If you are looking to buy a home in Arlington, you are competing in the hottest seller’s market in the country, according to Realtor.com and the Wall Street Journal (subscription required).
Why is the Arlington, VA, housing market so challenging for homebuyers? There were 18 percent fewer homes for sale in January versus a year ago. There are a number of reasons why there are more buyers than sellers, including:
- The effect of the new Amazon headquarters (HQ2).
- Continuing low interest rates on mortgages.
- One of the lowest unemployment rates in the country.
- Homeowners are staying in their homes longer.
With the first Amazon HQ2 buildings expected to open near Pentagon City in three years, I expect that this seller’s market is here to stay. Whether you are looking to buy a condo, townhouse or single-family home, you need to know how to compete – and beat – those other homebuyers eager to purchase in Arlington.
Most homes for sale in Arlington are selling in the first weekend – especially those in move-in condition in the $800,000 to $1.1 million price range. It’s tough out there. I have clients who have written offers on homes only to complete against 35 other buyers. Although that is an extreme, expect to compete with 5-10 other offers on average. It’s absolutely crazy!
Here are 5 Tips For Buying A Home In Arlington, VA’s, Seller’s Market
1. Make your first offer your best offer. You may not have a chance to negotiate with the seller so make sure you start with a very strong offer. You’ll need to make at least a full price offer and include a large earnest money deposit.
2. Be prepared to waive all contract contingencies. In Arlington’s current housing market you’ll need to waive the usual non-price considerations in buying a home, including:
- Home inspection. A professional home inspection can help uncover things that may be wrong with a home and provide buyers with leverage to negotiate a lower price or walk away if serious problems are found. For sellers, an offer without an inspection is much more attractive. However, you can still protect yourself with a pre-inspection (see #3👇below).
- Financing. This clause protects you if your mortgage financing were to fall through. You’ll need to be confident with your lender, your mortgage pre-approval, and your ability to obtain and pay your mortgage. Otherwise, you shouldn’t be in the game.
- Appraisal. I find that even in this frenzied market, most homes are appraising for the sales price even if the winning bid is thousands over list price. Most appraisers are aware of the rapidly changing home values. However, don’t count on this. If the final sales price is above the appraised price you’ll need to cover the difference with cash. So, make sure you have the reserves to do this.
- Home sale. This makes the sale contingent on selling your current home first. This is reasonable, but know that sellers in Arlington will almost always choose an offer that doesn’t come with a home sale contingency. If you can’t swing two mortgage payments at once, be sure to include this contingency. But if there is any way to avoid it, doing so will make your offer stronger.
- Radon inspection. You can test for radon once you own the home. Remediation systems typically cost between $800-$1,200. This is not worth losing the home over!
3. Conduct a pre-inspection. Waiving the home inspection contingency doesn’t mean you can’t have a home inspection. It just means you won’t be able to use the results to negotiate remedies or price. That’s why I recommend conducting a pre-inspection: a walk-through with a home inspector who will look for any major items of concern but not test every electric outlet. These inspections are becoming the norm. Having a pre-inspection can help you feel more confident and comfortable waiving the home inspection or allow you to walk away if large capital repairs are needed.
4. Be prepared for a bidding war and to escalate. Since a winning bid often comes down to price, don’t waste time looking at homes priced at your absolute maximum. Expect that you will be involved in a bidding war and need to offer more than list price. You’ll likely need to add an escalation clause, which increases your offer price in increments up to a maximum you set. These are now also the norm.
For example, turnkey move-in ready homes in Arlington in the $900,000 price range can escalate $50,000 to $100,000 over list price.
5. Don’t be too choosy and don’t wait. When home inventory is limited, you may need to adjust the expectations for your perfect house. Constantly re-evaluate your must haves vs. your like to haves. See if there is anything you can adjust to open up your options. Can you expand your price range? Your geographic area?
And, if you are in the market for a home, make sure to see it and act as soon as possible. While many homes for sale in Arlington, VA, go on the market on Thursdays with open houses on Saturdays and Sundays and contract offers due the following Monday or Tuesday, some homes are now selling *before* the open house is held.
Be Offer Ready
When competing in a fast-paced seller’s market like Arlington – the hottest seller’s market in the U.S. – it is important to be “offer-ready.” So make sure you are working with a seasoned Realtor® who can help you win a home. Remember that the seller – not you, the buyer – is paying the real estate agent.
There are many more tips and tricks to beating the competition and buying a home in a seller’s market than I’ve listed here. If you want to know more, I’d be happy to discuss them with you.