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There was a Glee Episode on Fox (yes, I love this show and I am not afraid to admit it!) where Sue Sylvester says:

“Like the time I sold my house to a nice young couple and salted the earth in the backyard so that nothing could grow there for 100 years. Know why I did that? Because they tried to get me to pay their closing costs.”

So is it REALLY that offensive to ask for a contribution towards your closing costs from the seller?

First of all, let’s define a seller subsidy: a lump sum from the seller the buyer may use to pay their closing costs. There is no actual cash exchanged or check written…it appears as a simple line-item in your closing cost statement (known as the HUD-1). Here’s what it looks like:

Things to consider:

Sellers pay a Grantor’s Tax of $1 per $100 in Arlington County on the GROSS sales price. So they’re paying higher taxes to give you the subsidy.

A buyer’s mortgage/loan amount is based on the GROSS sales price, so your monthly payment may be higher every month, but you’ll have more cash at the time you close.

Buyers pay a Recordation Tax on the GROSS sales price, just like a seller.

So is it offensive?

In 2009, almost 47% of ALL of the sold transactions in Arlington had a seller subsidy of some sort – they can range from a few dollars to 3-4% of the sales price. We factor about 3% of the sales prices for closing costs (in addition to your down payment), that’s how many people achieve a number they ask for as a subsidy. There has been legislation that limits the amount that may be contributed by a seller, but it varies by lender.

My general opinion on the matter is that IF you need the cash – ask for it. Sellers have a number in their head they’re trying to net – if that price is $600,000 and you want $20,000 for closing costs…you may have to give an offer of $620,000 with $20,000 in closing costs, because to the seller this is still a sale of $600,000. It’s a NET value.

First off – Happy New Year

1. Inventory Will Increase. We’ve had exceptionally low levels of inventory from August 2009 to now. I know December active listings were about 2/3 of the level in 2008. I think many people were scared out of the market last year with prices hitting bottom and the floods of foreclosures. Now that prices are starting to rebound (this will be prediction #2) I think we’ll see more properties on the market for sale.

2. Prices Will Continue to Increase. In hindsight, I think the market in Arlington hit bottom in the beginning of 2009 (Jan-Feb). We’re not quite back to where we were, some pockets are better than others, but overall we’re stabilizing. Right now the lack of inventory is driving prices back up – good news for sellers who have been waiting to put their houses on the market. *It is STILL a buyers market; prices are still far lower in some areas than they were at the peak.

3. Tax Credit Extension Will Drive a Busy Spring Market. Real estate has “seasons.” The market tends to get busy in the Spring (April-early June) and in the Fall (September – October). With the First-Time Home Buyer and “Move-Up” Buyer tax credits extended to April 30, 2010, I think it’ll help stimulate more movement in sales.

4. Interest Rates Will Continue To Rise. For many lucky buyers in 2009, they locked in at an interest rate below 5% – phenomenal! We’ve already seen interest rates begin to rise since December, and I think they will continue to do so throughout 2010. I suspect the Government will make efforts to keep the rates under 6% for the duration of the year, but I don’t think they’ll stay around 5% for very long. Many local economists expect to be around 7%+ by 2011.

5. Foreclosures in Arlington, VA to Decrease. From the numbers i’ve been running, about 20% of the sales each month were either short sales or foreclosures. I think there will be shadow inventory of more properties in distress in neighboring counties – Prince William, Loudoun, parts of Washington, D.C., some parts of Fairfax – but I think Arlington will see that 20% begin to decline.

These are my top 5 predictions for the year. As the year plays out, we’ll see how I did  As always,i’m here for any questions!

Wishing you health and happiness this Holiday Season and prosperity in the New Year. I’d like to thank you for your business and referrals this past year. Your confidence in me is truly appreciated. I look forward to providing help to you and your friends with your real estate needs in 2010.

If you need anything at all, please contact me.

All the best to you & your family,

Laura J. Rubinchuk

Detached Properties (Houses)

North Arlington
Average Net Sales Price: $708,376 after 53 days
Range: $438,000 – $1,295,000

South Arlington
Average Net Sales Price: $555,216 after 75 days
Range: $260,000 – $950,000

Townhouses

North Arlington
Average Net Sales Price: $730,475 after 51 days
Range: $514,300 – $1,150,000

South Arlington
Average Net Sales Price: $375,361 after 32 days
Range: $143,100 – $622,990

1 Bedroom Condo

North Arlington
Average Net Sales Price: $294,487 after 20 days
Range: $140,500 – $380,000

South Arlington
Average Net Sales Price: $233,811 after 28 days
Range: $69,000 – $342,900

2 Bedroom Condo

North Arlington
Average Net Sales Price: $502,587 after 50 days
Range: $375,000 – $814,200

South Arlington
Average Net Sales Price: $391,044 after 32 days
Range: $205,155 – $525,000

Of the 240 sales in November, 17 were short sales and 20 were bank-owned properties…which makes 15% of the market a “distressed property.”

As a county, Arlington average prices are down less than 1% from this time last year.

As a whole, the sales volume YTD is up 116%, number of units sold is up by 167%, and the days on the market are down 48%. I think much of this was attributed to the tax-credit and initial November 30th close date (especially in the lower price properties). Due to the high number of units sold, we’re at a VERY low level of inventory.

Detached Properties (Houses)

Average Net Sale Price: $840,469 after 64 days on the market
Range: $595,000 – $1,288,000

1 Bedroom Condo

Average Net Sales Price: $301,932 after 15 days on the market
Range: $203,000 – $363,750

1 Bedroom with Den Condo

Average Net Sales Price: $404,625 after 4 days on the market
Range: $335,000 – $500,500

2 Bedroom Condo

Average Net Sale Price: $523,268 after 35 days on the market
Range: $375,000 – $637,500

Townhouse

Average Net Sales Price: $668,575 after 18 days on the market
Range: $514,300 – $785,000

I can tell you that I already have noticed a difference in the past week from the smoking ban. There are a few places in Arlington that are notorious for being “smokey,” and I know many people dread going there as a result. It’ll be interesting to see how the venues who hadn’t previously enacted their own smoking ban is effected.

If you want to check out a new restaurant or happy hour now that everywhere is smoke-free, the Washingtonian has a great Happy Hour search feature.

I was at Whole Foods in Arlington on Monday…you can see some items have been picked over, left on the shelves waiting for the desperate and willing to come pick up the leftovers…I can say that this immediately rung as a metaphor for the Arlington, VA real estate market the past few months.

Just like these shelves will soon be restocked, so will our real estate market…

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With that in mind, I would like to take this moment to thank you for all of the opportunities you have shared with me over time, and for your continued support with referrals and business. I’ve been very lucky to work with some great people this year, and I look forward to continuing my relationships with you, both in real estate and life.

So with that, I want to say wholeheartedly,
~ Thank You and Happy Thanksgiving ~

Sincerely,