Owning a home in Northern Virginia or Washington DC has been part of the American Dream. However, nowadays it’s becoming harder to live that dream. With the mortgage crisis, higher minimum credit scores, larger down payments, and mortgage insurance premiums (PMI) are becoming more common. Fewer home buyers are qualifying for mortgages and the up front costs of home ownership has steadily increased.

There are still programs out there for first-time home buyers that offer discounted interest rates and are more lenient on underwriting standards. The Federal Housing Administration (FHA) has a good program and it’s backed on income-verification and debt thresholds. There are also first-time home buyer credits out there. For instance, one program in Washington DC states: Taxpayers who have not recently owned a home in the District may be eligible for a one-time tax credit of up to $5,000 of the amount of the purchase price against federal income tax. In Virginia, the Home Stride program helps out first-time home buyers. Home Stride is a loan program available to first-time home buyers using a Virginia Housing Development Authority (VHDA) loan product for their first trust mortgage. Home Stride allows eligible buyers to borrow up to the lesser of 10% of the sales price or $25,000 to pay down payment and closing costs. Payments and interest are deferred for the first 3 years of the loan. After this deferment period, the interest rate of the loan is 5% for the remaining 27 years of the loan. The loan has no pre-payment penalties and can be paid in full at any time.

If you are a first time home buyer, it is recommended that you consult with a real estate agent. Buyers are generally not aware of FHA and VHDA loan programs. Who knows, these programs may help you get into the home of your dreams.

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You can’t hide it from me, you love the fireplace in the bedroom, hardwoods throughout, and even the kitchen that isn’t totally decked out.  The only question left is how much are you willing to pay for them?One of the biggest obstacles when buying a home is determining what to offer.  This is because many factors come in the picture.  The interest rates, fallen prices, the foreclosure market, and the greedy sellers overpricing their homes all fall on the table.  Your agent can reassure you that you’re not going to overpay for the home.  However, you can step in and do some research of your own.  Search the market and look for recent sales.  You’re going to want to look at similar homes that have sold in the past two to four months.  If you want to get a great feel, I suggest you get in your car and drive around the neighborhood.  This will give you a more precise idea of why homes have sold for more or less than the asking price.

When looking at home data, one thing that doesn’t show up in the numbers is value.  A home’s value can increase significantly over time which makes the previous information irrelevant.  Sometimes looking at the tax records to see what the seller paid for the property can be ridiculous.  A better option would be to hire an appraiser to estimate the property’s value.  This will give you some firing power when you’re making an offer.  The appraisal may cost you $300-$400, but if the appraisal comes in at a lower value you good evidence to back up the offer.

The information on the internet is available to you but I would consult with a real estate agent who deals with these statistics on a daily basis.  Doing your research ahead of time will get you familiar with the market, but don’t count yourself as an expert just from a few web pages.  When submitting an offer, a low ball bid might insult the seller and ruin your chances on that home.  You will need substantial evidence to back up a low ball offer.  Instead of putting in a bid lower than the sales price, you may want to ask for closing cost assistance or an upgrade of hardwood flooring. 

After a home has been on the market and the price has been reduced, the seller is typically becoming more realistic.  A way to help your cause is making the offer contingent upon an appraisal.  If the home appraises for less than the asking price, the lender will refuse the loan.  The only sure way to protect yourself is having a good agent that knows that market and putting the contingencies in place.  No lender is going to give you a loan if it doesn’t appraise.

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With the home searches and home data widely available to consumers on the internet, many homebuyers are looking for homes online.  This is a big difference from 5 years ago.  Many consumers are becoming internet savvy.  However, they are not real estate savvy.  Since the information is available to everyone on the internet, there is less chance they come in contact with a real estate agent.  Buyers in this market should think about getting a real estate agent to guide them through the home buying process, especially if you’re a first time homebuyer.  There are many things that a real estate agent can help you understand throughout the process.  They have a lot of knowledge of the market, what homes are selling for, how much people are willing to negotiate, negotiating extras, what to look for on a home inspection, and help you with securing your financing.  The thing about hiring a real estate agent is that it costs the buyer no money at all.  The reason for hiring a real estate agent is that they look out for YOUR best interest.  They are not working for the builder/seller.  No matter what the sales people or sellers may say to buyers, they want the best for themselves.  So before you think you can handle the entire home buying process by yourself, consult with a real estate agent.

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Foreclosures are not what they used to be. Since the lending extravaganza, more and more Northern Virginia homes are falling into foreclosure because homeowners cannot afford to pay their mortgage. What does this mean? Well for starters, there are some bargains out there. Rewind a few years ago. You see, during the hot market, a lot of buyers got in over their heads. They thought because sellers were making big profits on the sale of their home, they would be able too as well. However, these sellers had purchased their properties when they were priced low. These homebuyers that purchased at the peak of the market had no idea it was the peak. Lenders were giving out loans to anyone during this time without proof of income or work history. Most of the homebuyers took out ARMs (adjustable rate mortgages) that would expire a few years later. These homebuyers had no idea that they wouldn’t be able to sell their home for a higher price in a few years. Fast forward a few years later. The ARM loans are adjusting and the mortgage payments are increasing thousands of dollars. What do the homeowners do that purchased at the peak who had ARMs? Some of them don’t pay their mortgage and the home goes into foreclosure. So with that being said, there are foreclosure homes that are fairly new out there. These foreclosures are in more desirable areas than observed in the past, and are getting scooped up by responsible buyers.

The increase in foreclosure homes can also hint at the bottom of a real estate market. Whether you live in the DC metro real estate market or plan to move there, a real estate professional can examine statistics to track the lowest foreclosure sales. Of course not every foreclosure is in a great neighborhood. You will find some of the best foreclosure deals in neighborhoods with new construction that sold in 2005-2006 that were priced above the median home price for that area. Most of the foreclosures in Northern Virginia are popping up in the suburb counties of Prince William, Loudoun and Fairfax, Virginia.

If you keep an eye out on the foreclosure market, it will give you a good idea of how well homes hold their value in your market. Who knows, you might find a great deal.

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I know this happens a lot with women when it comes to shopping and that’s why I never go to the mall with them.  You women know what I’m talking about.  You will go to the mall on a mission to find a pair of shoes and you come across the perfect pair at the first store you visit.  However, it’s too good to be true, so you have to go to every store in the mall to see if there is something better.  You spend an extra 2 hours strolling the mall just to find yourself coming back to the first store to purchase that perfect pair.  Although, sometimes you’re not that lucky and that pair has been swiped up by someone else.  That person realized that was the perfect pair and didn’t need any convincing. 

The reason I bring this issue up is because it has happened with a few of my clients.  In this market there are a lot of homes to choose from.  Just because there are a lot of homes out there does not mean that they’re the best homes.  With that said, if you find a home that you like, the chances that someone else likes that home are pretty high.  If you find a home that you really like, it doesn’t hurt to put in an offer on that home.  If the seller accepts the offer at the price you want then you just got a great deal.  I know it may seem too good to be true, but waiting around will only make things more difficult.  This buyers market is not going to be here forever and when it’s gone, it will be 100 times harder to get a home you like for the price you want.    

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Offers to purchase a home are most often accompanied by a check, a.k.a. the “Earnest Money Deposit” or “EMD”. The reason for this deposit is for buyers to “put your money where your mouth is”. It’s another way of saying that you’re “earnestly” intending to purchase the property.

Now the amount of the deposit is a different story. The larger the deposit, the more the seller is convinced that you really want the property. When the market is “hot” and there are multiple offers on the table, the deposits are usually larger than in today’s buyer market.

In a buyer’s market, the deposit can often be 1% of the sales price or as little as a couple thousand dollars, but you have to be careful. If it’s a must-have property, you may elect to increase your earnest money to show that you are a serious buyer. On the other hand, you don’t want to put down too much of a deposit because if you have a change of heart, you may risk losing it.

Once the contract is ratified, the earnest money deposit is put into an escrow account (sometimes interest bearing depending on closing date) at one of the listing or selling real estate brokerages. Most deals close and the earnest money funds are applied towards the buyer’s down payment and/or closing costs. If these isn’t a required down payment and closing costs are covered by credits (such as a seller subsidy or buyer agent rebate) sometimes the buyer will receive a check back from the title company for the earnest money with interest, if any.

Some sellers think that if the deal falls through, the earnest money deposit is automatically forfeited. Some buyers think that if the deal doesn’t close, they automatically get their deposit back. Needless to say, neither one is always true. Even when the failure to close is the buyer’s fault, the seller doesn’t have a “right” to the deposit as a way to punish the buyer. Nor does the buyer automatically get the entire deposit back, even when they are not at fault. It depends whether or not their are any contingencies still active and also whether they are reason for default.

If something goes wrong early in the deal, the seller may choose to return the deposit without a problem. However, if things go smoothly later in the transaction, both parties usually use common sense and negotiate a fair solution. 

99% of the time, an issue regarding the EMD is routine for a qualified professional real estate agent. The issue might be new for you, but many agents have run into an EMD situation in the past and should know how to resolve the issue fairly.

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