DCMetroHomeBlog.com

The Heating Season is Upon us!

Here we go with the “Winterize your Vacant Home” 2012 edition.  Sadly, this nice warm fall is bound to end one day.

Late October/early November is considered the beginning of the heating season here in the Washington DC metro area.  If your DC home is vacant you need to either winterize it yourself or hire a pro.  The water needs to be turned off and the pipes drained.   Most people can do this themselves by turning off the water and turning on the faucets.  Don’t forget to drain the toilets.  The water heater needs to be drained and that isn’t that hard to do either it has a valve on it.  There should also be a valve to shut off the gas to it.

Boilers are another matter.   The water should be drained and I have a forced air unit so I don’t know much about boilers.  If you use a company to inspect and repair your boiler, call them.

Even if the heat is left on your home still needs to be winterized.  If the furnace stops running and the pipes freeze, trust me, the home will be destroyed.   I have seen how a home looks after a few pipes have burst and it isn’t a pretty picture.

**Bonus tip**

If your home is going to be vacant do not forget to let your insurance company know because if you have a claim, and they find out it is vacant, they may not pay out.   Insurance companies are all about collecting premiums not paying claims.

Since When is a $370k/year Income NOT Enough to Qualify for a Rental Property?

I get calls and e-mails almost every day from people looking to call the DC Metro area “Home Sweet Home”.  Many are moving from places hundreds, if not thousands, of miles away while some are just moving within the area.

I got a call last week from someone interested in renting a beautiful DC rowhouse in Adam’s Morgan for $7,000/month.  When we got to talking about the application process , the subject of Income Qualification requirements came up.

“How much income do I need to be earning in order to qualify?”

A very standard question with a very standard answer.  Most Landlords require that the housing payment ($7,000/month in this case) be no more than 30-35% of the total monthly income.  This means that someone needs to be earning roughly $21,000/month (or $252,000/year) in order to qualify.

“Great!  Between all of us, we make $370,000/year!”

I had to ask, “What do you mean … all of us?”

I came to learn that this income was the sum total of 4 adults who were looking to rent the property together.  Nothing wrong with that … it happens all the time, doesn’t it?  There was only one problem, though …

About 90% of properties listed with real estate companies will not allow the qualifying income to be derived from more than 2 occupying applicants.

I know, for the lack of a better way to put it … it sucks.  In the case of these 4 adults, the 2 highest-paid applicants earned a combined yearly income of only $190,000 (or about $15,800/month).  The numbers, unfortunately, just didn’t add up in their favor.

So what should someone do in this situation? Well, either you’d need to only look at rentals up to about $5,200/month (based on the example) OR try your luck renting directly from a homeowner who has not listed their property with a real estate company (there are plenty of them listing properties every day on Craigslist).

If you have any questions regarding the rental application process, please do not hesitate to contact me.  I’ll be happy to help as much as possible!

How to Apply for a Rental Property in DC or Maryland

If you’re considering renting a property listed on the local MLS in DC or Montgomery County, you only need to follow a  few simple steps in order to complete the application process.  These steps are:

1.)  Complete the Standard Area Rental Application

Nothing out of the ordinary – very standard information required.  One application should be filled out for each adult applicant and, in most cases, there cannot be more than 2 applicants when it comes to income/credit qualification (click here to find out WHY).  The application should be filled out completely, signed and dated.

*** Click HERE to Download the Rental Application!

2.)  Include Funds for the Application Fee

Most Real Estate companies will change a non-refundable application fee of $30-50 per adult applicant.  These funds should be in the form of a check or money order.  Sometimes this is slightly discounted if the applicants are a married couple, but not always.

3.)  Include Funds for the First Month’s Rent

This is something unique to rental properties that are listed by real estate companies.  Although the First Month’s Rent is not cashed/deposited until terms have been agreed to and a lease has been signed, these funds are due upon application … almost the same as a “Good Faith deposit”.  The reason the first month’s rent is due with the application is because these funds are used to pay Realtor’s commission(s).

Also important to know:

Processing time can take anywhere from 24-72 hours depending on the real estate company that represents the homeowner.  This timeframe can also be influenced by an employer who is difficult to reach for the purposes of verifying an applicant’s employment/income.  Sometimes it’s helpful to include additional information with the application in order to speed up the process (ie. an “Offer Letter” from an employer regarding new employment – this will often fully satisfy the employment/income verification requirement).

Once an application has been processed, presented to the homeowner and accepted then the first month’s rent will be cashed/deposited and the security deposit (usually equivalent to one month’s rent as well) will become due.  If there are pets involved then the pet deposit will become due as well.  Once all funds have cleared, a move-in can be scheduled and keys may be given to the new tenant(s).

Want more information?

This is the application process in a nutshell.  If you have any specific questions that were not answered here or maybe just want to talk about the process in general, please do not hesitate to Contact Me.

Attention Homebuyers: What to Do BEFORE Looking at Houses

Over the years, I’ve helped a LOT of Maryland/DC First Time Homebuyers and have become very familiar with the process.  One of the most exciting parts about the house-hunting adventure is actually going about from house to house … the true “shopping” experience.  Oftentimes, this is exactly what my clients wish to do from the very start, but …

… you can’t put the cart before the horse.

Truth be told, sometimes I feel a little bad for forcing my clients to put on the brakes but I reason that I’m doing it in their best interest.  After all, I can remember my rookie Realtor days when I would take prospective clients around in my car looking at houses without first taking care of the all important FIRST STEP in the process … the Mortgage Prequalification … nothing is worse than watching someone fall in love with a house only to realize shortly after that they can’t qualify for the mortgage.  I quickly learned to never let something like that happen again.

As a homebuyer, knowing exactly how much home you can afford and that the mortgage payment falls within your budget puts you in a position of power.  It also helps put you at peace during an otherwise stressful time.  And the best part is that it doesn’t really take all that long or cost anything to complete this crucial first step!

1. Please fill the form below to begin the Mortgage Prequalification process. We will be in contact with you shortly to continue the consultation. Please know that we respect your privacy and will not share your information with any 3rd parties.

Personal Information

1. Your Name(required)
2. Email(valid email required)
3. Current Address(required)
4. How long have you lived there?(required)
5. How much is your housing payment?(required)
6. Do you own or rent?
7. Own Rent

Employment Information

1. Current Employer(required)
2. How long have you worked there?(required)
3. How much total income did you earn in 2010?(required)
4. How much total income did you earn in 2009?(required)
5. Is there anything else we should know?

 

How to Navigate Through Turbulence During Your DC Metro Real Estate Purchase

If there’s one thing I’ve learned as a DC Metro Realtor since 2001, it’s that there are a number of things that can go wrong during any given real estate transaction.  With so many hands that will inevitably “touch” the transaction, there are potential pitfalls that can be attributed to the Buyer, Seller, Realtor(s), Lender, Title Company, Appraiser, Inspector(s) or even the Property itself.  My job as a Buyer’s Agent/Realtor is much like that of a pilot to a passenger airplane.  I rely on my past experience and growing real estate knowledge in order to “steer clear” of most turbulence (pitfalls) well before there’s even a chance for a small issue to turn into a huge problem.

Although the list below could be much longer than it actually is, let’s review only a few of the most common turbulence items to be aware of:

The Buyer

1. Has recent late payments on credit report.
2. Cannot locate petitionor discharge of bankruptcy.
3. Difficulty in obtaining verification of rent.
4. Interest rate increases and buyer no longer qualifies.
5. Does not properly document (think “paper trail”) additional money that comes from gifts, loans, etc.

The Seller

1. Loses motivation to sell (job transfer does not go through, reconciles marriage, etc).
2. Cannot clear up liens – is short on cash to close.
3. Did not own 100% of property as previously disclosed.
4. Leaves town without giving anyone Power of Attorney.
5. Did not complete the repairs agreed to in contract.

The Realtor(s)

1. Has no control over Buyers or Sellers.
2. Delays access to property for inspection and appraisals.
3. Does not get completed paperwork to the Lender in time.
4. Takes unexpected time off during transaction and can’t be reached.
5. Inexperienced in the particular type of transaction in question.

The Lender

1. Does not properly pre-qualify the borrower.
2. Wants property repaired prior to closing/settlement.
3. Requires last-minute second appraisal or other documents.
4. The market raises rates, points or costs associated with loan.
5. Does not fund the loan in time for closing/settlement.

The Title Company

1. Fails to obtain information from lien holders, insurance companies or Lenders in a timely manner.
2. Lets principals leave town without getting all necessary signatures.
3. Loses or incorrectly prepares paperwork.
4. Finds liens or other title issues at the last minute.
5. Does not coordinate well, so that many items can be done simultaneously.

The Appraiser

1. Is not local and misunderstands the market.
2. Is too busy to complete the appraisal on schedule.
3. No comparable sales are available.
4. Is not on the Lender’s “approved list”.
5. Makes important mistakes on appraisal and brings in value too low.

The Inspector(s)

1. Pest inspector not available when needed.
2. Pest inspector too picky about condition of property.
3. Home inspector not available when needed.
4. Inspection report alarms buyer and sale is cancelled.

The Property

1. Termite report reveals substantial damage and seller is not willing to fix.
2. Home was misrepresented as to size and condition.
3. Home is uninsurable for homeowner’s insurance.
4. Portion of home sits on neighbor’s property.
5. Unique home and comparable properties for appraisals difficult to find.

Believe it or not, I could have kept on going but who knows if you would have kept on reading.  This is why I can’t imagine what it would be like to try and navigate this maze without having someone at your side, going to bat for you and who’s been there before.

If you have any questions regarding any of this content, please do not hesitate to contact me.  I’d be more than happy to help.

How Missing a Credit Card Payment Could Cost You Your Home

It was nearing the end of November 2009 when everyone (and their sister) was making a mad push to take advantage of the first Homebuyer Tax Credit before it expired.  I was working with a nice, hardworking family who wanted to buy their first home in Prince George’s County, Maryland.  With so many things that can go wrong during a real estate transaction,  this family did everything right.  After helping them fix a few items on their credit report we found a great 4-bedroom/3 bath detached (foreclosure) property in Hyattsville, got it under contract at a discount, conducted the home inspection, had the house appraised and were anxiously anticipating a successful closing.

Then they missed a credit card payment.

I received a call from their Loan Officer about 5 days before we were scheduled to close.  I remember his words all too well, “The customer missed their November minimum credit card payment and their credit score has plummeted 100 points.  They can’t buy the house.”

They can’t buy the house!? I’d always known that mortgage companies will check a buyer’s credit score one more time right before closing just to make sure there’s no funny business going on, but after being involved in more than 100 successful homebuying transactions over the years, this was the first time something like this had ever happened to someone I was working with directly.  What had happened to them was that, essentially, they lost their house because they missed one payment.

Credit scoring, at least to me, has never quite been an exact science.  Even though there are general guidelines for having a good credit score [link], sometimes we forget the obvious.  If you are in the process between having your offered accepted and actually closing on the property, don’t forget to pay your bills. In most cases, missing one credit card payment like this wouldn’t be enough to have a buyer’s credit score drop by a jaw-dropping 100 points but this family’s  situation was a bit different because they didn’t have a long, established credit history.  They had a good credit history … good enough for them to qualify for an FHA loan [link] with a low interest rate … but it was still a young credit history.  What would otherwise be considered a small blemish was so magnified that no bank would approve their mortgage loan.

Fast forward to the present, this family and I are still in contact.  We’re doing everything we can to get their credit score up to an acceptable level and capitalize on the amazing opportunity for them to own their own home.  It’s going to take some time to heal the wound left by that one missed payment but patience, thankfully, is something I have an abundance of.  A valuable lesson has been learned and I’m looking forward to sharing with you about this family’s successful homebuying experience in the near future.

How to Price Your DC Home Ahead of the Curve

What if your market is trending quickly down or quickly up (both trends are going on right now for Maryland and DC homes and is very area-specific)?  Can this affect your pricing strategy?  Absolutely.  In both cases you might miss an opportunity to sell your home for top dollar by not keeping a careful eye on the market trends.  In a rapidly rising market, for instance, it’s a good idea to closely evaluate not just the sold properties but to look very closely at the pending sale prices and the active listings.  Based on this, a savvy seller might want to consider pricing their home more aggressively knowing that if they are slightly above the market in a very short time the market will “catch up”.

But what about the reverse, a declining market? You might think of a declining real estate market like a stock market sell-off.  In a bear stock market what tends to happen is that sellers chase the market down.  In other words, they keep agreeing to lower and lower prices just to lock in what little profit they may have left.  Believe it or not, the same is often true in a bear real estate market.  Sellers chase the market.  First rushing to put their home on the market, thus causing a buildup of an inventory, and then slashing their price just to get their home sold.

This is a dangerous position for any seller and is all too common in the Maryland and DC Real Estate market. For instance in a declining market even if they price their home competitively, within a few weeks their price maybe significantly over what more motivated sellers are asking for their homes.  Take a look at how easily this can happen with Suzy Homeowner.

Suzy would really like to sell her home in the next 60 days but, of course, she would wants to net as much money as possible from the sale. Studying her competition and relying on the advice of her real estate consultant, she lists her home for $345,000.  Based on this price, let’s take a look at Suzy’s competitive position today:

• Competitor Home A: $368,000
• Competitor Home B: $349,000
• Suzy’s Home Today: $345,000
• Competitor Home C: $345,000
• Competitor Home D: $333,000
• Competitor Home E: $329,000

She appears to be very competitively priced relative to the market.  But let’s see what happens 30 days later:

• Competitor Home A: Expired
• Suzy’s Home Today: $345,000
• Competitor Home B: $339,000 (Reduced Price)
• Competitor Home C: $335,000 (Reduced Price)
• Competitor Home D: Sold
• Competitor Home E: Pending
• Competitor Home F: $326,000 (New Listing)
• Competitor Home G: $325,000 (New Listing)
• Competitor Home H: $319,000 (New Listing)

Now that’s what I call a market transition! Suzy went from being very competitively priced to becoming the highest priced property within her price range.  As a buyer, which home would you look at last? This is a terrible position to be in and the scary part of this scenario is that in most cases, a seller like Suzy would never know it.  Why?  Well … most sellers only request a market analysis at the beginning of a relationship with a real estate agent.  Savvy agents, on the other hand, make sure to provide updated list of comparable listings every thirty days.

For your Free, No-Obligation Maryland or DC Home Evaluation Report, please fill out the information below:

Short Sale Patience is a Virtue

Of all the potential stress triggers that exist in life, you can add Short Sales to the list if you’re considering buying one.  To say that patience is a virtue in dealing with this type of homebuying experience is an understatement and I’d go as far as saying that to go into this process without a clear, realistic mindset would be to invite sure frustration and potential failure.  So if you’re looking to buy a home now that the Spring real estate market is in full bloom here in DC and Maryland, it’s almost guaranteed that you’ll be looking at your share of short sales en route to finding the right home.

But what happens if the home you fall in love with is a short sale? What should you expect?

To answer these questions lies in the following question … just what exactly is a short sale?  To keep things simple, I’d define a short sale transaction just like any other between a buyer and a seller with one key difference … there is a bank (or two) involved that must approve the offer before it can go to closing.  The reason the bank needs to sign off on the transaction is because, in a short sale, the owner’s mortgage company often stands to lose a good deal of money since the home in question is probably worth less now than when the loan was made (a very common scenario in the Maryland and DC Real Estate market).  For example, let’s say that you’re interested in a house that the current owner bought 5 years ago for $300,000 but is now only worth $225,000 in today’s real estate market.  If you offer to buy the house at this price, the bank then stands to lose roughly $75,000 (or more) which is why they must always approve the terms of a given offer.

So now that we know what a short sale is and that the bank that holds the mortgage has to approve the offer, how long can we expect this process to take in order to go to closing?  I will always tell my clients to expect to wait 60-90 days (minimum) in order to hear back from the bank whether or not the offer has been accepted. Now since that last sentence may have made you feel a little sick, I should share with you that some short sale transactions will get approved in a matter of a few weeks … but this would be the exception and NOT the rule.  As a matter of fact, there are very specific conditions that need to be present in order for a short sale to get approved in less time.  But unless these conditions are present, expect nothing short of frustration if you’re not willing to wait.

I’ve been asked many times why such a long waiting period.  The main reason is that short sales have become so common due to the economy that many financial institutions simply aren’t equipped to process them in a timely or efficient manner.  I can’t tell you how many times I’ve called a bank to check on the status of a short sale only to learn that key documentation has been misplaced and needs to be submitted again in order to continue processing.  How could this possibly happen?  Well, in many instances there simply aren’t enough staff members at the banks to handle the volume of pending short sales.  There’s a good deal of work that goes into getting these transactions to the closing table and it’s not uncommon for one bank employee to be in charge of 50 (or more) of these files which are piling up on their desk.  Think of being in a store full of shoppers but not enough cashiers …

If you’re starting to get the idea that short sales are a potential nightmare … you’re right.  That’s not to say, however, that they’re not sometimes worth the wait.  For as many horror stories that exist involving short sales, there are just about as many success stories.  It all depends on how you prepare and put your plan into action.  Whatever you do, don’t let the stress get to you.  Just understand that it’s a waiting game and make the decision that you’re in it for the long haul.