When you’re looking at properties that are tenant occupied, you’ll have to keep a few things in mind:

1) Tenants have the right to say there through the end of their lease, whether you buy it before then or not.

2) If you close prior to the end of their lease, make sure their security deposit is transferred or credited to you at the time of closing, since you’ll be on the hook to return it as their new landlord.

3) If you’re using an FHA loan to purchase the property, you must move in to the property within 60 days from closing or else you’ll be committing loan fraud (FHA loans are for owner occupied properties).

4) If you specify the property  must be vacant at the time of closing and the tenants have not moved out at that time, you will likely have a delayed closing until the seller/landlord can get the tenants out and you’ve had another opportunity to walk the property to make sure no damage has been done.

5) If you’re buying the property as an investment and you’re inheriting tenants, make sure you get copies of their current leases and their security deposits.

A term was thrown around that show that sparked a blog topic for me. One of the agents said she’d look through the MLS as well as any Pocket Listings available. Let me clarify the term “pocket listing” for you:

• A Pocket Listing is a house an owner has expressed interest in selling, but doesn’t want to formerly list the property in the MLS (like all of the houses you’ve seen on the internet or have been sent by your agent). It’s almost like an underground property, if the right people know about it or express interest, the seller would entertain the idea of selling it.

Many times, pocket listings occur for very expensive properties or well-known individuals who don’t want “looky-loos” coming by just to check out their personal belongings and/or house.

We don’t see them often in the DC Metro area, including Arlington, for properties under $1M, so rest assured that what you see listed for sale is what your options are for picking a home.

FHA: Requires a minimum down-payment of 3.5% of the purchase price

Ex. Your monthly rent is $2,100 for a 1-bedroom in Arlington
Annual Income of $110,000

You could BUY a 1-bedroom Condo for $400,000 sales price
Down-payment of $14,000
Closing Costs: $12,000 (could be partially or fully paid for by the seller)
Monthly Mortgage Payment: $2,596.17 (doesn’t include condo fee)

But here’s the real reason people buy real estate:

Renting, you get no write offs. Your annual taxes on an income of $110k are $36,300
Buying, you get to write off taxes and interest. Your annual taxes would be $30,292.75

You’d save $6,007.25/year in taxes or $500.60/mo.

If you’re a Veteran or qualify for a VA Loan, you have the option of 100% financing, meaning you don’t need ANY money to buy.

If you have enough cash to buy using a Conventional Loan, which most people think of as requiring 20% down and the only way to buy a property, you actually DO have other options:

In SOME cases, you can put down as little as 5%. You could put down 10%, but in both of these cases you’ll still have monthly mortgage insurance. If you do put down 20%, you won’t have monthly mortgage insurance (otherwise known as PMI).

So you do have several options if you’re thinking about buying. Ask ANY question you want, whether it’s directed to me or to Brian – no question is too simple, and no question will go unanswered. But you have to ASK in order to find out!

It’s me and my husband!

We’ve been throwing around the idea of possibly moving and I have had an interesting perspective shift on the process. It’s interesting to be on the other end of the advice I normally give buyers just starting out, things like must haves v. would be nice, what are the deal breakers, are you looking for location or the most you can get for your money regardless of location? The list goes on and on.

So last night we sat down and ranked a list of things we’re most concerned with, kind of like an anonymous ballot to see if we were on the same page.  Interestingly, we were generally on the same path, which makes it much easier to start narrowing down the home search. I wanted to share some items you may want to consider based on the type of property you’re looking to buy:

Condos
Older condos are cheaper and generally bigger – are you willing to get a bigger space in an older building?
Are you looking for a traditional layout or loft style?
Condo fees – are you trying to stay within a strict budget? Maybe you can rule out any building with a condo fee above $X
Condition – are you looking for something turn key or a project?
Location – do you want a specific metro stop? Proximity to other metros?

Townhomes
Some have assigned parking while others have garages – do you have a preference?
Some have a small deck, but no yard or patio – do you have a preference or is 1 a deal breaker?
Do you care if 2 bedrooms are on the top floor versus 3?
Guest parking – are there spots for guests? What about street parking?
HOA Fee v. Condo Fee – some townhomes are condo ownership, meaning their monthly fees are higher – does that play into your search and price range?

Detached Homes
What style floor plan do you like most? Open? Formal?
Is the yard important or room for a deck/patio?
Does the neighborhood and schools rank up high on your list? What about the commute?
Condition – does it need some updating?
Does the Master have a bathroom or do you share one with the other bedrooms? Do you care?
Is there a basement? Is it finished or can it be?
Is a garage a must have?
Is there an additional HOA monthly/annually? (Most Arlington homes don’t have one, but this would be something like the Reston Association fee paid by everyone in Reston)
That’s just a start! There’s so much to consider, I was reminded how overwhelming it can be…normally my standard answer to clients is “I don’t have to live there, so it’s whatever is important to you.” But I can’t use that this time! I’ll be doing some more posts from the process if we do decide to move, I am sure i’ll be learning things all over again.

Many people ask about buying new construction versus an older home, and which one is a better value. This is a multi-faceted question since there are so many things to consider. In general around the Arlington area, you’re going to pay more for a new property than you will for an older home. The average age of an Arlington home is 57 years! Most of the county was built during the 1930s-1960s, so you’ll find many, many homes that are older than that AND younger. Keep the following in mind when evaluating your options:

When Considering NEW Homes:

• Less maintenance in the early years (many come with a short warranty)
• More energy efficient
• Usually larger than older homes
• Is the neighborhood established or is it an “up and coming” neighborhood?
• Landscaping is new, newer/younger trees still have yet to mature
• Modern inside and out, lacks the old “charm” of an older home
• Is the neighborhood still under construction? Will you have nails, hammers, construction crews around for a while?
• Usually priced higher since new land is hard to come by and pricier
• If it’s a condo – as the project sells out, the last units will be priced much lower than yours (usually), may see an initial drop until the builder sells all of the units

Anyone you want.*

*Within reason

Normally, the people in attendance for an inspection include:
1) The Inspector
2) Your Agent
3) You

Your attendance as the buyer is not required, but it’s certainly preferred. If there’s more than 1 buyer, we hope at least 1 of you will be there but it’s better for both or all of you to be in attendance. You’ll learn the way the house works, maintenance tips, important shut off valves, in addition to any problems that may come up during the inspection.

Some other people may drop by the inspection such as the Listing Agent (or the agent representing the sellers), a termite inspection (if appl.), radon inspector (if appl or different from home inspector).

Since this is most likely the last time you’ll see the property before your final walk-through before closing, it’s up to you if you want parents, friends, confidants, contractors, etc. to come to the inspection as well. Just coordinate with your agent so you don’t displace the sellers for an absurd amount of time and everything you want to accomplish during this time gets done!

Homeowners Insurance Basics

There are separate policies when you’re buying a home, townhouse, or condo, but if you have a mortgage, it’s going to be required by your lender that you obtain insurance. Normally, I recommend bundling your insurance with whoever does your car insurance (sometimes they can give you discounts for having more than 1 policy).

Condo Insurance: Required to insure your personal property and any parts of your unit that aren’t covered by your condo association’s insurance policy. Your association could have one of three policies: a policy that insures only the primary building and common areas; a policy that insures your building and any items in your unit other than personal property; a policy that insures the building, your unit, and any fixtures or improvements you make to your unit. In other words, a condo insurance policy will cover the interior of your 4 walls and all of your “stuff.”

Homeowners Insurance: A policy that covers at least equal to the estimated replacement cost of your house.Determining your home’s estimated replacement cost is important because this will ultimately determine which policy options are available to you. Since it is impossible to predict today what the exact cost will be to replace your home in future, it’s important to have enough coverage to account for unforeseen circumstances. In other words, if your house burns down, how much will you need to rebuild and replace.

Home Warranty Basics

A home warranty is a service contract that covers the repair or replacement of the most frequently occurring breakdowns of home systems and appliances. This policy is an annual, OPTIONAL policy. There are several types of warranties, but the basic plan will offer you core coverage. You’ll have an independently insured contractor who handles any repair requests (you don’t have to deal with finding a contractor, plumber, electrician, etc. since they have their own list of “approved vendors”.) There’s usually a Trade Call Fee (aka deductible) you’ll pay before the warranty kicks in for coverage. Well known Warranty companies include Old Republic, American Home Shield, First American Home Buyers Protection Corporation.

Who pays for insurance and warranties? The purchaser pays for your own insurance policies. However, as part of our sales contract, the warranty is a negotiable item. The seller can pay for one as part of the agreement, or the purchaser can pay for their own.

As a seller, should I provide a Home Warranty? It’s not a bad idea to get one when your home is on the market, just in case something breaks during showings or something comes up on the purchaser’s home inspection. You can also market that a home warranty conveys with the property at the time of purchase.

Who Qualifies:

• Teachers
• Law Enforcement Officers
• Firefighters/Emergency Medical Technicians

So how do you overcome all of that to really find the right place? Evaluate the properties based on these 3 things:

1. Price
2. Location
3. Condition

Condition
You can’t control the condition of which the house is put on the market for sale. You can control what it will look like once you buy it. So are the bones good? Can you remodel it or redo a kitchen/bathroom to make it what you want? At the current price, do you have any money left over to put back into the house?

Price
There are a few approaches you can take with price strategies. You can buy the best house for what you can afford, and live with it the way it is if you don’t have extra cash to put into it, or you can buy a cheaper house and put money into it to make it what you want. Just be mindful of not overextending yourself. You don’t want to max out your budget, and be left with nothing for furnishings, appliances, etc.

Location
This is the major thing you CAN NOT change. You can’t move the house, so you have to decide between the ideal location, but maybe a not “perfect” house or a more ideal house but not ideal location. What’s more important to you: the right location or the right house?

It’s a lot to consider. If you need help evaluating your options, let me help! Email me at Laura@TheLJRGroup.com or call my cell at 703.283.6120.

Required Repairs must be in accordance with Paragraph 7 of the VA Regional Sales Contract, which reads:

The following items must be in NORMAL WORKING ORDER: existing appliances, heating, cooling, plumbing, electrical systems and equipment, smoke, and heat detectors.

Examples:

Leaky faucet – required repair
Broken Windows – not required
Broken Outlet – required repair
Loose Tile – not required repair
Leaky roof – not required repair
Dishwasher that’s leaking – required repair

So many different scenarios can arise in a home inspection, especially if the unit is a condo and you’re also trying to figure out if the repair is the responsibility of the homeowner or condo board.  Let a professional help you figure it out.