Despite the pitfalls, first-time buyers have an advantage when a real-estate bubble bursts: Unlike those who already own property, they don’t have to sell in order to buy.
“We saw the poor economy as an advantage,” says Amy Reagan, who with boyfriend Gregory Hill bought a one-bedroom condo in DC’s Mount Pleasant for $240,000. Reagan was surprised by how many condos were for sale in their price range of $250,000 to $300,000.
“Our seller had lowered the price a couple of times,” says Reagan. “And the same thing was happening with other units we looked at.”
The 510-square-foot condo, which has a newly renovated kitchen, had been on the market 90 days when the couple made an offer of $240,000—$40,000 below the original list price—and asked the seller to pay all the closing costs. No one else was bidding, and the seller accepted.
For Reagan, 28, and Hill, 26, who both work for nonprofits, the biggest hurdle was the 10-percent down payment. The couple pooled their savings and sold some stocks to come up with the cash.
“Given our salaries, we didn’t think it was feasible for us to buy,” says Reagan. “Now I’m encouraging all my friends to look at their finances. It really is possible. ”
The growing inventory of foreclosures in exurbs such as Manassas and Ashburn can be a source of deep discounts. Marc Cormier, an agent with Re/Max Allegiance, shifted his real-estate practice to foreclosures and distressed sales when the market dropped last year.
He says the competition for foreclosed properties is fierce. “If I put a property up on Saturday, I’ll have multiple offers by Tuesday,” says Cormier. “I’ve sold properties where we haven’t even cleared the trash out yet.”
Buyers who don’t have the time or persistence to hunt down foreclosures are coming up with other resourceful ways to get a foot in the door of a still-expensive market. Charlie Arnold, who works for the Department of Defense, plans to rent out one bedroom in the two-bedroom condo he just bought for $270,000 in Alexandria.
First Savings Mortgage Corporation’s Renee Schuster Voyta is seeing more buyers asking their families to help with the down payment. “We’ve seen a lot of gifts,” she says.
Developers of new condo buildings, one of the hardest-hit segments of the market, are offering bargains. The Palladian at Rockville Town Square has a lease-to-own program that lets renters lease an apartment for one year, then get back 75 percent of their rent in the form of a purchaser’s credit if they decide to buy in the building.
Khelan Bhatia was surprised to learn that the Moderno on DC’s U Street was offering 100-percent financing through a deal with PNC Bank. Bhatia loved the condo building’s small size, modern finishes, and floor-to-ceiling windows. And its location—in the heart of the U Street corridor, just a block from the Metro—couldn’t be beat.
“With no down payment, I was still able to get a 30-year fixed mortgage,” says Bhatia. “It seemed too good to be true.”
Where to Look
Established neighborhoods such as Dupont Circle, downtown Bethesda, and Clarendon are perennial favorites with first-time buyers. But we hunted down neighborhoods where you’re more likely to find a bargain. These eight areas offer an urban lifestyle that appeals to many first-time buyers. They’re neighborhoods where residents can walk to dinner, take Metro or the bus to work, and spend a week without getting in the car. Some are enclaves that saw a rebirth during downtown DC’s revival. Others are new town centers that offer city-like living in the suburbs.
“Capitol Hill is the new mecca for young people with children,” says Long & Foster’s Roby Thompson.
Dog owners and moms and dads with strollers congregate in Lincoln Park, Stanton Square, and Folger Park. Eastern Market bustles on weekends. Residents come for flowers, produce, specialty foods, and wares by local artisans. Nightlife includes Hill-staffer standbys Hawk ’n’ Dove and the Pour House as well as newer spots like the Ugly Mug and Belga Café on Barracks Row.