Living close to these areas carries a premium.

Near metro
Living near a metro also carries a huge premium. As parking becomes more difficult in the city, oddly, it’s not as highly desired as proximity to metro. Roughly half of new buyers want off-street parking. But probably 90 percent want to be close to metro. But what is close? For some, walking a mile to metro is fine. Those people will have a good chance at finding a home. For others, 2 blocks to metro is the max they will walk. Those people need to get the wallets out. And now, about that money.

Price
I’m not sure what it is but often after I’m given the wish list that includes items 1-4, the buyer will then state their price. Sometimes they’ve done some research online to determine what their desires will cost, but I’m actually surprised at how many people haven’t. They will often be hundreds of thousands of dollars off the mark. It’s just surprising because everyone has internet access, and could do a basic property search to find out what price ranges are, so when we hear that someone wants a 3 bedroom single family house next to a metro stop for under $300,000 and it needs parking and to be close to lots of fun shops and restaurants, it’s hard not to fall off our chairs. It might be possible in another city, or in another decade.

We’re not afraid to do a little work and renovation
Yes. You are. Trust me. Every single buyer who fancies themselves an HGTV junkie is going to be the same buyer who thinks they are handy and want to fix things up. It’s painful to fix things up and live in construction squalor. Everything takes three times as long and costs three times as much as you think it will. No, trust me. You don’t want to renovate.

I’m open to foreclosures and short sales
These are rare. So rare, that the few that are in existence have serious problems and until the bank behind the curtain making the decision is ready to sell, the property will likely sit a long time on the market. They’re rarely worth the time and effort they take and often aren’t that much better of a deal because the list price is just a guess - the bank often counter offers you at higher than the list price.

Advice for new buyers is this. It boils down to the old adage of “you get what you pay for.” Google Earth is your friend. When you see a house that looks like a great deal, check it out on Google Earth instead of trying to see it in person first. Look at the neighborhood. Put the address in to the Metro Crime Stats site to see what goes on in the area.

And finally, be realistic about what your budget constraints are. In this crazy market, you would be wasting time if you are searching for a house way below market value in the middle of the action.

Waiving Contingencies to Compete in a Seller’s Market

Also published on the Huffington Post

~~~~~

As spring progresses, the real estate market continues to be competitive. Buyers are doing all sorts of things to get houses beyond writing a “pick me” letter. In some cases, the risks they are taking are tough to justify. As an agent, I have to protect my clients as best I can. I give them the information they need but ultimately they make the final decision.

So what really happens when a buyer, wanting to make their offer more competitive, waives one contingency — or all of them? Well, they put themselves at risk of losing their earnest money deposit, but let’s look at each one in depth.

Home Inspection: In this market buyers are afforded the ability to inspect a home in one of two manners — a general inspection in which they forfeit their right to negotiate with the seller for any repairs, or a home inspection where they can go back to the seller and ask for compensation or repairs. Sellers hate both of these inspections, but if given a choice, the general inspection is definitely less risky to the seller. There will be no more negotiation but, it still leaves an open window of time where the buyer can walk away for any reason.

A regular inspection is the seller’s nemesis. Many buyers think it’s because the seller is hiding something. I’m not saying this hasn’t happened but it usually isn’t the real reason. Sellers don’t want buyers to get regular inspections because they don’t want to fix anything, they don’t want to give an additional credit for broken items, and they don’t want to see a copy of the inspection report. Once they see the report and are made aware of every deficiency with their house, they are obligated to tell a future buyer about it should the current buyer decide to walk away.

We never advise clients to waive inspections. Sometimes they choose to on their own, but it’s not a good practice.

Another contingency to protect the buyer is the appraisal. If the property appraises below the contract value, the lender will only underwrite the loan for the financing percentage the buyer specified. If the buyer was putting 20 percent down, the lender will only finance 80 percent of the appraised amount, not 80 percent of the contract price. If the buyer wants the property and has the money to bridge the gap, it’s not an issue. But, a low appraisal brings all parties back to the negotiating table to reach a mutually accepted solution. The choices include the buyer kicking in the extra money, the seller reducing the price to the appraised value or a combination of both. If not, they can walk away.

If a buyer has additional cash in reserve and isn’t unwilling to use it, waiving the appraisal is not as risky.

The final contingency is financing. This is risky to waive only from the aspect that the financing approval is ultimately up to the lender. Online lenders, credit unions and other banks where you’re just a number are usually not a good bet to use if you plan to waive financing. Local lenders who know the market and get documentation from the buyer typically have no issues approving their loans unless the buyer does something unforeseen, like spends their down payment. But if the buyer does everything they’re supposed to, was honest about salary and assets, doesn’t lose their job, and interest rates don’t go through the roof overnight, then lender approval isn’t a difficult hurdle. There is a way around the entire hurdle though. Many lenders can pre-underwrite buyers which is an excellent advantage to have. Only then can a buyer then waive the financing without risk.

Contingencies exist to protect buyers, and seeing them waived in the name of getting a house is unfortunate and dangerous. There are plenty of stories of buyers who were encouraged to waive inspection completely and they paid dearly for it. The risk-taking buyers don’t believe it though until they see rain outside their window... and rain coming through their ceiling into the middle of their living room.

 

Spring 2015 Real Estate Market Update

Also published on the Huffington Post

And, we’re off to the races!

The spring real estate market in D.C. is about to be in full swing. What spring market conditions would be like was anyone’s guess since leading up to the holidays was just one long coma. Listings were sparse. Buyers were few. Time of death was called sometime in early November.

Markets typically reset themselves after a long hiatus like the holidays. It’s sort of like being in the middle of a heated discussion when the phone rings and you have to take the call. When you hang up, you can’t just pick up where you left off. You have to regroup. (I am suddenly reminded of when I was a kid and my friends and I would laugh at how our mothers could be screaming at us one minute and then “RIING,” followed by them taking a deep breath and purring “hello” like they were was mid-massage.) It’s like that with real estate. The calendar dictates that the market is due for a break and the flavor undoubtedly changes when it resumes. Some emotionally spent buyers may decide to find alternate living arrangements and some new hopefuls arrive on the scene.

As long as D.C. isn’t battling an Arctic Freeze a la January 2014, the majority of home buyers and sellers get busy on January 2nd, thereby kicking off the spring market. The rest of the holdouts get on board the Monday after the Super Bowl when they sober up. Listings hit the market with a fury and buyers are out pounding the sidewalks looking for their new home. This year so far has been no different.

I was especially curious to see what would happen this spring since the market really winded down to a close in the fall. Listings that we all thought would sell immediately last fall languished on the market for weeks, sometimes months. We were not sure if this was a sign of things to come but in many ways it was a welcome change. Perhaps the playing field would level a bit more for buyers and sellers.

As I began to see the new listings with clients, we all quickly got a taste for what was next. The first offer I wrote for a client in 2015 was one of 15 others. My client had a decent escalation and a substantial down payment and still, we were told that my client’s offer was near the end of the pack. The next offer was also one of several - many of which kept sneaking in after the deadline. Yikes. Someone pass the corkscrew.

I’m an agent who is all about getting clients a good deal; I love when people pay below list price. I even tell them this in our first meeting. But sadly, that strategy isn’t going to work this spring. It’s all about getting the house the client wants, and if that means going in with an offer that is list price or above, well, shoot. I’m sorry. I didn’t write the rules for this game but I’m adjusting my model to live by it so my clients aren’t left with nothing.

The forecast is this: Sellers can still enjoy multiple offers if they price their home properly. But that’s the key - pricing properly. It’s still tough to convince some sellers that 10 - 20% annual price appreciation was a fluke in 2013. If your neighbor sold for $500,000 in October 2014, you are NOT getting $550,000 now. It’s better to price at or slightly below market value and have multiple offers from which to choose. Too high a price won’t elicit offers. Sellers often have a hard time understanding this though until they see it in action.

For buyers? When something is new to the market and priced well, they should know what’s coming because they’ve seen this show before, right? It will go over asking and it will go quickly. This means you need to have your lender lined up, your documents ready to go, and your checkbook in hand. If you like a property, you need to move fast or someone else will.