Bidding wars are heating up, often with escalator clauses, for sought-after listings in Northern Virginia

January 20, 2013 — I’m seeing them more frequently with each passing month. Not only are more attractive and accurately-priced listings for single family homes, townhomes and condominiums drawing several offers, we’re finding more buyers willing to include escalator clauses.

Multiple offers - images

Multiple offers on the sale of your home may bring a few unanticipated challenges. CREDIT: Activerain

Escalator clauses were a common feature of bidding contests in from 2003 through 2006 throughout the Metro Washington, DC area. With notable exceptions, one had to include them in their submissions on top of matching the asking price.We may not be quite there yet throughout the entire DC region. But we may be there soon with homes for sale that have good locations, have been kept relatively up-to-date and are priced realistically to begin with.These factors in the Northern Virginia, DC and close-in Maryland suburbs figure to play even stronger roles in 2013 and beyond:1) pent up demand

2) low interest rates

3) a steadily improving economy, and

4) the stable federal and contracting workforces.

Average home prices in Northern Virgina home rose 13% year-over-year in 2012, that’s the most drastic increase in more than six years.

If you find yourself competing with other others, first understand how escalator clauses work. Don’t go it alone. Working with a Realtor  you trust can keep you from overpaying or making some other mistake you’re bound to soon regret.

It is quite possible that deploying an escalator clause might needlessly inflate the selling price. That’s great if you’re the seller, not so if you’re the buyer.

A contract might say something as simple this:

“In the event of multiple contract presentations for the property located at 12 Main Street, I hereby increase my purchase offer by $5,000 above any alternative offer, providing that my maximum purchase price shall not exceed $650,000.”

If an owner receives several full-price offers, the details of their escalator clauses (e.g. any maximum offering price) should push one on top of the others. Before you choose any such option, however, it helps for sellers to look at which offer represents the best chance to close, especially if the owner is in a hurry to sell.

At one extreme, the best offer might be an offer with no contingencies, such as need for mortgage financing, the sale of an existing home, and an inspection of the property for sale. (Remember, home inspections still make sense so you at least know what your getting yourself into.)

At the other extreme, the escalator clause might come with a a few strings attached, attached, e.g. a faster than normal closing to register children for the next school year.

Here are a few examples of what can happen with escalation clauses from the Northern Virginia Association of Realtors, of which I’m a member.

Please call me at 703-593-9432 if you have any questions. And be sure to mention you read this on my blog.

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Help ensure home appraisers in Northern Virginia and Montgomery County, MD have ALL the data they need

June 26, 2012 — I often get questions about appraisers not fully appreciating the rising value of  homes for sale in parts of Northern Virginia and Montgomery County, Maryland. It’s no wonder because more mortgage loan officers and RE/MAX colleagues are sharing experiences of appraiser reluctance to report local appreciation.

A home sale contract does not have to be jeopardized because the appraiser does not have — or does not collect — all the relevant facts. CREDIT: TotalMortgage.com

The impact on buyers and sellers can be significant and maybe even kill a deal. When an appraisal comes in much lower than the mutually agreed-upon contract price, the buyers typically need to revise their loan request. That could mean having to renegotiate the contract price with an unhappy seller. What’s worse, this may not even be possible.

Sometimes the appraiser will do his or her job but experience push-back from the appraisal management company that hired him to “revisit” an upward adjustment, e.g. get rid of it.

A recent poll of members of the National Association of Realtors fthroughout the U.S. found 33 percent reported appraisal problems. This is the single most important valuation obstacle to seeing a sustained recovery in regions such as the Greater Washington, DC area where we have multiple economic indicators that justify rising home prices.

The bottom line: make sure agents on both sides of the transaction have accurate data on “comparable” sales or pending sales. This can demonstrate how a market is improving, especially over the past three months. Make sure the appraiser sees that data. I do this EVERY time for my clients.

Previewing homes for buyers – here’s how I do it

May 14, 2012 — I am often asked what I do when I preview homes for buyers. How do I know whether a home comes close to what they would consider buying?

I start by conducting a thorough inventory of what they want and what their needs will likely be for the next 5-10 years.

I enjoy previewing homes, especially when I find a matches that make complete sense for my clients. CREDIT: The Andy Advantage

– Where would they like to live and why?

– What can they prudently afford?

– Are there any family additions in the offing?

– Do existing children need a big back yard?

– How important is close access to the Washington, DC-area’s Metrorail system?

You get the picture.

With that information in hand, on my own I preview qualifying homes and schedule visits with my clients I think are worth showing. As we walk through each one, I watch and listen closely to what they like and what they don’t, especially if there are any show-stoppers such as only a one-car garage. After that, the responsibility falls to me to ‘home in’ on properties that meet at least 80 percent of their needs.

With that I place them on a “drip” of homes that might meet most of their criteria that they receive via email as frequently as the homes materialize in the regional Metropolitan Regional Information Systems, or MRIS

In the early going, most of the homes that pop up may miss the mark. But as I sharpen the search criteria, this is a very efficient way to get a quick bead on properties as they are put up for sale.

On a parallel path, I research and visit neighborhoods to get a first-hand sense of the location. I might get in touch with agents who are active with listings in those neighborhoods to let them know of my clients’ interests.

Whenever a good prospect materializes, I preview it and quickly relay any relevant information that my client should know. I don’t recommend taking a client to see a home unless it meets that 80% threshold.

In the type of market we’re experiencing now in Northern Virginia and Montgomery County, Maryland, timing could be integral, perhaps critical, to submitting a contract that can win the next house of your dreams.

For a taste of how I preview a home, watch these previews of homes in May 2012.

Short home preview excerpt (1:53);

Long home preview excerpt (3:46).

In the shorter version, watch for what appears to be at first an excellent match  . . . until I peak through the sliding glass doors in the kitchen.

I welcome your comments!