Curbed U, our non-boring guide to the nuts and bolts of real estate, turned you all loose on Ben Dursch of Evers and Co. last friday, inviting you to ask all your crazy questions. Today we are back with his responses.
Q: How many lenders should I talk to before selecting one?
Ben: There is no set minimum or maximum amount of lenders a homebuyer must contact. It really is up to the individual. When selecting a lender I advise two things. First, ask friends, family, coworkers, colleagues, neighbors, etc. if they or someone they know has recently bought a home and had a good experience with their lender. If so, contact that person. Second, ask your Realtor to suggest a few lenders his or her clients have used and recommend. Your Realtor will know of reliable local lenders who have consistently closed transactions of all types without issue.
Depending on circumstances (i.e. military status, down payment amount or if parents are assisting or gifting money in the transaction) and the type of financing (conventional, FHA, VA, 203k loan etc.) a given buyer may have many questions and a few things to learn. Consulting with more than one lender allows you to compare interest rates and loan products. This way, one gains an understanding of the process and moves forward confidently with financing.
Q: My agent thinks I should lower the asking price on my house, but I want to wait it out. How long should a seller wait before lowering the price?
Ben: Well, how long has your home been listed? Have you had any contract-level interest in that time? Why do you "want to wait it out"? Is it possible staying on the market at the current list price will increase buyer interest? Remember, you have tasked your Realtor with the job of selling your home at the best possible price in the shortest period of time. Given your agent has broached the issue it is possible your home could be on the market for a period longer than your agent thinks necessary.
Pricing depends on so many factors: property condition, location, comparable sales in your area, market conditions, a seller's personal or financial circumstances, etc. Some sellers and their agents agree on a pricing structure before listing a home for sale. In this scenario you first list at one price for an agreed upon period of time. If there is little buyer interest within that time the list price can be reduced to a second agreed upon number or by an agreed upon percentage. Ultimately you do not want your list price to drive prospective buyers to other properties that appear to hold greater value at a lower price.
Its important to realize market value of a given property can fluctuate based on comparable sales each day and week. Ask your agent to review recent sales with you and note any differences between the "original list price" and the "close price". Check how that difference impacted the days-on-market. Do you see a pattern of diminishing returns? On average, did houses with price reductions take longer to get a contract and sell at a lower list-to-close-price ratio?
As a seller in a competitive market its possible your pool of potential buyers are smart and experienced home owners who may own more than one home concurrently and have been through this process before. If, on the other hand, your property is expected to attract first-time home buyers or investors but has not, it could be those buyers are finding other properties in your area that are similar and better priced. In either case an examination of current sales data with your agent will reveal if your list price needs an adjustment.
Q: Our financials are solid so there isn't a problem there but twice we've missed out on a house because the sellers went with someone else. What can we do to stand out from the crowd?
Ben: What are "solid financials"? Are you putting down 20-50%? Are you a cash buyer? What is your debt-to-income ratio? What is your price range? In what neighborhoods are you looking? It sounds like some houses in your preferred areas have shorter days-on-market and get multiple offers meaning buyers are competitive and ready to act.
Not knowing more about your particular situation it's hard to provide an accurate answer given there can be so many variables at play. I'm sure your Realtor has told you the DC area is a seller's market with remarkably fewer properties for sale. Real Estate Business Intelligence (RBI) reports the DC area experienced a drop of over 4,000 listings since January 2012, the metro area has the lowest housing inventory since 2005 and DC buyers are "facing the stiffest competition since 2006".
As you may already know, low inventory forces buyers to compete for fewer available properties resulting in multiple offers, cash offers, escalation clauses, higher close prices, tightening list-to-close-price ratios, and shorter days-on-market. In addition, you may be competing with investors. As The New York Times reported last week, many investors have been outbidding owner-occupants and have a financial advantage as cash buyers.
There are at least five levels on which you could re-evaluate your search:
• Price: Is the property you seek realistically available in your price range? Are you able to offer list price or above to compete with other buyers who can?
• Property Type: Some buyers have adapted to the market by considering the purchase of a condo or smaller townhouse as a practical alternative for now, given buyer competition is increasingly pushing home prices higher and out of reach.
• Search Area: Some have adapted by expanding their search to include a wider range of neighborhoods.
• Contingency: Some buyers are willing and able to strike contractual contingencies such as financing and home inspection. Remember that contingencies protect the buyer. While a home inspection is advised some forego this option to keep their offers competitive.
• Time Frame: Another option is to take a brief break from your search, wait for the inventory to refresh and then start looking again.
I advise you stay resilient and persevere. I also suggest discussing your options with your Realtor for ways you can adapt to the current DC market.
Q: What are the best neighborhoods to buy in right now if I know I want to stay in the house at least five to seven years?
Ben: Quick answer? It's all good?but there are no guarantees. It's not possible to know what our local real estate market will be doing in five to seven years. The best way to learn how certain neighborhoods are doing is to contact your Realtor for current and past sales data in the areas of your choice, understanding that these statistics may not be an indicator of future performance. If you do not have a Realtor talk to a few agents for their input.
Some of the more popular neighborhoods include the H Street Corridor, Trinidad, Eckington, Bloomingdale, Truxton Circle, Shaw and Petworth to name just a few. However, there are no guarantees on how particular property types and neighborhoods will perform in five to seven years time. Should you buy a condo in Shaw or a townhouse in Trinidad? Ultimately this is your decision. Just try to make the best choice based on actual sales data provided by a real estate professional.
Q: What is the most expensive house you've ever seen a first-time homebuyer purchase?
Ben: The most expensive house one of my first-time home buyer clients bought closed at $880,000. In my experience first-time home buyers are generally within the $250,000 to $500,000 price range, although there are exceptions. I'm sure my Realtor colleagues could provide examples of even higher purchases. Of course nothing beats Ekaterina Rybolovleva, daughter of Russian billionaire Dmitry Rybolovlev, buying an $88,000,000 condominium at 15 Central Park West in Manhattan.
Q: Houses go off the market so fast. What is the best way to find out what is still for sale (some of the search engines are almost always behind the times).
Ben: Online real estate search engines can overstate housing inventory and yield search result inaccuracies. For example, some properties listed as "active" might actually be under contract, sold, expired or withdrawn.
In Washington, DC, Maryland, and Virginia Homes Database is the best source to obtain straightforward and accurate listing data. This site is the public component of the official multiple listing service for the DC area known as Metropolitan Regional Information Systems (MRIS). Homes Database includes all properties listed for sale by licensed real estate brokers and is a trusted and accurate source for consumers.
Your best bet? Contact a licensed real estate professional (or as many as you wish) for a market consultation. Real estate is a local phenomenon. A Realtor with knowledge of the local housing market is better suited to accommodate your specific needs. Work with someone who not only understands your search parameters but also has access to the most accurate sales statistics available from the local multiple listing service.
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