2021 was a rough year for home buyers across the country, not just Richmond, with average home prices rising almost 20% and homes frequently selling over asking with multiple offers and inspections waived. The housing frenzy was driven by millennials, 64% of whom said they had regrets about their home purchase according to a Bankrate survey. Many buyers in 2021 felt they paid too much, didn’t get the best rate, or underestimated the cost of homeownership.
The good news? There are many signs of improvement, especially in the Richmond, VA real estate market. Virginia REALTORS predicts increased inventory of Richmond houses for sale and softening demand. That means it’s a great time to buy a house in Richmond!
With the market showing signs of stabilizing and fewer bidding wars, you can avoid buyer’s remorse when buying a home in Richmond by knowing what to expect and going into the process prepared. Here’s everything you want to know about Richmond, VA real estate with a step-by-step guide to buying a home.
Steps to Buy a House in Richmond
You don’t need to feel overwhelmed about entering the real estate market! This buying a house guide for Virginia home buyers covers each step of the process plus what to know when buying a house for the first time.
Step #1. Determine What You Can Afford – How Much Does it Cost to Buy a Home in Richmond?
Don’t get swept up in the excitement of buying your own home without taking the time to figure out what you can comfortably afford. Go slowly and make sure you consider many aspects of homeownership, including financing costs, moving costs, home maintenance, insurance, and purchase price.
How much house can I afford? Start by using the 28/36 rule that lenders use to qualify you. Your mortgage payment should not be more than 28% of your gross income. This includes principal, interest, home insurance, real estate taxes, and HOA fees. Your total debt payments including car loans, credit cards, and student debt should not exceed 36% of your gross income.
Below, we’ll cover average home prices in Richmond, VA and hidden costs of homeownership to budget for. Don’t forget to also consider closing costs and the cost to hire movers when deciding how much you can afford to pay!
Home Prices in Richmond, VA
To help you prepare a budget, you’ll want to know what to expect to pay for houses for sale in Richmond, VA. What is the average home price in Richmond? Let’s take a quick look at average prices by neighborhood and home type.
The Richmond, VA median home price is $295,000, up 12% year-over-year. Homes sell after just 14 median days on market. Here are median home prices based on the type of home:
- $286,000 median price for single family homes for sale in Richmond, VA
- $320,000 median price for condos for sale in Richmond, VA
- $235,000 median price for townhomes in Richmond, VA
Note that only 30-40 condos in Richmond, VA are sold in a typical month. That means the median condo price is less reliable than single-family home prices and changes dramatically from month to month. The median condo price increased from $258,000 to $320,000 in one month alone.
The Richmond Association of REALTORS offers more in-depth reporting with median and average sales prices, not list prices:
The median sales price for Richmond, VA single family homes is $332,000 with an average sales price of $387,000.
For condos, the median sales price was $322,000 with an average sales price of $335,000.
Of course, home prices vary significantly depending on the neighborhood. Here are median prices of homes for sale in Richmond, VA by neighborhood to help you budget.
- Manchester: $635,000
- The Fan: $572,000
- Church Hill: $550,000
- Museum District: $477,500
- Three Chopt: $427,500
- Ginter Park: $420,000
- Colonial Place: $415,000
- Stratford Hills: $418,500
- Church Hill North: $330,000
- Downtown Richmond: $251,000
- Midlothian: $250,000
- Fulton Hill: $224,500
Average Costs of Owning a Home in Richmond
More than half of people experience buyer’s remorse after buying a home. One of the biggest reasons? The hidden cost of homeownership. Over half of new homeowners say they are surprised by how much it costs (and how much time it takes!) to own and maintain a home.
Before buying a house in Richmond, Virginia, make sure you are prepared for these hidden costs and plan for them in your budget.
- Your Richmond, VA utilities will likely be higher as a homeowner than you paid while renting. Budget about $330 per month or $3,960/year for electricity, natural gas, water, and trash.
- Lawn care
- Plan to spend about $100 per month during the warmer months on lawn care. You can do your own lawn maintenance which will require buying and maintaining a lawn mower and other equipment or hire a service.
- Homeowner’s insurance
- The average cost of homeowner’s insurance in Virginia is $1,031 per year. That’s more than 20% below the national average.
- Property taxes
- The biggest hidden cost of buying a house in Richmond, Virginia? Real estate taxes. City of Richmond real estate taxes are $1.20 per $100 of assessed value. The assessment value is 100% of the home’s market value. That’s the highest in the metro area.
- The average Richmond real estate assessment increased to $315,000 in 2021, up 13.7% over 2020, which increased the average property tax bill by $456.
- HOA fees
- If you are buying a home in Richmond, VA with common areas, whether it’s a condo building or a neighborhood with a pool, playground, or park, you will pay monthly or yearly HOA fees. The fee depends on the size and type of the development, the services and amenities, and the age of the homes. Fees can range from $150 to $1,500 per year.
- You can use this HOA Lookup tool from Henrico County to see if the home is in an HOA and check HOA fees. Otherwise, you can enter the name of the subdivision or community to search the Virginia HOA database.
- The older the home, the more likely it will need major home repairs in the near future. Many older homes have serious issues that aren’t detected in an inspection like a roof that’s ready to be replaced, an 18-year-old water heater ready to fail, or an aging air conditioner. A new central AC alone can cost $5,000 while a new roof can run you $10,000 or more.
- A general rule is budgeting 1% of the purchase price each year for repairs and maintenance (more or less depending on the age), but be prepared for major repairs to come up unexpectedly.
Step #2. Choose a Mortgage & Get Pre-Approved
Hopefully you now have a realistic idea of what you can comfortably afford to spend and you’re ready for the next step: getting pre-approved for a home loan. This pre-approval process should be completed before working with a real estate agent and house hunting to make sure your offer is taken seriously and you are qualified.
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It’s a good idea to explore Virginia first time home buyer programs then work with an approved lender to get pre-approved. You’ll find several home loans in Virginia designed for first time buyers with reduced interest rates, down payment assistance grants, and more if you qualify.
Otherwise, you can explore other popular mortgage options. FHA loans are popular for buyers with some credit issues or a small down payment, but these government-backed loans come with high costs. If you have good credit and a decent down payment, you will probably get a better rate and lower costs with a conventional loan. Qualifying military members, veterans, and military families will find that VA mortgages are the best option with 100% financing allowed, low funding fees, and no mortgage insurance.
Here are general requirements to buy a house in Richmond, VA and get approved for a home loan.
- Cash reserves for closing costs and immediate expenses.
- Down payment based on the home loan. This may be 3.5% to 10 or 20% with most mortgage options, but some require no down payment. First time home buyers can qualify for down payment assistance.
- Acceptable credit. A credit score of 620 or higher is usually needed.
- Ability to repay. You should have stable employment with a debt-to-income ratio of 36% or less.
- Sourced or seasoned funds. The lender will want to see that your down payment and closing cost funds have been in your account for more than 90 days or they can see the source of the money like a paycheck.
- Gift letter if you are going to use gift money for your down payment.
First Time Home Buyer Programs in Virginia
As a first time buyer, you can qualify for several programs that make buying a house in Richmond easier and more affordable. Note that you will usually need to work with an approved lender and may need to complete steps like free home buyer education courses. Research Virginia first time home buyer programs before committing to a lender or mortgage.
- HOMEownership Down Payment & Closing Cost Assistance (DPA) from the Virginia Department of Housing and Community Development (DHCD) is one of the best Virginia first time home buyer grants. It offers gap financing for first time buyers below 80% of the area median income. Get up to 10-15% of the sales price plus $2,500 in closing cost assistance.
- VHDA loans. A VA first time home buyer loan from the Virginia Housing Development Authority can often be combined with grants to reduce the out-of-pocket cost of buying a home in Richmond, VA. The VHDA offers several mortgage options for first time buyers with income and sales price limits.
- Mortgage Credit Certificate (MCC). Get a federal tax credit equal to 10% of the annual mortgage interest you pay for as long as you live in the home and have your mortgage.
- Down Payment Assistance Grant can be paired with the MCC but is only available with VHDA loans.
- SPARC Program from VHDA helps first time buyers qualify for a special 1% mortgage interest rate deduction.
- HOME Program from Home, Inc. offers a forgivable loan of up to $10,000 for closing costs and down payment assistance in Richmond, Virginia.
Step #3. Hire a Richmond Real Estate Agent
Once you’re pre-approved and now what you can afford, it’s time to find a buyer’s agent to guide you through the process of buying real estate in Richmond, VA.
Your agent’s commission is paid by the seller so you don’t need to worry about out-of-pocket costs. Your agent will:
- Represent your best interests
- Help you explore neighborhoods
- Show you homes for sale in Richmond
- Prepare your offer with advice
- Negotiate on your behalf
- Offer guidance and insight based on market conditions, experience, and recently sold homes in Richmond, VA
When choosing a buyer’s agent, make sure they have experience in the area or neighborhoods you’re considering and your price range. They should have enough time to commit to you and respond quickly to communications. Above all, you should feel comfortable in their experience and knowledge to represent you.
Step #4. Go House Hunting in Richmond, VA
You’re finally at the most exciting step – house hunting! Your agent will help you find the best neighborhoods in Richmond, VA to fit your needs and budget. While house hunting, try to keep your expectations realistic. It will help to make a list of your absolute needs, things you want, and deal-breakers. Be prepared for a potentially long process given Richmond’s tight inventory and demand.
Here are some important things to consider while house hunting:
- Type of home (single or multi-level, single-family, condo, or apartment)
- Age of home
- HOA and fees
- Nearby amenities
- Lot size
- Public transportation & access to highways
- School district
- Neighborhood noise
Step #5. Submit an Offer on a Home
While the Richmond housing market is normalizing, it’s still a strong seller’s market. You will face competition and should be prepared to make a strong offer on a home as soon as possible.
Your real estate agent will help you review recently sold homes in Richmond, VA and give advice to help you craft the best offer you can make. Depending on the neighborhood, market conditions, and the home, they may recommend strategies that can help you overcome the competition like:
- Making an as-is offer that’s contingent on an inspection so the seller will not need to make repairs
- Reducing the contingencies
- Offering your best price with your initial offer
- Offering a rent-back clause
Keep Richmond, VA Real Estate Market Conditions in Mind!
48% of houses in Richmond, VA recently sold above list price with a sale-to-list price of 101.9%. That means the average home will sell for 2% over list price and go pending in just 11 days. The hottest homes sell for around 6% over list price and sell in only 5 days!
You may need to make an offer over list price to get your offer accepted.
At the start of 2022, the Richmond Association of REALTORS reported inventory was down 43% for single family homes and 53% for condos and townhomes year-over-year. The months supply of inventory dropped around 40% to just a half-month supply, making the Richmond housing market incredibly tight for buyers. At the start of the year, the inventory of existing homes for sale was just 910,000 – the lowest level recorded in 23 years.
This means plenty of competition and the potential for multiple offers. Be prepared to make your best offer as soon as you see a home you want.
Step #6. Close on Your Home & Move in!
Once your offer is accepted, you will officially be under contract! Next comes the paperwork, preparation, and waiting. During the escrow process, you will need to perform due diligence to make sure all contingencies are met. The home must be appraised and you will need to schedule and sign off on the home inspection. You will also need to go through underwriting with your lender to make sure your mortgage is secured.
Once this is all done, a closing date will be scheduled. You will do a final walkthrough of your house then sign a mountain of paperwork. In return, you will finally get the keys to your new house!
Are you getting ready for buying a house in Richmond? Don’t forget to plan for your upcoming moving day rather than leaving it for the last minute. Start by downsizing, planning for the logistics of your move, and giving us a call at On the Fly Moving Guys for a free, personalized moving estimate so you can better plan for what happens after closing!