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I'm a first-time town home buyer in Fairfax County. Found this site a while back when I searched for "Northern VA Real Estate Blogs". Here are my observations from the first-time buyer's perspective.The <$450k market feels like a sellers market. Every time I put an offer on something good, there are already 2 or 3 "strong" offers at or greater than list price. No surprise ... I lose the bidding war to someone willing to overpay.On the other hand, I've also looked at properties that are languishing ... and I wouldn't take the keys if you gave them to me.Anyone else noticing this trend, too? It's either pretty good and going very fast at list price, or it's pretty bad and sits on the market forever. There's no in-between.Planning to put 20% down, using up my savings. But finding it very hard to get in without expecting buyer's remorse over price or quality.Comments and/or advice welcome. I'm new at this ... still have a lot to learn. Everyone is saying how prices are dirt cheap. Does it just get worse from here for the first-timers?
As a follow-up, I'm putting offers in the Annandale 22003 zip code. Also looking a little bit in nearby 22042, but haven't put an offer there yet. Don't quite consider these areas "immunozone". Maybe I'm wrong.I'm generally offering 97% of list price. Pretty consistent with what things sell for in Fairfax County.I can understand serious buyer competition in the Ballston and Clarendon areas, for example. But now you have to outbid and overpay to get in Annandale?
FTB - i agree, annandale is certainly not the immunozone. As far as I know, some places are way down off peak.Again, without knowing the specifics of that area, I would assume offering 97% of list should put you in the ballpark. How much hither (generally) is the winning bid over yours?
The winners appear to be paying (at minimum) list price with no seller subsidy. And we're not talking housing perfection, either. The home I bid on this morning has a renovated kitchen and bathrooms, but has a nearly-dead Furnace/AC and Hot Water Heater, among other immediate issues. If I win, I'm looking at a significant repair expense on day one.I'm not made of money. A 20% down payment plus closing costs plus day one repairs becomes a stretch.The home is new on the market. I saw it over the weekend and put in an offer this morning. The listing agent said there were already two "extremely strong" offers and another one expected. Bring your "best possible offer" if you're gonna bid. Here we go again.
FTB, welcome."Overpaying" has to be determined relative to comparables rather than to the asking price on the specific property.Realtors and owners sometimes set the asking price at a point lower than the market for comparable properties, in hope to get more buyers interested. If a lot of them are doing this where you're looking, I'm not surprised that a 97% of list is getting outbid, but this doesn't mean the area is "hot." A bidding war may push the price up slightly over asking, far over asking, or somewhat over the market price for comparable properties. Only the last of these three options would I consider "overpaying", if the successful bid is significantly above true comps. Or, if the prices stay that high, then I would consider it a "hot" market.
So, my advice (if you want it) would be to look really carefully at the recently sold prices for true comparables, make adjustments for improvements that favor/disfavor the property that interest you, and figure out what it should go for.In answer to one question you raised, yes, in Arlington, I also see some houses flying off the market and others languishing. In most cases, it appears to be due more to the listing price being set too high relative to the market value of the house, than to the condition.A lot of properties have been removed unsold from the market, too. I don't know how to track these down.
One other note. My offers are closely aligned with recent comps, a bit toward lower end of the range.On the other hand, I'm offering a 20% down payment with local lender and title. I can close quickly without headaches or drama.But, getting a $20k jump over and above the house across the street that sold last month seems to be the winning ticket in this market. And they buyers are willing to offer that.
OK, but your prior posts made multiple references to the list price. You may want to be doubly/triply sure that you are comparing apples to apples in comps. Esp. with older homes, it is very expensive to update systems as well as kitchens, baths, etc. Most sellers won't have done everything that needs to be done. For example, I've put >$200K into my small house (mostly systems and exterior work) over more than a decade, and I still don't have a gourmet kitchen and new baths, and have just gotten bad news about >$10K in improvements that are needed but won't really "show", i.e., a prospective buyer of our house likely wouldn't pay more for them. So it's conceivable that the house across the street lacked $20K in improvements that the current house has had.
ACE, thanks for the comments and advice. And, you're right, there could be a difference in renovations between the house and its comps. But some renovations are more valuable, while others put on a good show. I could live with an older bathroom, but not a nearly-dead furnace.When I'm ready to make an offer, my agent gives me a list of recent sales with similar square footage, which then determines a range. I try to fall somewhere between the middle to lower end of the range.Generally, my strategy puts me at about 97% of list price.
FTB,Thanks. My point is that, especially with older homes around here, the square footage is only one of probably > 20 variables that contributes to value, so you are relying primarily on square footage (which may work with similar homes in a new development), you are missing a lot of reasons for price variation. You have to add (subtract) for improvements and try to factor in the wear and tear, etc. My other point is that many people who have not owned a home previously underestimate considerably how much it costs to replace stuff (e.g., a basic replacement A/C unit last fall cost $3500, and it wasn't even the coolest energy saving model because those don't work with our middle-aged furnace; windows can be $10K+; a stainless steel liner in the fireplace/chimney to enhance safety could be $4K); a small stone patio on a concrete base, $20K, etc. My regular plumber wanted $14K to redo a tiny bathroom, no reconfiguration, and I still had to buy the vanity and countertop. So when such buyers come across a house that has had some of this work done, they may think it is terribly overpriced relative to a house next door that has had some or none of it done.If you've factored in these investments very carefully, then the good news is that you have very good taste in houses (i.e., lots of other buyers who can afford them are willing to bid on them). So it's just a matter of deciding when you really want to take the plunge on one. See The Anon's similar story on a prior thread.
sorry - typo "IF you are relying..."
Ace,I've got a contractor you should meet!FTB,I assume you are looking at a single family detached home? Why the preference for Annandale?
Ace, very good advice. Thank you. I've considered some of this previously, but perhaps not carefully enough. I'm new at this, after all.VA_Investor, my offers so far have been on town homes. I've looked at single family homes, too, but have never put an offer on one. My location choice comes down to commuting and price level. I work in the Annandale area, and my affordability is maxed out around $450k. Centreville and Herndon offer great deals, for example, but a rough commute, too.
FTB -- I did a quick search on your 2 zipcodes. It seems that the biggest problem you have at that pricepoint is the lack of inventory. Specificaly, right before things were bottoming out, each zip had 4-5 times as much inventory available as it has now, and MOI is fairly tight.Unfortunately I dont see either of these improving much in the near future. Inventory will eventually improve, but likely only in a truly rising price environment, which is probably a few years down the road. And frankly that doesnt help much either since affordability is apparently an issue for you now. You may have already tried this, but have you ever considered looking at some of the more dated properties that need even more updating, (but yet appear structurally sound)? As you probably know, there is a premium associated with "turnkey" properties. Yet, if you find one that is sound but otherwise dated (i.e. crappy kitchen & bathroom materials), you may be able to lessen the competition and get one.Of course, you will have to live with the crappy decor til you have enough money saved up to do the updating, but at least you had gotten the location you want.
Thanks, Anonymous. You're right, there's not much to choose from. And when one pretty good home comes along, it immediately falls into bidding-war territory. That gives the feeling of a seller's market.So, where did all the inventory go? Everyone is so content that nobody wants to sell? The higher price ranges have tons of inventory. Unfortunately, that does me no good. What first-time buyer has the savings to afford a down payment on a $600k+ home?I have toured some homes with outdated decor. In my price range, that's the norm :) Older decor doesn't bother me. But a lot of this same inventory has been so poorly maintained that it has festering problems. I frequently see the effects of water damage and mold. Call me a chicken if you wish, but I really want to avoid that kind of stuff.
Also, I see A LOT of investor properties / rehabbed foreclosures on the market. At first glance, their pictures look amazing with new appliances, carpet and paint.Then you look a little closer, and you realize they've done an "HGTV renovation". They've made the updates that look good in pictures. But what's not in the pictures is horrendous. You don't see that stuff until you tour.Generally I've been warned to avoid these kinds of properties. Anyone have thoughts on this? Seems to be a big percentage of my market segment these days.
anon says"I made bids on 14 houses. After losing 13 times, I finally won.The first 8 of these bids were in 2009-2010 when I made lowballs to try to take advantage of the higher inventory and uncertainty in the market. I was outbid every time, the final bid was so far ahead of my max price, it was clear I needed to adjust to reality if I ever wanted to buy.The next 6 places were all multiple bids. I won on the 6th, beat the next bid by about 5K.My purchase price was about 80% higher than it was when I looked at similar places in 2003. At its worst, my place probably fell to 5% off peak, and is now at peak once again."OkWhat neighborhood did you buy in?what kind of property did you buy?How much did you pay? I'll respect your privacy and not ask for the MLS number or anything that would absolutely give away your privacy, but, I think it's fair to ask these questions.
http://franklymls.com/DC7431236listed 410, sells at 228, assessed at 355K. down 45% from ask and down 36% from last purchase.This one is a real comp killer.
First Time BuyerLook the inventory numbers suck.That's reality right now. Now, there are two approaches.1) Get on the high side of a buy,which leads to Bidding wars and "Buy now or be priced out", but i fyou are going to stay there for 20 years, it may well be priced out.2) Be willing to rent, and bide your time. I just bought a Place in DC, which has been the cinderella story of the C-S index.The place i bought i got for 35% less then ask. Now that said, it's painful to lose bids. I lost on 5-6 bids, because i was willing to not chase the craziness. however, if you want, get into a bidding war, add escalation clauses, don't add inspection clauses, be willing to overpay and woo sellers. Sure, you can own your own little piece of a mortgage.
FTB,I agree with you and others who think it's often a good idea to avoid poor quality flip properties. Not only would you get exasperated living in the house later, you would probably overpay, because many buyers, esp. first timers, can't or refuse to try to look past bad decor.The neighbors behind us bought at the top of the market. The former owner was there only a couple of years and had people working there almost every day, putting in a new kitchen, baths, and other showy stuff. Since buying, the neighbors have had to invest tens of thousands fixing some structural issues that the previous owner likely knew about but decided not to fix, so she could spend money on the fancy kitchen, etc. It might have been a smart selling decision for the former owner if she figured she was going to be transferred, but the current neighbors probably thought they were getting a totally or at least largely renovated house. You see cases like this on Holmes on Holmes all the time.I like the neighbors, so the bright side for me is that means they are likely planning to stay in the house a long time. VA_I, I would LOVE to have the name of your contractor(s). I didn't go for the bathroom remodel--the price seemed ridiculous. And we are leaning more and more toward adding onto the house rather than moving--that would be a big job.
pat, Do you not see the contradiction in the idea that DC is a Cinderella story in the C-S #s, yet you bought for a price much lower than the asking price?The reality is that, as with the rest of the metro area, prices in some neighborhoods in DC have escalated substantially and kept the value or are rising after a small dip, but prices in other neighborhoods, such as in the area in which you bought, have not. While the average for DC proper is high, this masks the variation by neighborhood. What you have done is to decide that it is worth the risk to you to move into a lower-cost neighborhood that has not kept up with the rest of DC. That may well pay off for you non-financially as well as financially. You may love living there, and you may have found a neighborhood that will escalate a lot in value in years to come, outpacing many others. It's happened in other DC neighborhoods, and sometimes those willing and able to take the risks have profited handsomely. But obviously there is downside risk as well. Since a lot of your buying competition wasn't willing to take on those risks at the price you bid, you won. I hope it all works out well.
PS FTB--every older house has mold. The questions are: what type of mold is there, how extensive is it, how easy/inexpensive is it to remedy? If I were you and were determined to buy now in Annandale (and that may be a very good decision for reasons Anon pointed out) I would ask friends for names of Realtors who are good at sizing up the condition of older homes (because they can help you discern which problems are reasonably easy to fix and which aren't). Some Realtors are really good at this and some of them know next to nothing. It's amazing. You also want the names of good inspectors. Do not make an offer unless it is contingent on inspection.It's possible that some of the houses where you "wouldn't take the keys if you gave them to me" need mostly your ability to look past some ugliness and willingness to pay for some repairs, but could be bought for a price that would make it worth your while. A furnace, for example, is really easy to replace. It's expensive (and unfortunately for you, the tax credits for energy efficient stuff will expire soon--though dealers may reduce prices once the tax credits are gone), but the job can be done in a day or two. Ditto a roof, new flooring, etc. Removing ugly wallpaper or cleaning a filthy place can be done by you and your friends. Are people passing it buy because it looks disgusting but the problems are cheap and require physical effort to correct, and can you get a huge discount as a result? Contrast these needed changes with redoing the only bathroom in the house, or redoing a kitchen, or buying a place with a bad floorplan or location that can't be changed. That may be the kind of house to avoid. But even then, there may be ways to make the place and price palatable.
"passing it by" that is.Also, there are painters who don't charge much for removing old wallpaper, repairing walls and painting them.
Thanks, Pat. I appreciate the blunt honesty. For now, I'm choosing option #2 - rent and bide my time until I (hopefully) find a good bargain. Maybe it will be the property I bid on this morning ... unless the other bidders start a feeding frenzy. If so, I won't join their bidding war.I've heard Fall/Winter is the cheapest time to buy. They say Spring brings more inventory but higher prices. Is this a pretty normal assumption? Should I expect a bigger feeding-frenzy in a few months?
Thanks, Ace. You make an excellent point. Fortunately, I take notes on all the properties I tour. I've been going back through them to see what the real turnoffs have been.You're right. Sometimes the turnoffs have been things that are fixable, but expensive ... e.g., badly warped hardwood floors.In many cases, the issue was stuff you can't change ... e.g., parking was non-existent, the neighborhood was terrible or the house was 100 feet from a major highway and you couldn't hear yourself think.It's definitely good food for thought in the future.
FTB,One other thing - in the quick look I took at properties on the mkt in 22003, it certainly looks as if the "good value" homes go very quickly. But it also appears that putting a cap at $450K, or substantially lower for houses that need work, is very reasonable for that zip. That suggests a few other things for your consideration:1) you don't need to raise your cap2) after you've sorted through some of the points raised in this thread, you may feel better prepared to jump in quickly at a market price, when something comes on the market that is flawed but in ways you can live with or fix3) if you're willing to be patient and get prepared to act quickly, something will come on the mkt that will work for you4) one option for a house that strongly interests you but worries you re: condition is to pay to have it inspected before you make an offer. The downside of this is that you may be wasting several hundred $ if you don't bid or bid and lose. The upside is that what you may hear is that an ugly, well-located, well laid out house is in great shape structurally and systems are working well, which may give you more confidence than other buyers might have when you decide what to bid. Thus they may be scared off, giving you less competition. Also, you learn a lot with an inspection even on a house you don't buy.5) don't use up all your savings if you buy a fixer, even if it means you have to put less than 20% down. The stress of worrying about an emergency you can't afford to take care of, or having to live with something truly awful for too long, outweighs the PMI and/or slightly higher interest rate but a bigger emergency fund in the bank. An even better option is to rent and save awhile longer as Pat did, so you may have both the 20% and a cushion for upgrades. Prices could go up while you're doing this, but maybe not enough to offset what you may gain while saving.
FTB - you do know about www.franklymls.com, don't you? Should have mentioned that first. It's a great site for checking out comparables - on the market or sold in the last 2-5 years.
Ace says"Do you not see the contradiction in the idea that DC is a Cinderella story in the C-S #s, yet you bought for a price much lower than the asking price?"No I absolutely see that. Basically, while the eastern half of the city,has taken some serious deflation, NW has continued appreciation, which masks the variation.It's why i chose to buy into a value area. I figure if the losses have occurred, it's already heavily baked in and if there are gains, which i really doubt, i'm more likely to be dragged up.no seriously, i see it.
FTBhere's a link to a graph, now i think the author is shilling hard, but yeah,the seasonality data matches my expectations.Now Cheryl says there is a lot of sales in Feb, http://kwbelize.com/real-estate-news/is-metro-dc-housing-market-undersupplied/http://www.ziprealty.com/blog/washington-d-c-real-estate-market-as-dramatic-as-politics/yeah it's seasonal but the inventory is also that way.
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