DC Transfer and Recordation Taxes Explained

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calculatorThough less complicated than Maryland, DC recordation taxes (a.k.a. transfer taxes) are two-tiered.  Buy a house for under $400,000 and you pay roughly 1.1%.  At $400,000 and above the rate jumps to 1.45%. Each.  Buyers and Sellers both have the privilege of paying this tax.*

So, if you are buying a house in the District for $350,000 the math works like so: $350,000 x 1.1% = $3,500.  Both the buyer and seller will pay $3,500 for a total of $7,000 going to DC.

If you are purchasing something for $600,000, the math works like so: $600,000 x 1.45% = $8,700.  Both sides pay the tax, with a total of $17,400 paid to DC.

Big difference.  If you’re looking to purchase property right around $400,000, try to keep it just under the $400K mark.  It’ll save you @ $1,400.

For certain borrowers whose income allows it, there are tax abatement programs in DC that can save Read more

5 Things Every Homebuyer should Know…

5 things a homebuyer should know

5 things a homebuyer should knowJohn Maxfield of the Motley Fool has written an interesting article highlighting stuff that homebuyers should know… but don’t always. In a nutshell, they include:

  1. When you buy a home, you’re making two purchases (this is one of my favorites)
  2. Homes are like people — they all have problems
  3. Your real estate agent is a partner, not a salesman (Amen!)
  4. HGTV does not resemble reality, and…
  5. Always think about resale (Always!)

To read the full article (Source: Wikimedia Commons), click here.  It’s an insightful and informative read.

4 Tips for Buyers in a Smoking Seller’s Market

We’ve been complaining about a lack of inventory for a while now, but recently, the market has been behaving in a rather frenzied way, all benefiting the seller. In the close-in Bethesda/Chevy Chase/DC market, the well priced and well-appointed homes are receiving multiple offers within days of hitting the market.  Used to be that one could wait for the weekend open house.  No more.  So, as a buyer, what can you do to outwit the competition and get your offer accepted?

  1. Work with a buyer’s agent.  When it comes to identifying an agent, a lot of buyers like to sit on the fence until something attractive comes along (not the agent… the house!).  By the time they identify a hot house on the internet, and make a connection with any random agent, the house is gone.  Get someone on your side early in the game, and be prepared to jump.
  2. Get pre-approved for a loan.  It can take a day or more to secure a letter from a lender.  Sometimes that letter can make the difference between getting a house and losing a house.  Have it ready to go, and make sure to update it once it expires (usually 90 days).
  3. Keep your offer as clean as possible.  By clean, we mean non-contingent. Back in crazed market of 2005, we had one client make 7 offers before hers was the winner.  In order to be competitive, we would routinely pre-inspect a property before submitting an offer.  This allowed us to determine if the house was in good shape before submitting an offer without an inspection contingency. It was expensive and it was nuts.  Pre-inspections might be the way to go these days.  Or, a general inspection might work, whereby you make your offer contingent upon an inspection, but agree to either take it “as is” or leave it.  Financing and appraisal contingencies are difficult to make go away unless you are sitting on a big pile of money. These are all things you should discuss with your buyer’s agent ahead of making an offer!
  4. Be prepared to jump!  Yup- it’s time to drag out that old sense of urgency.  The days of casually viewing properties at an open house are gone.  If a listing comes on the market on Tuesday, waiting to see it until Friday because you want to watch the Olympics is a tactic that will not serve you well.  Ask your buyer’s agent to alert you as soon as something new hits the market, and do your best to see it that day. If you like it, be prepared to write up an offer… that night!

So, how do we feel about this uptick in activity? A little cautious, honestly. We’ve seen our share of distress among home owners that bought at the tip of the market and then found themselves in the position of having to sell just a few years later. It’s hard to advise people to pull out all stops to get a house without our crystal ball on hand. Turmoil in Europe, our upcoming election, super low interest rates, or traffic on Wisconsin Avenue all factor into local housing decisions. Thankfully, we’re operating in one of the few healthy markets in the country. We’ve almost made a full recovery from our 10-15% decline.

The bottom line is, we’re good at telling you how to get a house, but a lot more hesitant about telling you whether or not you should get it.

Perhaps more homes will hit the market once September rolls around?  Hard to tell.  But for now things are moving at break neck speed.  If you are searching for housing in the Bethesda/Chevy Chase/DC marketplace, please get in touch.  We’d love to help.

 

Moments Like This

Dupont Circle Home Owner on Settlement DayNow, what’s so special about this picture?

It’s Closing Day! See the little key in her hand? And the big smile?

It’s a perfect, if hot, day here in Washington DC, and a favorite buyer is about to conquer her favorite new place, at her favorite Dupont Circle location. What a wonderful moment.

And this is exactly why we’re doing this. Sometimes — in the more stressful moments — it helps to remember this.

Thanks, Rosie, thanks, Billy, thanks, John, thanks Tom, and thanks to everybody else who helped this transaction to sail on as smoothly as it possibly could. You’ve all been delightful!

And since it’s not always like this (anybody who buys, rents or sells real estate knows what I’m talking about), it was one of those special moments indeed.

Housing Affordability Best In Years

Housing Affordability Reaches Record High

According to the National Association of Realtors via the Daily Real Estate News/Tuesday, May 15, 2012, home affordability is at an all time high:

“Housing affordability conditions for all buyers reached a milestone in the first quarter, according to the National Association of REALTORS®.

NAR’s composite quarterly Housing Affordability Index rose to a record high of 205.9 in first quarter, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power. This is the first time the quarterly index broke the 200 mark; record keeping began in 1970.

NAR President Moe Veissi said market conditions are optimal for home buyers. “For those with good credit, we’ve never seen better housing affordability conditions or market opportunities than we see at present,” he said. “Although home prices are stabilizing and sales are rising, some buyers still have to jump through a lot of hoops to convince a lender that they are creditworthy, even for a mortgage that would be well within their means. This is especially true for self-employed buyers.”

Veissi noted home sales would be much higher if lending standards would return to normal (my take: What’s normal?  2005 normal? Do we really want that? Isn’t that what got us into trouble in the first place???)

The index shows the median-income family, earning just under $61,000, could afford a home costing $325,500 in the first quarter, which is more than double the national median existing single-family home price of $158,100. The median monthly mortgage principal and interest payment for a median-priced home would take only 13.5 percent of gross income.

A companion index measuring the ability of first-time buyers to purchase a home also set a record, with the first-time buyer index reaching 135.8 in the first quarter.

Assumptions for the first-time buyer index include a lower-income, at 65 percent of median family income, a starter home costing 85 percent of the median price, and a down payment of 10 percent. This index means the typical entry-level buyer could afford a home costing $182,500, which is well above the overall median price.

“It’s never been easy to buy a first home because of the cash required for down payment and closing costs, but conditions for first-time buyers who are able to get a mortgage have never been better,” Veissi explained.

Most first-time buyers choose a loan with a lower down payment, often an FHA-insured loan with 3.5 percent down, and some use the VA program with no down payment.

Both home prices and mortgage interest rates are expected to edge up modestly as the year progresses, but housing affordability will remain very favorable with the median-income household well positioned to afford a median-priced home. For all of 2012 the index is projected to set an annual record, averaging 191 for the year.”

Source: NAR (National Association of Realtors)

 

You Gotta Walk the Walk

When I first started out in real estate, I remember tagging along with a seasoned agent on our Tuesday Tour.  During the course of our ride, I heard about one of her clients who had found the perfect house… absolutely perfect… but for the neighbors next door.  Turned out the neighboring house was home to their daughter’s ex-boyfriend (so they discovered after they fell in love with it). The daughter nixed the purchase. So continued the search.

As a buyer, you have to walk the walk.  Or, in layman’s terms, get out and about in your possible new neighborhood and get the lay of the land. The time to do this is before you write an offer, or at least before all of your contingencies expire.

It’s your golden opportunity to see how long it takes to walk to metro. Or find the nearest park.  Is it an uphill walk to the bus stop?  Will you need to hop in your car to get to your nearest Starbucks?  Or grab a gallon of milk?  Try to be there during the times that you will be coming and going from work. Do the neighbors talk to each other? Are the streets backed up with traffic? Is there a place where people gather to let their dogs play?  Is there a daycare center near by? Does your daughter’s ex live next door? Or, your ex?!

Most importantly, you should talk to the neighbors.  See if there is anything going on in the neighborhood that is contentious (i.e., new middle school or hospital expansion) or controversial. Ask if there are any nut jobs on your “new” block.  I had one client move into their new home only to find that there was a really troubled teen just 3-doors away.  Eventually the kid moved, but for a couple of years he lurked. Another client moved onto a block only to discover that it was the preferred short-cut for overflow traffic heading north on 355 at rush hour. You don’t get that sort of info on a single Sunday open house.

On the flip side, I once heard of a crafty buyer paying some bums to hang outside a Dupont Circle Sunday open house in order to scare off the competition.  Can you imagine!  Again, a single Sunday shouldn’t be the criteria upon which you base your house-buying decision. Invest a little of your time and hang out… as much as you can.

And remember, please, that what you deem important might not be such a big deal to me.  It’s not that I’m insensitive, but everything is subjective.  It pays to do your homework.  As your agent, I’m pretty good at finding houses.  But I’m not so good at sniffing out barking dogs or brash neighbors.  And, even if I were, that barking dog might melt your heart some day, and the brash neighbor could turn out to be your best buddy. Life’s a gamble.

When making the largest purchase of your life, a little due diligence can pay off.

 

10 Mighty Good Reasons to Ditch Your Real Estate Agent

Some might find it a little odd that we are promoting reasons to fire your agent… on our website. But, good advice is often hard to come by (and we’re full of it)!

Not all real estate relationships are a good match. Sometimes there are compelling reasons for parting ways with your agent. Here are our top 10:

  1. The Yes Man (or Woman). Some agents “buy” listings, meaning they will take a listing at any price just to win it. They figure they can always lower the price down the road when it doesn’t sell. It’s a silly business plan. We don’t get paid until your house sells, so it’s in our best interest to provide you with the best pricing advice, period. If an agent comes in with an inflated price, or agrees to your own ludicrous one (no disrespect, Seller), make sure they have the chops to prove it. Pricing a home isn’t a science. That said, demand to see recent comps and ask a lot of questions.
  2. Length of Service. This one might surprise you. Experience counts. But so does attention to detail, enthusiasm, and follow through. We’ve had dealings with some very “experienced” agents that were nightmarish, and delightful transactions with some agents in the green category. So, you shouldn’t necessarily shy away from a newer agent. We were all new, once.
  3. The Know-it-all. Don’t you just hate being with people who claim to have all the answers. Real estate is an evolving, ever-changing practice. Cati and I have been in the business for almost 30-years combined, and trust me, we don’t have answers to everything. Occasionally we have to ask… and we’ll let you know if that’s the case.
  4. Do you click? Sometimes people just don’t mesh well. Real estate transactions can last a long time. Be honest with yourself (and your agent). If it’s not working out, cut the cord and move on.
  5. Can you find your agent? Quite often we get calls from buyers wanting to see our listings. Sometimes, with a little digging, we learn that they already have an agent, but said agent is vacationing in Bimini for the next 2-weeks, and can we let them in? For goodness sake! Make sure your vacationing agent has a back up plan. For that matter, make sure your agent returns your phone calls and e-mails in a timely manner. Things are competitive out there, folks. You need someone who can react quickly.
  6. Market Updates. Anyone can send them. Heck, you can set them up yourself now with all of the Search Engines out there. What you really need is someone to cull through the batch and pick out the ones on which you should focus. We do this obsessively. Our goal is to let you know when to JUMP TO IT.
  7. Location, Location, Location… and we don’t mean this in the traditional way. Where does your agent live? Where do they typically practice? If they live over in Fairfax County, VA, chances are they can’t point you the way to the nearest coffee shop, let alone elementary school, if your search is focused in on Bethesda, Maryland. Hire a local agent and soon you’ll know the ins and outs of the town.
  8. It’s a rather Zen-like thing to say, but think of us as your Guide… not as your Dictator. If you’re selling a house, you set the price – we merely advise (sometimes quite strenuously). As a buyer… you get to choose the house, not us. You should never feel guilted into putting an offer in on a house, or pressured to live in a particular neighborhood because the realtor says so. If you do, it’s time to run.
  9. It’s our job to take you through the steps. Sometimes we get rushed for time and race through the signing of an offer… but we’ll always try to summarize what you are signing and why. If you’ve got an agent with a “sign here” mentality, be very careful.
  10. It is our duty to look out for your best interests. Always. We’ll look out for you as we negotiate the terms of a sale, work our way through inspection contingencies, or discover irregularities with title. If an agent brushes aside some of your legitimate concerns (should I be worried about a wet basement? Or a neighboring fence that sits on my lot?, etc.), challenge them. If it doesn’t ring true, chances are, it ain’t right.

So, if you’re feeling like the pained guy in the photo, for goodness sake, ditch your agent.

And if we can help answer any questions about buying or selling, or administer some friendly advice about real estate, please give us a call. We’re here to help.