As with the rest of the metropolitan area – and most of the country – the real estate market in 22309 this year has taken some hits to the chin. No significant change in performance is now expected until after the fall elections, which means there should be a continuing buyer’s market into 2012. However, some important changes to the way real estate business is transacted in Northern Virginia will begin to affect buyers and sellers as soon as the new year begins.
Changes in 2012 – Buyer Beware!
The Northern Virginia Association of Realtors (NVAR) is introducing a new contract effective January 1, 2012 that is intended to streamline the legal process and minimize those last-minute surprises with home inspection items.
Some changes are stylistic – moving some boilerplate language to the addenda, such as the financing language, and making the font larger so that it is easier to read.
The most substantive change relates to the condition in which a seller conveys a property – paragraph seven. In the past, the seller transferred the property “broom clean” with the utilities working. The seller warranted that the major systems – such as furnace, air conditioning, electrical and plumbing – were in the same working order on settlement day as when the contract was ratified or agreed to by both parties. In other words, unless the seller had specifically stated that something was not in working order or was “as-is”, the seller was expected to deliver these same systems in good working order at the time of settlement.
The new paragraph seven underscores the buyer’s responsibilities to inspect and investigate and lessens the responsibilities of the seller. From NVAR’s “Summary of Revisions," the new language is explained (emphasis added):
“The principal change is that the property is to be conveyed in “As–Is” condition, with optional inspection contingencies available. The Seller is no longer required to provide any warranty as to the condition of equipment, appliances, or major systems by default. Purchasers are encouraged to include a home inspection contingency in order to assess the property condition and to negotiate items to be repaired. But if the Purchaser declines the opportunity for inspection(s), the Seller’s obligation is simply to deliver the property in substantially the same condition as of the date specified in the opening sentence of this paragraph.”
All homes in Virginia are sold with the warning “caveat emptor” or “buyer beware," with the onus being on the buyer to check out the property before buying it, which is why most people schedule home inspections.
This new contract is still evolving and additional language changes may occur even after the new year, according to sources at NVAR. This means that buyers and sellers will need good advice as they enter contract negotiations in 2012. This change means that sales negotiations will include home inspection items during the initial phase of contract acceptance. The path ahead is uncertain, but this change is intended to make the overall home buying and selling transaction easier.
All the numbers aren’t in yet, but we do know that 2011 has been a challenging year for real estate in 22309. Overall volume is down from last year and comparing November performance over the last several years, it is lower than 2008 levels, which was the first year of economic recovery after the “crash”.
One challenge in our area has been for sellers to lower their expectations when they establish their list price. The average sold to original list price ratio for November was 92.75%, which means that sellers have accepted about 7% lower than list price. One year ago, the ratio was higher and sellers were getting much closer to their asking prices.
As list prices have adjusted downwards, sold prices for all properties combined (this includes condos, single family homes and townhouses) have experienced a slow and modest increase. There was a slight increase in sold prices in November, compared to the previous month. It is a small positive sign.
While four bedroom, single family homes in the $200,000-$1 million range are the top sellers in 22309, the condo and townhouse market below the $400,000 price point has been the hottest for cash buyers. Looking at all of the buyers for November, one third used a Veterans Administration loan, 23% utilized cash, 23% conventional loans and 14% used FHA financing. However, VA loan limits are scheduled to decrease substantially on December 31, from just over $818,000 to $625,500 with no money down. According to PHH Home Loans, after the end of this year buyers will need a 25% down payment if they use a VA loan to finance more than $625,500.
NAR Revises Numbers
One final point of note is that in December the National Association of Realtors re-benchmarked their statistics for home sales nationwide between 2007 and 2010, producing a four-year average decline of 14%. Of course, the numbers you’ve received in this column are from the MLS (Multiple Listing Service) and have always been accurate. For those of us realtors “on the ground”, the revised NAR numbers come as no surprise.
Why is NAR making the revision? NAR was previously using records from county deeds after sales were recorded that meant some discrepancies could arise, such as fewer for sale by owners (FSBOs), and some double counting of sales as investors “flipped” foreclosures and short sales.
Stay tuned for reports of what will certainly be an exciting year ahead in real estate.
I wish all Patch readers and their families a Happy New Year!
November 2011 Real Estate Statistics, RBI
Total Sold Dollar Volume
Median Sold Price
Avg Sold Price
Avg Days on Market
Avg Sold to Orig List Ratio