Sponsored

This week’s Q&A column is sponsored and written by Hope Peele of The Peele Group and McEnearney Associates Realtors®, the leading real estate firm in Alexandria. To learn more about this article and relevant Alexandria market news, contact The Peele Group at 703-244-6115 or email [email protected]. You may also submit your questions to McEnearney Associates via email for response in future columns.

Question: What is a title company?

Answer: In a Virginia real estate transaction, the buyer is allowed to select which title company they would like to use. Most buyers, however, especially first timers, don’t have a preference, and likely don’t even know what a title company does. So why does it matter? And how do you choose?

Quick Note: “Settlement” and “Closing” are used interchangeably here, as are “Title Company” and “Settlement Company”

Most likely, your trusted realtor will have one or two recommendations for a settlement company that they’ve worked with before, and have contacts that they trust to get you to the finish line.

But what does a Title Company do? To start, they typically hold the Earnest Money Deposit in an escrow account and distribute it accordingly at settlement.

Then, they get to work on the title search.

At settlement, both the deed and the title will be transferred to the buyer. The basic difference between the two is that the deed is tangible, whereas the title is more of a concept.

The deed is a legally binding document that contains a property description, so that it is clear which property is being transferred. The chain of title, however, is all the parties who have rights to the property. If there are unpaid contractor fees, for example, that contractor could have put a lien on the title. That means that they have partial rights to ownership until the debt is cleared.

A title search will ensure that there are no surprises in terms of ownership of the home, and the seller does in fact have the legal right to sell the property. The settlement company will also provide you with title insurance, just in case there is a hidden or fraudulent issue that arises after settlement.

Even though they are chosen by the buyer, the settlement company is a neutral third party who prepares the paperwork, conducts the closing with a settlement agent/notary, records the documents with the county and distributes funds at the appropriate time.

Whichever company you decide to work with, it is important that there is a point of contact who is easily reachable and responsive to questions.

Hope Peele is a licensed real estate agent with McEnearney Associates, Inc. in Alexandria, Virginia. She grew up in Old Town and currently lives in Del Ray. As a partner with The Peele Group, Hope is dedicated to guiding her clients successfully through the many-faceted process of buying or selling a home. Contact Hope at 703-244-6115. 

If you would like a question answered in our weekly column or to set up an appointment with one of our associates, please email: [email protected] or call 703-549-9292.

McEnearney Associates Realtors®, 109 S. Pitt Street, Alexandria, VA 22314. www.McEnearney.com Equal Housing Opportunity. #WeAreAlexandria

This week’s Q&A column is sponsored and written by Brian Bonnet, Senior Loan Officer (NMLS ID# 224811) of Atlantic Coast Mortgage, LLC (NMLS ID# 643114). To learn more about current mortgage rates and the home loan process, contact Brian at 703.766.6702 or email [email protected]. You may also submit your questions to McEnearney Associates via email for response in future columns.

Question: Are there loan options to help a buyer purchase and renovate a fixer upper?

Answer: Let’s face it, when purchasing a new home, most of us would prefer to purchase one with upgraded kitchens and baths, a new roof, new windows, new systems, and our favorite paint colors — oh, and in the ideal location. Most of us would also like to win the lottery.

None of those are realities for most people.

The housing market continues to struggle with a level of supply that is not keeping pace with demand. Buyers are competing for too few available houses and properties deemed “fixer-uppers” get less prospective buyer attention. However, these properties have untapped potential and should not be overlooked if a buyer is willing to take on the home improvement challenge and can identify the means to finance the effort.

As different properties require various levels of effort to improve them, the methods of financing those improvements can also differ greatly. Some buyers are flush with cash and have enough to cover a large down payment, closing costs, and improvements. Others struggle with how to meet the minimum cash requirement just to purchase a home. Just as homes differ in big and small ways, buyers need financing options that differ as well. Here are some general questions to consider.

Instead of making the down payment I had planned, can I make a smaller down payment and cover the cost of improvements with the cash I have retained? 

The smaller down payment means a larger loan, which requires a higher monthly payment. But since we are talking about fixer-uppers, the starting price for the home is presumably lower and therefore the loan amount is lower than would be the case for a home that did not need upgrades and improvements.

Can I borrow from my active retirement account to increase my cash to cover the down payment and the costs of improvements?

Most qualified retirement programs allow active participants to borrow for the purchase of a new home. The funds available can supplement or replace other savings, which can then be used to cover the cost of repairs and improvements.

Does an FHA 203K loan make sense for my particular fixer-upper scenario?

Some lenders provide FHA 203K renovation loans for home purchasers that allow them to finance 96.5% of the cost of the purchase price plus qualified improvements and renovations.

• The streamlined 203K program allows for the purchase price plus non-structural renovations and upgrades up to an additional $75,000 in cost.
• The full 203K program allows for a purchase with major renovations, up to a maximum loan amount in the Washington metro area of $1,149,825.
• The FHA programs require only 3.5% of the combined cost of the home purchase and renovations or upgrades from the purchaser.

Am I ready to take on a construction loan to turn the fixer-upper into my dream home?

Some lenders provide true construction financing, which can finance anything from a major kitchen and bath renovation to buying a vacant lot and building a new home and can be an effective method to finance the complete renovation of a true fixer-upper. Often there is great value in the “bones” of the structure and the location of that structure, but very little value in anything else associated with the property. A construction loan may be the best approach to acquiring and bringing new life to a tired, old, fixer-upper.

If you are lucky enough to find your perfect turnkey home in this competitive market, you can expect to pay top dollar for it. But savvy home buyers will tell you the best value is in properties that require some sweat equity and TLC. Keeping that in mind and identifying the best way to finance those efforts can open more homebuying opportunities in our tight housing market.

Please reach out to me or my colleagues at Atlantic Coast Mortgage to have a conversation about whether a construction loan works for your homebuying goals.

If you would like more information about financing a mortgage in today’s market, please contact Brian Bonnet at [email protected] or call 703-766-6702.

If you would like a question answered in our weekly column or to set up an appointment with one of our associates, please email: [email protected] or call 703-549-9292.

McEnearney Associates Realtors®, 109 S. Pitt Street, Alexandria, VA 22314. www.McEnearney.com Equal Housing Opportunity. #WeAreAlexandria

This week’s Q&A column, sponsored and written by McEnearney Associates Realtors®, the leading real estate firm in Alexandria, is a bit of a departure from our usual format. To learn more about this article and relevant Alexandria market news, contact us at 703-549-9292. You may also submit your questions to McEnearney Associates via email for response in future columns.

Question: When do you need a licensed contractor vs. a handyman?

Answer: There comes a day in every homeowner’s life when you realize it’s time for reinforcements. Whether it’s a leaky pipe, a new electrical box, replacing an appliance, or drying a wet basement, finding a fix starts with choosing the right expert for the job. However, not all home projects are created equally, so how do you know whether to call a handyman or a licensed contractor?

(Renters, you will call your Landlord or Property Manager!)

The main differences between a licensed contractor and a handyman are the type and size of jobs they work on, their licensing requirements, and how many people they supervise. Contractors typically work on larger projects, like home additions or renovations, while handymen usually work on smaller projects and home maintenance.

When it comes to licensing, do your research for the requirements in your area as some handyman work may require a contractor’s license. For example, there are three levels of general contractor license in Virginia, based on the size of the job being performed. The lowest level of general contractor’s license, a class C license, allows for residential contracting jobs between the amount of $1,000 and $10,000, including materials and labor, while Class A contractors perform or manage construction, removal, repair, or improvements for projects $120,000 or more, or when costs for any12-month period is $750,000 or more.

A handyman may do work that includes painting, drywall repair, window or door repair, replacing faucets or electrical outlets, swapping out light fixtures, laying carpet, hanging curtains, or installing shelves.

For smaller jobs that can be completed in a couple of hours or a day or two, homeowners can check out popular options on sites like TaskRabbit and Thumbtack — like Uber or DoorDash for home projects, complete with client reviews — or Angi (formerly Angie’s List), which also offers contractors for larger jobs. Handyman fees can be charged by the hour or per the project and generally don’t require signing a contract.

States often require a contractor’s license for jobs that cost more than a certain amount, require structural changes, or involve electrical, plumbing, or HVAC work. Sometimes the project may require a permit for work being contracted, including these examples:

• New windows. Replacing an existing window does not need a permit, but cutting a hole for a new window does. This includes new doors and skylights.
• Most municipalities require permits for siding projects whether you use strong cardboard or other materials.
• Not all fencing projects require a building permit, but cities often place restrictions on non-permitted fences. For example, in Maryland’s Montgomery and Prince George’s Counties, a permit is needed for fences 4-feet or higher while in Howard County it’s 6-feet or higher and in Calvert County it’s 7-feet or higher.
• Electrical and plumbing. If you’re installing new or removing current plumbing permits, you’ll need a permit. Any improvement project that includes installing a new electrical system also requires a permit.
• Water heater. You need a permit if you want to replace your water heater.

Who can apply for permits, expiration dates, and other details vary based on the type of permit required so be sure to check your local jurisdiction to confirm whether it will be you as the homeowner or the contractor who will apply for the appropriate permits. Regardless of whether you’re hiring a handyman or a contractor, interview a few professionals to see who fits best based on their expertise and how they answer these questions:

• How long has your company been in business?
• What experience do you have with this type of project?
• Do you have the necessary permits or licenses?
• Do you have references?
• What is the cost estimate?
• What is the timeline for this project?
• Are you insured?

Big or small, it can feel daunting to start a home improvement project, especially if it comes up unexpectedly due to damage or a breakdown. But with a bit of research and planning, you can find a home improvement professional who will work with your timeline and budget.

If you would like a question answered in our weekly column or to set up an appointment with one of our associates, please email: [email protected] or call 703-549-9292.

McEnearney Associates Realtors®, 109 S. Pitt Street, Alexandria, VA 22314. www.McEnearney.com Equal Housing Opportunity. #WeAreAlexandria

This week’s Q&A column is written by Darlene Duffett of McEnearney Associates Realtors®, the leading real estate firm in Alexandria. To learn more about this article and relevant Alexandria market news, contact Darlene at 703-969-9015 or email [email protected]. You may also submit your questions to McEnearney Associates via email for response in future columns.

Question: How can we prepare our children to move into our new home?

Answer: I recently helped friends of mine find a home for their growing family. Moving to a new home is an exciting milestone for any family, but it can also be a challenging experience, especially for children. The process of relocating involves more than just packing boxes and signing papers; it requires careful planning and communication to ensure your children feel comfortable and secure throughout the transition. Here’s a comprehensive guide to help parents prepare their children for a move and home purchase.

1. Involve Your Children Early in the Process

Children, especially older ones, often appreciate being included in family decisions. While the final choice might rest with you, involving your kids in discussions about the move can help them feel like active participants in the process. Explain why the move is happening, whether it’s for a new job, to be closer to family, or simply for a better home. Allow them to voice their concerns and ask questions. This openness will help alleviate any fears they might have.

2. Visit the New Neighborhood

If possible, take your children to visit the new neighborhood before the move. Show them the nearby parks, schools, and other places of interest. This can help them visualize their new life and feel more at ease about the transition. If an in-person visit isn’t possible, use online maps, virtual tours, and photos to familiarize them with the area.

3. Create a Moving Timeline Together

A visual timeline can be a great way to help children understand the moving process. Include important dates, such as packing days, the last day at their current school, moving day, and the first day at their new school. Marking off days on a calendar can also give them a sense of control over the situation.

4. Encourage Open Communication

Moving can stir up a range of emotions in children, from excitement to anxiety. Encourage them to express their feelings and reassure them that it’s okay to feel nervous about the change. Regular family meetings can be a good opportunity to discuss any concerns and offer reassurance.

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This week’s Q&A column is sponsored and written by McEnearney Associates Realtors®, the leading real estate firm in Alexandria. To learn more about this article and relevant Alexandria market news, contact us at 703-549-9292. You may also submit your questions to McEnearney Associates via email for response in future columns. 

Question: How should I prepare financially to buy a home?

Answer: September brought several positive changes to the real estate market for homebuyers, including the Federal Reserve’s decision to cut rates for the first time in more than four years, an improvement in the home affordability index by 4.1%, and an increase in household income by 3.1%.

There are even signs that home prices, while still continuing to rise in markets with limited housing inventory, are increasing at a slower rate, reporting just a 0.01% uptick for the most recent report in July.

Even better news for homebuyers in our region, seasonally adjusted monthly price changes from June 2024 to July 2024 were down by -0.7 percent in the South Atlantic division. Both presidential candidates have also announced their plans to increase housing affordability, following up President Biden’s White House proclamation in May with initiatives for tax credits, cash grants, elimination of some fees on federally-backed mortgages.

While homebuyers in our area are definitely feeling the effects of a strong seller’s market, these small but steady shifts mean that those in the market to buy in the near future have reasons to be hopeful that a home purchase is within reach… with a bit of planning and a smart buying strategy.

Determine Your Budget & Timeline

Homebuyers should start their strategic planning by taking a detailed look at their monthly income and expenses along with their timeline for making a move, reviewing how much they need to save on a monthly basis to ensure that short, intermediate, and long-term savings goals are funded.

“There are many people who will give you the ‘Starbucks Example’ of savings and advise, ‘Just cut back on your weekly Starbucks runs, put that money into savings and you’ll start to see your nest egg grow,’” explains Chris Woods, a Certified Financial Planner and Founder of Silvis Financial.

“But it’s the overspending on the Big-Ticket items (like vehicles and vacations) that can significantly hamper someone’s ability to save money over the immediate long term. These are some of the most consequential financial choices you can make, and it’s important to think through and plan for the impact it will have on your household budget for the years and decades to come.”

In addition to keeping an emergency fund of 3+ months of monthly expenses to cover unexpected and onetime expenses, Woods advises buyers to consider other life events and goals that they might also be saving for: a vehicle, wedding, children, tuition, travel, monetary support for family members.

“A hefty, fixed monthly mortgage payment can keep you from saving for some of your life goals and limit the discretionary spending on activities that you love to do,” says Woods. “A more manageable mortgage payment will give you margin in your budget in the event that your expenses increase or your income decreases down the road.”

Build a Nest Egg

As to how to help savings grow, Woods suggests that buyers who are looking to purchase in the next 3-12 months should put their money into a high-yield savings account, adding that sometimes online savings accounts will offer higher interest rates than brick-and-mortar institutions. He suggests checking out options at NerdWallet, an online resource for many financial milestones and experiences.

For a longer timeframe, say up to 3 years, Woods suggests parking cash in FDIC-insured CDs. Keep in mind that as the Fed continues to cut rates, CD returns will also decrease, and locking in a rate now can ensure a higher return.

Line Up Your Financing

The next step in a buyer’s strategy is connected with a local lender or their current financial institution to determine a budget, clear up any credit or debt issues, and establish a timeline for the homebuying process. One reason to consider working with a local lender over a national bank is their knowledge of local programs that can provide additional money and grants to buyers who qualify. (Tip: Realtors® are a fantastic resource here, too, and can help buyers find a great lender to speak with.)

“Be firm in what you know you can afford before a lender tells you what you qualify for,” advice Woods. “This is important because a lender will look at a buyer’s income and current debt to determine the amount of loan they would qualify for, but those ratios aren’t taking into account savings and financial goals along with discretionary spending.”

Woods advises that when trying to determine how much a buyer can afford, factor in all these items alongside known fixed costs to determine how much to spend on a mortgage payment.

He shared a story about clients who looked for properties that were 20% less than what they qualified for, which allowed them to continue to fund their other financial goals while also giving them flexibility if they found themselves competing for a home and needed to escalate their offer.

A reminder for renters: utilities, parking, condominium/HOA fees, and other housing expenses are often built into the monthly rental amount. Being able to afford $3,000 in rent doesn’t necessarily mean that the same $3,000 for a mortgage is equally affordable.

Buying a home involves many moving pieces, but it doesn’t have to be overwhelming. Whatever your plans are, start a discussion now with your Realtor about getting started on the path to home ownership.

If you would like a question answered in our weekly column or to set up an appointment with one of our associates, please email: [email protected] or call 703-549-9292.

McEnearney Associates Realtors®, 109 S. Pitt Street, Alexandria, VA 22314. www.McEnearney.com Equal Housing Opportunity. #WeAreAlexandria