In Tight Market, Even Insiders Struggle

The Washington Post
Author: Karen Tanner Allen
Nov 4, 2000

For Barbara Carnemark, finding a four-bedroom house for less than $500,000 in Bethesda's Walt Whitman High School district this fall was a quest as daunting as the hunt for the Holy Grail, and more pressing. Her marriage depended on it.

She and her fiance, Thomas Nalls, have five daughters, ages 5 to 13, and they didn't want to marry until there was a place where they all could live.

"We wanted to bring these families together," she said. "Neither one of our houses was big enough to accommodate us, even on a stretch."

As recently as two years ago, it might have helped more that Carnemark is in the real estate business, as an agent in the Bethesda office of Pardoe Real Estate ERA. Real estate agents once had the luxury of making offers before houses came onto the market and even trying to negotiate the best deal.

Not so today. Anyone hunting for a house knows that it's frenzied out there. Inventory is so low that shoppers who once could choose from dozens of potential homes at any one time now choose from just four or five. Houses that linger on the market are often highly priced, in poor shape, or both. Open houses attract hordes of buyers and several offers from people who, in one day, must commit a huge amount of money to a place they plan to spend much of their life.

Those in the business are not immune.

"There are so many multiple offers on properties that we end up being caught up in the same situation as clients," said Samuel Davis of Long & Foster's Woodley Park office in Washington. "We're definitely being affected by it."

For real estate agents such as Carnemark, their own searches have brought the experiences of their clients closer to home. "While I sympathized with them before, I really empathize now," she said.

In her own search, Carnemark became obsessed. "I was looking at everything that was available," she said. "I was looking at the computer 10 times a day."

Her geographic parameters were tight: within the public school district where her own three daughters are at school, but not too far away from the private school that her fiance's daughters attend.

During two months of looking, they lost a house because they didn't bid aggressively enough. They lost another house because they couldn't bid aggressively enough. (Another buyer had promised all cash, no contingency and no cap on an escalation clause.) "There was nothing we could do to beat them," Carnemark said.

These are no longer the days of lengthy contract negotiations, even by those most skilled at the task. Agents who want to snag a sale for their own families say they are making higher offers than ever before, forgoing all contingencies on the deal, and preparing to make an offer on the spot and even paying cash.

Carnemark and Nalls finally signed a contract in early October on a farmhouse-style home newly constructed in Cabin John, an area they originallyweren't going to consider. They offered full price--more than Carnemark thought the house was worth and beyond, of course, their original $500,000 limit. At that point, "I didn't want to lose it," Carnemark said.

Other real estate agents have contended with today's market in similar ways. Liz Brent, at Taylor Real Estate in Northwest Washington, marshaled all her buying tactics when looking for a larger home near where she and her husband already lived with their 2- and 5-year-old in Silver Spring. The prospective house didn't have to be huge, but should have high ceilings, spacious rooms, good curb appeal and be away from major streets, she said. Brent spent about a year scouring the multiple listing service, targeting a six-block Woodside neighborhood. She even sent letters directly to about 15 different houses, but with no leads. Finally, she heard about a gray- painted, brick colonial coming up for sale and knocked on the door, hoping to make an offer before it went on the market.

"It didn't work," she said. "They wanted the competition. Who can blame them?"

To get the house, Brent had to wait out an open house that garnered four other offers, then make her own offer aggressive: $75,000 more than the $325,000 asking price, and higher than any other house in that neighborhood had sold for.

The toughest places for real estate agents are where their clients are looking, too, in desirable neighborhoods closer into the city. But real estate agents say they still have the advantage of being willing to judge a property's value as an investment. Real estate agents, therefore, can skirt competition by considering houses that require large-scale renovations, are newly constructed, or are in less-popular neighborhoods where housing values are just beginning to rise. They can make aggressive offers with more confidence.

Brent knew that property prices in Woodside were rising; the neighborhood is just blocks from downtown Silver Spring, which is undergoing renewal. "To me, it was worth what I was paying," said Brent. "It was in the right place. . . . We're going to be in this house forever."

Jamie Peva, an agent at Pardoe in Georgetown, spent a year looking for a house in that neighborhood. He said he had to pass up many because his clients wanted them. "There are about 12 realistic houses on the market, whereas a few years ago there were 150," he said.

This fall, he paid list price for a three-unit apartment building on Q Street that he intends to convert to a single-family home for his wife, baby son and two dogs. "How many people are going to take on that level of renovation?"

In Prince George's County, the scarcity of affordable split-level or rambler homes has surprised even realty veteran Boyd Campbell, who is managing broker of Century 21 Home Center in Lanham. "It's time to sell, but I'm having trouble finding a house," Campbell said. Getting the $329,000 contract on his existing two-story colonial in Bowie was easy. But by late October, he had already spent more than 60 days looking unsuccessfully for a smaller house, also in Bowie. Houses he thought would sell for $160,000 or $170,000 now sell for more than $200,000 and are scarce, he said.

"I thought this would be a slam-dunk," Campbell said. "I'm a broker and I've been doing this for 25 years. I thought I had this thing figured out."

Campbell is contemplating temporary places to live, while continuing his search.

Donald Yee, who works in the Burtonsville Long & Foster office, is keeping a lookout for a house, and even considering bank foreclosures. But in the meantime, he and his wife are trying to reconcile themselves to staying in their Burtonsville town house until prices and inventory improve. Yee said he and his wife would love to move with their two young children into a detached house, somewhere in the community. But, "to pay at these prices is ridiculous," he said. "I don't see how you can get that money back."

In Virginia, Michael Patterson of McEnearney Associates sold his brick colonial in North Arlington, where the market is at its peak, for a much larger, newer colonial-style house in South Arlington, which is less fashionable.

LaVon Warner, who runs her own real estate business in McLean, found herself at the mercy of a different kind of transaction when she sold her longtime residence there. Fortunately, she already had a house to move into, a smaller farm house she used to rent out. But she wanted to conduct a tax-deferred exchange on the acre lot that had adjoined her original home. The conditions of the exchange required her to purchase another investment property within 45 days that was worth the same amount, in this case $470,000. Otherwise, she would be required to pay tax.

That's when Warner ran into trouble. She couldn't find any single property worth that amount, so she had to buy three.

"Everything was selling overnight and it was wild out there. The first house was gone in two hours," she said. Warner wrote a contract $1,000 over the asking price on one small house. She put an all-cash offer on another house the next morning, and then bought a town house on a lake--to reach the full $470,000 amount.

"Ordinarily, you would look, and compare, and shop around," she said. "You didn't have time to shop around."

The ability to bargain prices down is a luxury many agents miss. "Even though you're in this economy that feels so rich, there's that bargain shopper in us that doesn't want to pay a penny more than you need to get it," said Long & Foster agent Julie Roberts, who said she agonized in 1998 about paying $6,000 more for a 1927 three-bedroom bungalow in Washington.

That has given her better perspective on how her clients feel about offering tens of thousands of dollars more than list price to seal a deal. "I was hemming and hawing" over that $6,000, she said. "I couldn't come to terms with having to pay more than I needed."

Personal experience has helped them make them better advocates for their own clients and respond more appropriately, real estate agents say.

For example, agents commonly console buyers who lose a house by telling them: "This wasn't the right house for you."

"I believe that," said Brent, who has said those words to many a client. But she realizes now how little comfort they would have been if she had lost the house she wanted so badly in Silver Spring.

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