Buyer FAQ: I want to a write a low ball offer. How low is “too low”?

This is a tough question without knowing more of the background, and I suspect the answer varies considerably depending on the geographic area you’re in.  In our area of metro DC, many agents would advise their buyers that more than 10% off of list price is considered ‘low ball’.  Does that make it offensive?  Not necessarily.  A good agent will investigate and help you determine what’s a fair market value to offer for a property you’re considering, and present it accordingly to the other side.  Some things to consider:

What are the comparable sales that are pointing you towards your offer price?   Are they within the past 90 days? Within a similar season (late winter but pre-spring run up in prices) as last year?   If there are clearly similar homes that your agent can walk the listing agent through, then it’s not offensive — it’s fact. But it needs to be presented in the right way.  There are tactics to this…for example, a phone call with a simple “I’m trying to find comps to justify this price and having a hard time…can you send me which comps you used to come up with this price?  The ones I’m finding are all quite a bit lower, and I don’t wish to offend your seller or waste anyone’s time.”  This is the sort of thing an experienced agent can guide you through!
Is the neighborhood trending up or down?  How many homes like this one are likely to come on the market in the next few months?  What is the seller’s situation and his estimated carrying costs (i.e., what did he pay for the property and can you ballpark how much his mortgage is?  Maybe it’s a very low cost and he’s not opposed to waiting if his carrying costs are low).  Has your agent called the listing agent to see what the situation is?  It could be that the agent knows it’s overpriced but the seller is just unreasonable.  Has the seller turned down offers previously that could help you narrow a range of what the seller is likely to accept?
Many agents will advise you not to write an offer if it’s too low because the seller is unlikely to accept it, or even counter offer.  However just because an amount is what the seller will accept doesn’t mean it’s the market value!  Sometimes it’s better to pass on a house if you think something similar will come up in the next few months that is in a lower price point for similar condition, or if the seller is just unreasonable. A look at historical sales in the neighborhood in the past 12 months will tell you that, combined with a live discussion between your buyer agent and the listing agent.  But before you decide to move on, discuss these questions with your agent to determine whether it’s worth the time to submit an offer, and how long to wait for a response before you move on to a reasonable seller. On the other hand, if the comps support a higher value, then in the absence of special circumstances, you might just be wasting valuable time, and more likely to offend a seller.
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Renting Vs. Buying In The Washington, DC Area

We often find that incoming clients are on the fence about buying or renting in the area. The DC area is a very transient one, and many people find themselves packing up to leave just as quickly as they arrived. The decision of whether to rent or buy is a difficult one; renting is essentially hassle free, but without the possibility of appreciation and no tax benefits.  Consider this: DC and the surrounding area average a 34% higher rental rate than a comparable mortgage. So if you find yourself loving a home for rent at $2,000/month, that same home sold to you and financed through a typical mortgage would be only $1,300-1,500/month! Here is a great Rent vs. Buy Calculator to start determining what would work best for you!

 
The Washington, DC, region is one of the strongest housing markets in the country, and as such you can typically expect your break even horizon to be 4 to 5 years.  Why is this important to you? Over the course of a standard 2 to 3 year lease, with a monthly budget of $2000, you will have spent anywhere from $55,000 to $85,000 in total rent and utilities. This money might be better used to build equity and then either sell for a profit or use as a rental investment property. We can help you think through the decision of renting vs. buying, and then to find the best home to reach your financial goals. Contact us for a no obligation consultation!

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Free Money Monday: Fairfax County First Time Home Buyer Program

Fairfax County has a program that offers first time home buyers affordable townhomes, and condominiums – both new and resale. This program is a part of the Affordable Dwelling Unit Program (ADU) and is offered directly through area builders or current owners at a drastically reduced market rate ranging from $70,000-$160,000.  The communities are located throughout the county and offer many of the same amenities as you would find in your standard local neighborhood. For details on income restrictions, eligibility, and how to apply; contact us today.

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Free Money Monday: VHDA/FHA Plus Loans

This program is a combination of FHA/VHDA Loans that allows for 0% down payment on a low 30 year fixed interest rate. The program includes a second mortgage designed to help qualified borrows who need down payment and closing costs assistance. A standard FHA application/disclosure is required as well as a FHA Plus program application.

contact us to schedule a consultation with us to discuss this and other programs that might help get you into your dream home!  We’d love to help you get started!

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Free Money Monday: HPAP (DC)

The DC Housing Finance Agency provides a great program with down payment assistance for both first time home buyers and previous home owners. Your maximum allowed income cannot exceed $123,395 and the property must be purchased in the District. 20% of the loan is forgiven every year. With an allowable minimum credit score of 640, and a debt to income ratio no greater than 45%, this is an ideal choice for individuals looking to get into the city.

contact us to schedule a consultation with us to discuss this and other programs that might help get you into your dream home!  We’d love to help you get started

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Free Money Monday: BB&T Chip Loans

The Community Homeownership Incentive Program (CHIP) offers first time home buyers and previous home owners benefits including up to 97% financing on the majority of allowed property types, as well as waving the private mortgage insurance. This is a great program for individuals who are concerned about funding large down payments, are unsure of their qualifying status, and for individuals who lack credit history. Your income can not exceed 80% of the county median income.

contact us to schedule a consultation with us to discuss this and other programs that might help get you into your dream home! We’d love to help you get started!

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November Sales Are Down 16%, Should You Be Worried?

By Nikolai Goranov – Wethman Group Buyer Specialist

The November real-estate data came out last week and as reported by the Sun Gazette, the number of closed transactions is down double digits compared to November 2012. Before getting overly concerned, it’s important to remember that a single data point is hardly the indication of a changing trend. In fact, new trends usually don’t become obvious until they are fairly well played out. To put things in perspective, I went back to 2009 and compared how the November data changed year to year (statistics courtesy of RBI):

Period

Closed Transactions

Difference From Previous Period (Units)

Difference From Previous Period (%)

Nov 2013

2,128

-410

-16.2%

Nov 2012

2,538

587

30.1%

Nov 2011

1,951

-368

-15.9%

Nov 2010

2,319

-653

-22.0%

Nov 2009

2,972

It’s a little hard to draw conclusions by just looking at these data points. So to put things in even further perspective, I pulled up a few charts showing monthly sales and price data again going back to 2009:

 

The annual sales pattern is now more easily discernible. It is common knowledge that a lot of real-estate activity takes places during the spring and summer months which leads to more closed transactions. This is followed by a lull during the winter and a corresponding drop in the sales numbers. Still, every year looks a little different because of ever-changing market conditions such as the economy, interest rates, consumer confidence, etc.

Another good chart to look at is the average sales price:

The seasonal highs and lows are visible again, but not as drastic. Still, it bears some thought whether it’s more advantageous to go house hunting during the winter despite the less abundant inventory. This could be covered in more details in a future post. One thing I’d like to point out about the above chart is the stable trend of increasing prices.

As the Sun Gazette article adds, the rest of the sales metrics such as average sales price, days on market and sales price vs. asking price all point to a healthy even if a little overheating market.

It’s also important to keep in mind that real-estate is invariably local. The above charts talk about the general picture, but I’ve had very differing experiences in my transactions. To win the contract on a one-bedroom condo in Arlington’s Colonial Village, my clients had to put forward an extremely aggressive offer because they were competing with seven other buyers. The sales price was over asking with no contingencies and no seller subsidies. Two months later another client was able to get below asking price, a generous period to closing and decent seller subsidy on a townhome off Route 1 in Alexandria. And they also had FHA financing which is often perceived less favorably by sellers than conventional one.

In conclusion, staying abreast of market data is useful, but having a real-estate agent with local market knowledge on your side will make you even better prepared.

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Determining The Impact Of School Districts When Buying A Home

We are often asked how important school quality is when buying a home. The short answer is that it’s a big driver in price. Of course, all things being equal, one would prefer to buy a house in a good school district rather than a poor school district, however, the differential in price is obvious when you start to look at homes that sit close to school boundaries. It’s important for homebuyers to ask themselves how long they intend to be in the home. We find most buyers have either a 5 to 7 year time frame or a 7 to 10 year time frame. Combine this with the age of current or potential future children, and you should have a good idea of whether you need to be concerned with elementary, middle, or high schools, or none at all!

It is also important to keep in mind whether your resale market is for singles, couples, couples with small children, or families with school age children. For example, if you are buying a two bedroom condo, it’s likely that the resale target market is not going to be very concerned with school district, since most families with school-age children are looking for townhouses, or detached homes. When you start to research schools, be sure to check the county website to verify the school district for your future home. You can’t always rely on the entry from the agent in the MLS, in fact, many agents leave that field blank either because they do not know, do not want to assume the risk, or do not want to make the time.. Sometimes it’s even a strategic decision not to list the school district if the schools are not perceived to be good. You can research school districts at a website such as greatschools.org, or by looking at the County school websites themselves. Overall, the best way to research schools is to visit the school itself and schedule a meeting with the principal or another member of the administration to get the answers you need.

Call us if you’re looking to buy a house in a certain school district. We’d love to help with your search. Or you can search here

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What Happens When Interest Rates Rise?

Over 2013, we saw a jump in interest rates from about 3.5% to anywhere between 4.0%-4.5% for your typical 30 year, conventional loan. Most people expect a catastrophic bubble much like everyone experienced 5 years ago. In fact, in today’s market, with housing and income levels as they are, we would have to see upwards of 7% rates to make a U.S. median priced home unaffordable. We can, however, expect a drop in refinance originations (as to be expected with record low rates just months before). So even though interest rates are on the rise and it can be expected to reduce housing demand, rates would have to drastically increase before purchase demand would reduce substantially. There is no recent trend that hints towards decrease in market stability. In fact, a steady, gradual rise in rates is not only a sign of our overall economic situation improving, but that it will not derail the recovery.

 

For more information on current interest rates,  please contact us. We have a list of preferred lenders and individuals who can give you the most up to date interest rates and loan product availability.

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DC Open Doors Mortgage Loans Offering 100% Financing. Yes, Really!

A program developed by Housing Finance Agency for first time buyers, step up buyers and existing homeowners offers up to 100% financing to assist home buyers in purchasing a home in DC.

Program options

  • Conventional 97% financing with 3 down payment assistance
  • Conventional 97% financing
  • FHA 96.5% financing with 3.5 down payment assistance
  • FHA 96.5% financing

Program Guidelines

  • First time home buyers, step up buyers, and existing homeowners
  • Maximum borrow income of $123,395
  • A debt ratio not to exceed 45%
  • Down Payment Assistance Loans must be used with DC Open Doors Mortgage Loan
  • DC Open Doors can be layered with any of the District’s already established down payment programs (HPAP, EHAP, NEHAP)
  • All borrowers must purchase the subject property in DC, but do not have to be a resident at the time of writing the contract
  • No co-borrower allowed

This is a wonderful chance to speak with an expert regarding your possibilities. As always, contact us for more information or for an approved lender referral.

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