We are so excited about this hugely requested blog post!! After posting about our home buying struggles, SO many of you messaged that you are/were going through similar situations. We thought it would be a great idea to reach out to a visi alum, who is part of the Laura Steuart Team of Compass to help answer our questions about this insane housing market + buying a home in general.
The blog post Q&A is separated into two distinct parts –
1) The current *wild* market
2) General homebuying questions
This is a long one but SUPER informative and we hope it is as helpful to you as it was for us!
XO, Katie & Molly
About the Laura Steuart Team of Compass –
From the Desk of the Laura Steuart Team of Compass –
Thank you! We’re so thrilled to have had this opportunity to answer questions from the community through the DC Darlings. There’s understandably so much anxiety for buyers these days. My team and I hope this perfectly timed Q&A event will give you, the reader, a bit of peace-of-mind as you decide whether and how to move forward in buying a home.
Initial Thoughts: Never has “Home” been more important. The last year-plus has taught us that home is not just an investment; it is an office, a gym, for some a classroom, and a place to grow and find your personal joy. We’re lucky to live in a market that has remained fairly recession-proof due to the area’s unique need to employ its residents in high-paying government, private sector, and government contractor jobs. Yet, lately for buyers, the market has been frustrating. With little inventory on the market, sellers are bombarded with dozens of offers and – with their own needs at heart – accept the ones that can fast-track all parties to closing. This, however, doesn’t necessarily mean “wait for a better market.” Finding your dream home IS possible!
One of the true joys of my real estate career for the past 25 years, and now as an Associate Broker with Compass, is assisting clients while they discover and emotionally connect with homes, and help guide them to succeed in their home buying dreams. I understand the importance of a savvy team, a proven professional toolkit, and a desire to help clients feel empowered with knowledge. I hope this Q&A will help guide you on a path forward in achieving your Real Estate goals.
To that end, I’m here to help. Please feel free to reach out with additional questions!
-Laura Steuart
Q&A Session – the DC Darlings x the Laura Steuart Team
MARKET-RELATED QUESTIONS
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(Q): Best tips to buy in this market and in any market!
(A): Surround yourself with a team of professionals you trust. To ensure you’re guided through what should be an exciting time with as little stress as possible, properly vet your support team including your agent, lender, home inspector, title company, etc. who all work in tandem to ensure a smooth home buying process. Our team is happy to discuss how to reach out to the right industry professionals!
(Q): In this seller’s market, we’ve been told to waive contingencies and inspections…is this smart?
(A): The short answer is…it depends. Waiving contingencies and inspections certainly helps as a seller is more inclined to choose the highest and strongest offer, but you need to know you can afford the risk. First, ensure you have a trusted lender. If you waived financing/appraisal, and your appraisal comes in low, you would need to make up the difference between the contract price and appraised value. If you can’t afford the risks of a low appraisal or bad home inspection, don’t risk it.
(Q): How much above asking price is normal these days? How much should I go if it is my dream home?
(A): Each house and market is very different. That said, in our experience, many agents list a property below market value to spark multiple offers. Become familiar with Escalation Clauses (the ability to bid incrementally depending on other offers on the table). Your best offer and final bidding amount is a personal choice based on your financial comfort and desire to buy the home.
(Q): When is it a good investment to pay above the asking price?
(A:) While we all wish we had a crystal ball, and can’t truly predict what will happen, the Washington area has proven itself to maintain its value over time due to the stability as our nation’s government center and the consistent job market. While it’s understandably frustrating for buyers to wait for inventory to increase, the flip side is that investing in Washington area Real Estate has traditionally been a safe, stable market for your future home.
(Q): How long will this crazy market last?
(A): As Covid-19 lingers, this is a tough question to answer. We’re not anticipating a sudden increase in inventory over the coming months, but as more people get vaccinated, we expect to see more people thinking of selling and looking to take advantage of this strong Seller’s market.
(Q): I am losing-out on every offer these days, should I look to rent again?
(A): Many buyers in the current market are suffering from “buyer fatigue”; getting their hopes-up time and time again, only to lose out on every offer they’ve put forth, not to mention being out hundreds if not thousands of dollars on preinspections. With this in mind, it could be wise to rent, while waiting for the market to slow down, depending on your personal situation. If you choose this route, to rent while you wait, it could be a great opportunity to explore and get to know another Washington area neighborhood. Alternatively, interest rates are at historic lows, and purchasing is one of the best ways to build wealth and potentially take advantage of tax incentives.
(Q): I know people who have sold their home and are going to rent until they find their next one. Is this a tactic so they will be able to: 1. buy with no contingency that they have to sell their home first and/or 2. be able to use that cash to put more down (like 50%+)
(A): Yes to both. Since the market is so strong right now for sellers, buyers who are renting are likely trying to take advantage of this and win an offer above asking with no contingencies. From what we’ve seen, however, many people are renting out of necessity rather than choice – given they’re losing out on every offer they put towards purchasing a home. Renting isn’t always ideal, but it can be a great opportunity to “try out” the area you’d eventually like to purchase a home in, or to explore an area of interest without having to commit to staying.
(Q): Is it a better idea to build right now?
(A): You’re not alone in this question. It’s asked often! As the weather warms up in our region, ideal building conditions are upon us – this is a great moment to choose new construction homes if you have the time and energy to commit to the process! Building a home involves choosing plots, fixtures, design features, and other details which can be frustrating, or fun, depending on your time and patience. Many believe building may actually be the catalyst to increasing inventory and help to even out our inventory shortage. According to MarketWatch, “U.S. homebuilders started construction on homes at a seasonally-adjusted annual rate of 1.74 million in March, representing a 19% jump from the previous month’s upwardly-revised figure, the U.S. Census Bureau reported Wednesday. Compared with March 2020, housing starts were up a notable 37%.”
(Q): How can your bid compete with so many offers within a short period of time? My mortgage pre-approval doesn’t seem competitive.
(A): Work with a well-respected, savvy agent who can arm you with as many “arrows in your quiver” as possible. They’ll research the property before writing an offer, talk directly with the listing agent, have sharp negotiating skills, and a strong team of professionals in their back pocket (i.e. trusted lenders, home inspectors, etc.). In doing their homework, your Buyer’s agent can inquire about the motivations and timing of the seller before crafting a compelling offer. This will help provide an edge, even if the motivation is a short settlement timeline. With your agent and team, discuss the possibilities of short term “bridge” or “swing loans” which are seen as “same as cash” and can close quickly, and lastly seek ways to prepare the underwriting side of your mortgage for early completion to further reduce the timeline, making your offer more appealing.
(Q): Is it better to wait to buy a home than purchase in this current market?
(A): The answer rests in your financial situation, level of “buyer fatigue”, how long you’re willing to stay competitive, and your current living situation; i.e. how long you have until your lease ends.
Questions to consider:
1) Are you financially competitive with other buyers in this market? Can you pay all cash, or “same as cash” by waiving appraisal/home inspections?
2) Do you really love the home you’re preparing to write an offer for?
3) If you’re a first-time buyer who’s renting, does your lease end within an ideal timeline?
4) Do you need to sell your current home to finance your next home?
5) What is your general willingness to “stay in the game”; competing against other offers?
6) Determine your “deal breakers” and consider your willingness to be flexible in a difficult market. Location, home size, number of beds and baths, etc. all should be considered ahead of time to know if you are flexible enough to dive in, or perhaps need to wait for more inventory.
(Q): How is the market in DC vs. Alexandria, Bethesda, Arlington, etc. – areas close to the city.
(A): Since the start of the pandemic, we’ve noticed a regional shift in buyer needs. While all DC, MD, and VA markets are consistently strong, we’ve seen an increase in buyers looking for more space for home offices, gyms, outdoor space, etc. Already competitive markets like Maryland’s Bethesda, Potomac, Silver Spring, Chevy Chase, and Virginia’s Arlington, McLean, Great Falls and Alexandria have become even more appealing, thereby escalating home prices well above listing price. That’s not to say Washington, D.C. proper isn’t also strong, but most neighborhoods boasting single family, semi-detached, or townhouses in or out of the city have continued to increase in value.
(Q): Can those who are buying over asking price expect to make their money back when they sell? Should folks settle on a home that’s just so-so in order to build equity in a home or rent instead?
(A): In any investment, especially when buying a home, it’s important to weigh the pros and cons. The demand for homes, especially detached single family homes, has been driven mainly by Covid, and has significantly increased sale prices. That said, wanting to start your equity building journey is understandable, but appreciation is not always guaranteed. We can’t tell you whether to buy or rent, because you know your lifestyle best. If you plan on staying in the area for sometime, it would make sense to buy. If you’re one who travels, or moves frequently, it may make more sense to rent. We always recommend mapping out a 5 year plan – nothing too intense – but one that would paint a clearer picture of where you’ll be, or like to be – both geographically and financially. This will serve as a good roadmap for next steps in your home buying adventure.
(Q): Are interest rates expected to rise?
(A): According to Federal Reserve Chairman Jerome Powell, interest rates should stay in relatively the same range. “I think it’s highly unlikely that we would raise rates anything like this year,” Powell recently told CBS “60 Minutes” journalist Scott Pelley. In this same vein, Chief Economist and Senior Vice President of the National Association of Realtors, Lawrence Yun, believes rates will remain “similar or modestly higher, maybe 3%” (Time Magazine). If you are a new or seasoned buyer, it’s important to stay in the know – a knowledgeable, experienced lender will be a great resource for you, and again, can communicate and work in tandem with your agent.
(Q): Is supply expected to rise? I read the lack of supply is driving this craziness.
(A:) While experts are not predicting supply to increase in 2021, we can conclude that supply will increase by 2022 based on Fannie Mae’s prediction of decreasing home prices next year. According to Inman, “Given the continued supply-demand imbalance, home prices are forecast to rise 8 percent in 2021 – up from the previously forecasted 4.2 percent – before decelerating to 2.9 percent annualized in 2022, as measured by the FHFA Home Price Index.”
(Q): Is it smart to buy in the city now, and wait to move to the suburbs because that seems to be where everyone is going?
(A:) At this time, the condo market in D.C. is generally slower in comparison with the suburbs, given that many city-dwellers have opted to move further out in expectation of easier commutes with more square footage and backyards. While it’s hard to imagine our lives going back to normal right now, eventually Washington will become more familiar with restaurants open to full capacity, concert venues opening, etc. Many condos are currently selling below the asking price and sitting on the market. So if you envision yourself staying in the city long term, it is a valuable option to explore! As Warren Buffet says, “Be fearful when others are greedy and greedy when others are fearful.” In other words, while many are buying out of the city, it’s a great time to buy in!
(Q): Has there been any type of slow-down since the beginning of the year? Will summer be a better time to buy?
(A:) Traditionally, we’ve seen the Spring market as the busiest time to both buy and sell homes. Within the past few years, however, we’ve seen the entire year become more reflective of what a seasonal “Spring Market” previously represented. This is even more true now with the pandemic as many people halted vacation plans, stayed home, and started looking for homes with more square footage and outdoor space (DC Urban Turf). The Washington D.C. region has remained strong, with ever-increasing home values, as D.C. and its suburbs are stable being home to thousands of federal employees, along with private sector professionals, and government contractors. These jobs are high-paying and consistent. In addition, Amazon announced its second headquarters in Crystal City, Arlington in September 2017, where it plans to host 50,000 high-paying jobs and executive leadership positions at National Landing.
GENERAL REAL ESTATE QUESTIONS
(Q): What should you look for in a great real estate agent and what are red flags?
(A:) When looking to hire an agent, seek-out someone who is…
1. proactive in the marketplace, utilizes their network to find properties and uncover new potential listings
2. a great listener and takes the time to really hear your questions and thoughts around what you are looking for
3. experienced and has exceptional market knowledge
4. a great educator on the market and is sure that you fully understand the transaction structure, the comparables, and the process from start to finish
5. there for clients “beyond the close.” Your agent should be able to help with homeownership questions and issues that arise even years beyond a purchase.
6. a concierge service that provides recommendations from lenders to contractors, plumbers to designers.
7. has great references, as well as excellent relationships with other agents in the community
Be wary of any agent who…
1. is non-responsive (agents should respond within six hours at most unless the communication is sent late at night)
2. is newer to the business without mentorship
3. is not a full-time agent
4. isn’t interested in your individual buying needs and is pushy and putting their ideas before yours
5. doesn’t follow up or keep in touch with you throughout the process
6. doesn’t have established relationships with agents across multiple firms
(Q): What are the most important things to know when buying your first home?
(A): When buying your first home, you’ll want to surround yourself with a highly experienced team of professionals (Real Estate agent, a lender, title company, inspector, contractor, etc.) who can guide you on the process from start to finish. Before you think about buying your first home, consider your finances. Start saving early so you can afford a downpayment, closing costs, and any move-in expenses such as moving fees, upgrades, and furnishings. Once you feel you’re ready to start searching for your dream home, apply to a trusted lender for pre-approval. This number will determine how much home you can afford. From there, we will start your home search! Here’s where the fun begins! If you were to work with us, we would then present you with a Compass Collection by filtering your home-buying criteria into a lovely “Pinterest-like” layout. Buyers are able to “like”, “mark as uninterested”, or make comments on each matched listing so we can filter out your “deal breakers”, and we can better get to know your needs, taste and style. Knowing your maximum price point and having narrowed down your dream homes, we’ll be ready to start touring!
(Q): What advice would you give to someone looking to buy a rental property?
(A): For whichever state you choose to invest in, make sure to understand the rental laws. For example, D.C. favors the tenant over the landlord. According to the DC Tenant Bill of Rights, a tenant is able to rent month-to-month after their lease expires (if they’ve given their landlord notice as stated in their lease) for as long as they want. Also, it’s important to look at the surrounding area of the property you want to rent out. What’s going up around the property? Is it a quiet or busy area? Is there public transportation nearby? If you’re looking at condos vs. co-ops, be sure to inquire whether the co-op bylaws allow rentals. If they do, find out how long the lease term allows. For further info, this article on Co-ops from The Washington Post is a great resource.
(Q): What to keep in mind when doing a virtual tour over an in-person?
(A): If you are safely able to do an in-person tour, do it. Seeing your potential new home in person allows you to get a good sense of room sizing, feel the vibe of the home, and allows you to get to know the surrounding neighborhood. If you can’t do a walk through, try to at least drive by to note the neighborhood and understand the home’s position in the community. If you need to do a virtual tour, take your time. You’ll need to see the space as best as possible, don’t be shy in asking to see anything you need to take in the house fully.
(Q): Do sellers care if a potential buyer sees the house virtually vs in person?
(A): Typically, the seller isn’t in attendance at open houses, and shouldn’t be concerned with how you’re viewing the home. A seller’s main focus will be how strong your offer is, and should be understanding that you may not want to view the property in person while we face Covid-19.
(Q): Should you ever waive an inspection?
(A): If you have time for a pre-inspection before writing an offer, it will make your offer more competitive. Pre-inspections range anywhere from $250-$2000, depending on the size of the house and the qualifications of the inspector. Otherwise, in this market, you can choose to waive an inspection; though we caution against this. Keep in mind you’ll shoulder the financial risk if you later find there are issues in the home, such as water damage, mold, electrical, or structural issues.
Feel free to reach out and chat with the team !!
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