Searching for an affordable home in a tight market

By Michele Lerner,

Purchasing a home in the Washington region is tougher than ever with more buyers in the market seeking to take advantage of historically low mortgage rates and fewer properties for sale — particularly in the $300,000 to $500,000 range.

But it’s not impossible. For Jason Spear and his wife Domonique Williams, like others who managed to find a house within their means, it meant making trade-offs and stretching their budget a little.

“Domonique and I both work in the city and were renting in the city, so we wanted to stay in D.C. but everything in our budget was too small or not in a great location,” says Spear, a 35-year-old public affairs specialist for a government agency. Williams, 34, is a museum educator for the National Children’s Museum.

“We found out Domonique was pregnant while we were looking for a home, so that changed our priorities a little,” says Spear. “My new priority . . . was to be in a location where we could live on one income if we needed to. We ended up spending just above what we wanted to pay and just below our preapproval.”

According to Bright MLS, 2020 was the tightest housing market on record in the D.C. region, with just 1.3 to 1.4 months’ supply of homes for most of the year. In December, that supply fell to an all-time low of one month, which means that if the pace of sales stayed the same and no new homes were listed for sale, the entire supply of homes would be snapped up within 30 days.

When the couple started looking for their first home in November 2019, they obtained a preapproval from a lender and contacted Ericka S. Black, a real estate agent with Coldwell Banker Realty.

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Spear and Williams spent about five months looking for a home and ended up widening their location search and increasing their budget to become homeowners.

The couple purchased a 2,200-square-foot single-family home in Suitland, Md., with four bedrooms and three full bathrooms, each with a bathtub, for $339,900. The house also has a fireplace, a garage and a backyard.

“It’s a competitive market out there, especially for homes in a lower price range,” says Black. “Jason’s goal was to spend $275,000, but I educated them on the difference it could make to go up in budget even just by $10,000. It wouldn’t make a big difference in their monthly payment spread out over 30 years and could get them a little more space.”

In addition, Black helped Spear and Williams recognize that buying a single-family home meant the couple did not have to add condominium or homeowners association dues to their budget.

“It helped us not to get too caught up in the location,” says Williams. “We’re on the border of D.C. and it takes us about the same amount of time as it did before to get to places in the city, but we were able to find something much bigger and better than we could in the city.”

Financial preparation

Mickel Rambus, 37, a move-up buyer, worked with Darnell Eaton, a real estate agent with Century 21 New Millennium, to find a larger home that met her requirements.

“Darnell really listened to me and understood that I’m a proud D.C. woman who wanted to stay in the city,” says Rambus. “I work in Southeast and wanted to be close to my job or to a Metro station or direct bus route for an easy commute. I wanted off-street parking or free parking that didn’t require a permit.”

Rambus, who works for the Navy Department, has a side business making shea butter products, so she wanted some extra space for her business and a backyard or balcony. She initially lost the townhouse she eventually bought in a bidding war against eight other offers.

“I was outbid again on a similar house, and then Darnell called me and told me the first one was back on the market so I jumped on it,” she says. “He had already started the paperwork for my offer because he knew I wanted it and we had to move fast.”

Rambus raised her offer by $10,000 to $365,000, but that was still below her $400,000 preapproval. She loves her three-bedroom, four-bathroom townhouse, which gives her the space for an office and guest room. Rambus has about 100 plants, so having enough light for them was also important.

“It has a balcony, a nice kitchen and even a garage,” she says. “I got more space than I needed and I can walk to a grocery store. I compromised because it’s not near Metro, but it’s near a bus stop.”

Rambus says she preferred visiting homes by appointment when she was searching, instead of during an open house where she might be distracted by other buyers.

“I can be loud and obnoxious sometimes, but I want to live in a place that’s quiet and comfortable and still be able to get to where other people are,” says Rambus.

Taking your own advice

Will Hirzy, 30, and his wife, Katie Bishop, 27, didn’t have to look far for a real estate agent when they became first-time buyers: Hirzy has been a real estate agent with Redfin for five years.

“Katie and I were renting in the Van Ness area of D.C. and planned to save for a 10 percent down payment and buy in late 2021,” says Hirzy. “But then we realized that interest rates were so low that it made more sense to buy in 2020 with just 5 percent down.”

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The couple’s budget was $400,000 and they hoped to keep their mortgage payment close to their rent payment.

“We didn’t want to leave D.C., but in our budget we knew we could probably only buy a condo that we would live in for a few years,” Hirzy says. “We ended up buying a single-family home in College Park [Md.] with about 2,000 square feet. It has four bedrooms and two full baths and a nice yard.”

Hirzy and Bishop looked at homes for about one month before they purchased their home. At first, they looked for less costly homes that needed some renovation but decided that while they are both working at home a remodel would be too disruptive.

“We ended up having a nontraditional wedding this summer because of the pandemic, so our in-laws helped us with cash for the closing,” says Hirzy. “We worked with a good lender who did all the underwriting on our loan ahead of time so that we could waive the financing contingency safely.”

Flexibility and patience

For Judy and Jack Mark, retired doctors who moved to Florida from Long Island two years ago, the pandemic led to a major life decision to buy a second home in the D.C. area.

“Our plan was to live in Florida most of the year and divide our summers between traveling and visiting our kids and grandkids in Maryland and Colorado,” says Judy, 67. “Because of covid-19, we spent last summer hot and isolated and decided to buy a second home near our daughter in Rockville.”

The Marks consulted Suzanne Parmet, a real estate agent with Compass, to explore their options with a budget of $300,000 or less.

“We thought maybe we’d like Annapolis but realized it was too far because of traffic,” says Judy. “We liked Bethesda because of the walkability, but it was too hard to find anything in our price range. We wanted two bedrooms so our grandkids could spend the night and we hoped for direct access to the outdoors because we have a dog.”

Eventually, the couple chose a two-bedroom condo in Leisure World in Silver Spring, Md., with 1,300 square feet and a large terrace that cost $329,000, including the furniture.

“We didn’t intend to buy in a 55-plus community, but this place is in good condition and has nice amenities,” says Jack, 68. “We have a view of a stream, and we’re on the second floor, which makes it easy to take the dog out.”

Judy says that their agent’s neighborhood knowledge was valuable since they are not as familiar with Maryland.

“What helped us stay close to our budget is that we were really flexible,” says Judy. “When what we thought we wanted wasn’t available, we adjusted our priorities to what was available.”

Practicality

Aurelian Braun Lauer and her husband, Matt Lauer, 29-year-old first-time buyers in Manassas Park, Va., planned their purchase so carefully that they only looked at six homes and had their first offer on a home accepted. The couple, who have a 2-year-old daughter and a new baby on the way, worked with real estate agent Kara Chaffin Donofrio from Long & Foster Real Estate.

“We watched the market for months to see how fast things were selling and whether they were selling for more than the listing price,” says Braun Lauer. “We deliberately rented a home with a flexible lease so we could move fast when we were ready. We chose Kara because we wanted an agent with a lot of experience in this highly competitive market.”

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The Lauers were in a bidding war for their townhouse with seven other prospective buyers.

“We offered $320,000 and an escalation clause, so we got the house for $328,000,” says Braun Lauer. “We waived the contingencies and just had a ‘take it or leave it’ home inspection after our offer was accepted.”

Braun Lauer, a stay-at-home mother, has a side business selling handmade stationery that she now runs from a studio in the basement of the 1,600-square-foot three-bedroom, three-bathroom townhouse.

“My husband works remotely now, but his office is in Crystal City so we chose a neighborhood where he can walk or bike to a VRE station,” says Braun Lauer. “We looked at single-family homes in our price range, but they all needed too much work, and we didn’t want a condo because condo fees are higher than HOA fees. The townhouse is perfect.”

Location over condition

Carrie Banachowski, a 58-year-old business manager for the Girl Scouts in D.C., calls herself a “serial mover.”

“If it hadn’t been for the pandemic, I don’t know that I would have moved this time,” she says. “I was living in a townhouse in Clarksburg [Md.] for three years, and my commute to D.C. was awful. My kids are grown, and I realized that I didn’t have any sense of community in Clarksburg and didn’t know anyone there.”

Banachowski wanted to move to Maryland’s Washington Grove area, a small community where her mother lives that has mostly historical single-family homes. Her townhouse sold within days, so she moved in temporarily with her mother and hired Parmet, of Compass, to help her buy a house under $500,000.

“I realized that I didn’t care about a shiny new house anymore, I just wanted to be in that neighborhood,” says Banachowski. “I found a house four doors away from my mother where the owner had moved into an assisted-living facility and asked the owner’s son if I could see it just to find out if I was interested.”

Banachowski waited for the house to go on the market because she felt that was fair to the family.

“I was in a bidding war and had to escalate my offer, but I got it for $495,000,” she says. “I did my own home inspection and fixed the roof, the chimney, some electrical items and appliances before I moved in. I’m living in a 1960s house with a faux brick vinyl floor in the kitchen, but I’m happy with my sunroom and my yard, and I’ve already met a lot of nice neighbors.”

Banachowski says she will eventually do more upgrades, but for now she is thrilled that when she goes into her office occasionally her commute has been cut in half.

Extra cash sealed the deal

For Patrick Lee, a 31-year-old software salesman, and his partner, Katie Peters, a 32-year-old quality assurance specialist, the desire to move out of their separate rental homes was accelerated by her pregnancy.

“I’d been saving for a 20 percent down payment and then we decided it was time to buy since we’re starting a family,” says Lee. “We hired Joan Reimann, a real estate agent with McEnearney Associates, to help us and we looked at about 30 homes within three weeks.”

Lee and Peters were frustrated by the fast pace of the market. Homes that went on the market on Thursday were often already in the thick of a bidding war by the time the couple saw them on Friday evening or Saturday morning. They bid on three homes, each time over the list price.

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“We lost the first bid and the offer on the second home was accepted, but we backed out after we visited it a second time because we realized we had made the offer out of desperation and didn’t really want it,” says Lee. “We bought a townhouse in Reston [Va.] for $456,000, $16,000 over the asking price.”

The couple waived an appraisal contingency and a home inspection. Their initial offer was $445,000 with an escalation clause, which means they would go above another bidder’s offer by a specific amount. The 1,600-square-foot townhouse has three bedrooms, four bathrooms, a deck and a walk-out basement.

“We’re very close to Reston Town Center, and we realized that the location was more important to us than getting a larger place,” says Lee. “We think we got this one because we saw it right away, had an escalation clause and a 20 percent down payment. It also helped that our agent and lender have good reputations and relationships with other agents.”

The compromises that buyers must make in a tight housing market include accepting homes that have not been updated, purchasing in a less desirable location or buying a smaller home than planned, says Parmet.

“No one is negotiating on the condition of the property anymore, so if buyers have time, they should do a pre-offer home inspection,” says Parmet. “Escalation clauses, where the buyer says they will pay a specific amount or percentage above the highest offer, can be a good way for a buyer to prove they’re serious about a property.”

Besides being financially prepared, the best qualities buyers today can have are patience and persistence.

Tips for buying an affordable house in a tight market
●● Pick the right real estate agent: Interview several and choose one who listens, knows the market and has good relationships with lenders and other agents.
● Be prepared financially and with a preapproval before you shop for a home.
● Be flexible.
● Know your must-have priorities and nice-to-have features.
● Consider a pre-offer home inspection or a post-offer inspection that allows you to walk away if necessary but not to ask the sellers to fix items.
● Be ready to move quickly.
● Try to put all your spending on hold in the months leading up to your purchase so you have more cash saved.
● Have your cash on hand for your deposit.
● Be ready for a possible bidding war with your upper spending limit and an understanding of what it means to waive contingencies.