Real Estate Live

Welcome to Real Estate Live, an online discussion of the Washington area housing market, featuring Post staff writer Daniela Deane.

In her Live Online discussions with the audience, Deane discusses the specifics of the market, from condos and investment properties to contracts and mortgages.

Deane has covered real estate for The Washington Post since 1999 and has worked as a reporter for more than 20 years.

The transcript follows.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

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Daniela Deane: Hi everybody! I've got so many questions here, you can't believe ... real estate seems to be on everybody's mind these days. So without further delay, let me dive in. Please feel free to chime in with your own experiences or suggestions. The viewpoint of anybody out there in the real estate trenches is invaluable to all of us. So don't be shy! (Have you ever been? Uh, no, I wouldn't say so!)

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Washington, D.C.: Daniela you rock! With the real estate market continuing to be strong in our region and the inner burbs running into a housing shortage, do you see people moving out further to places such as Faquier and Warren counties? I've seen some great deals in Washington, Va., Linden, Front Royal etc., and hear that many are escaping to these locations to get away from it all. Are these people in search of weekend get-away's or are the burbs really expanding beyond the growth of Loudon and Fairfax counties?

Daniela Deane: Hey there! Thanks for the compliment ... people are moving further out every day, as far as I understand it, basically searching for something they can afford. We're publishing a special Real Estate section on March 23 and the story I wrote for that is about the compromises people are making to become homeowners these days. Please pick it up. One of the major compromises is location. And that generally means moving further out. Yes, I do think the boundaries of the Washington area are being pushed back all the time. To a builder, Leesburg is now considered close in. Imagine that.

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Arlington, Va.: How are people coming up with enough money for the downpayment in this market? Are they raiding their retirement accounts or using credit card cash advances? Not everyone has enough home equity to buy a home.

Daniela Deane: That's the million dollar question, or at least one of them, isn't it? I hope people aren't using credit card advances ... my gosh ... a lot of people are getting adjustable-rate mortgages so they can pay less interest for a specific period of time (like 5 years, 7 years, 1 year, like that). A lot of buyers are also opting for interest-only loans, which come with reduced monthly payments because you're not paying back any principal, only interest. People are making compromises on where they buy and what they buy. They're also using lower downpayment schemes, like those hybrid 80-10-10 type mortgages and the like, where you get two mortgages basically and pay a lower downpayment. The truth is, I feel pretty sorry for people who are trying to buy now without having the luxury of selling something that has gone up in value.It's very hard for a lot of people.

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Fort Wash., Md.: How soon after can you sell a home after you refinance? I am thinking of refinancing and then shortly after selling so I don't have to pay capital gains on a hefty amount.

Thanks!

Daniela Deane: You can sell your home right after re-financing if you want, but it doesn't seem like that great of an idea to re-finance if you're selling right away. Re-financing cost money (usually around $2,000 or so) and you re-coup that money over time by reducing your monthly mortgage payments. That's all part of the calculation you need to do to decide IF you should re-finance. Re-financing doesn't have anything to do with capital gains tax, as far as I'm reading your question ... that's based on how much your property has gone up since you bought it, minus improvements.

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Washington, D.C.: Hello Daniela,

Thanks for your great bi-weekly talk. It's rare these days to find someone who can talk about real estate with both humor and wisdom! (And compassion, too!)
As potential first-time homebuyers, my partner and I are horrified by the prospect of giving up our rent-controlled, beloved, greatly located 2-bedroom in the city to buy a small, expensive house in a faraway suburb. (That's all we can afford if we want to become homeowners.)
So sometimes we dream of continuing to rent in the city and buying a small condo somewhere in the suburbs to rent it out. I understand that the rent (after taxes and expenses) would probably not cover the mortgage for a number of years and that having tenants can be a lot of work.
But generally speaking, would you recommend this option?
Thanks in advance.

Daniela Deane: Hey there ... I understand how you'd be loath to give up a cheap apartment in a place you like to move to a place you don't like that much for more money. I'm not sure I'd be that excited by that prospect either ... so perhaps you're one of those people who should just continue renting. There are people who fall into that category for whatever reason. You don't say how much your rent is. I believe in real estate, you know that. I believe that owning real estate is the best way for a middle-income person to amass some capital in life. But perhaps it's not right for you at this moment. You have to weigh all the compromises you have to make. Buying an investment place might not be right either since you may not like being a landlord and you're right, you could easily find yourself in a negative cash flow position these days. Only you know yourself and how you feel about all these options. Do I sound like a different person, all of a sudden? I do believe there are times when buying just isn't the right thing to do for some people at some times.

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Southern Maryland: Submitting early cuz I'm almost too depressed to come back for the Live Online. Well, I spoke with my credit union for prequalification ... I'm going to live with my parents forever.
I either have to find a new job which pays more, which is unlikely to happen or give up my car, which I need (I don't live near public transit). What's a young single girl with excellent credit who doesn't quite make $30K and has student loans to do! I don't want to wait till I'm married, which may never happen, or move, or freakin' continue to live with my parents ... this market is nuts.

Daniela Deane: How about trying to get a loan from your parents for the down-payment? They may want to see you break out on your own just as much as you want to. Anyway, it's a suggestion. Certainly a lot of young people get help from their parents to get started building equity in real estate. I've already figured out that it's very likely my kids will end up in at least one of my condos when they start out. How else they'll first get started is hard to see.

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Arlington, Virginia: Hello Daniela,

I'm now living in a condo in the Ballston area. An ice rink is being built for the D.C. hockey team at Ballston Commons.

Not being very impressed with most of the neighborhoods around the sports venues, I'm thinking of selling. Do you see this community "improvement" causing real estate to appreciate or crash?

Daniela Deane: Hey there. I live near Ballston and I think it's pretty cool we're gonna get an ice rink there ... I've heard, although this isn't confirmed, that it'll be open to the public when the team isn't practising ... that'll be so much fun for a lot of kids in the area! My thought is that it will be only a plus. Just more to do in Ballston...If it were me, I wouldn't even consider selling because of that ... now buying, maybe!

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Anonymous: Hi Daniela, I'm the person with the 150k mortgage question -- anyway, if you can post this...for those willing to go through a process of 3-6 months NACA seems a ligit organization for people with low/moderate income and ok credit -- go to naca.com and check it out. NO downpayment and NO closing costs -- can't beat that right?

Daniela Deane: I'm not vouching for this or giving any opinion on it, since I don't know nearly enough to have an informed opinion. I'm merely posting it for others to check out if they wish.

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Reston, Virginia: I have a contract on a condo under construction next to the Vienna Metro. It won't be ready until this coming January. I am worried about a possible housing bubble later this fall where I could not sell my existing single family residence in Reston for what I can now. I am considering putting my house up for sale sooner rather than later because of this concern so I can lock in a top price. Am I overly concerned about the real estate climate in the Washington, D.C. area?

Anxious in Reston.

Daniela Deane: Hard for me to say for sure, of course, but if it were me, and it isn't, and you're asking my opinion (right?) I would not even consider selling my house in Reston (which I think will continue to go up) out of fear that a crash is coming. But that's just me folks!

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RE: Down Payment: In response to the question about where people are getting the money for downpayments -- they don't! As someone who works for a mortgage company, I can tell you that there are many programs available for either a low (2.25%) or NO down payment. We do 100% financing all the time. It is split into an 80% first trust (to avoid PMI) and a 20% 2nd trust.

Daniela Deane: Yes. Thanks for adding to the discussion. Coming from a mortgage professional, that's an invaluable comment.

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Washington, D.C.: Greetings! I didn't think it would happen so quickly, but I had a bid accepted on a home in Cheverly, Md. last night after beginning a search in December 2004. I'm in house love and I can afford it. I highly recommend Cheverly to those looking for nice size family homes built between 1930 and 1960 at prices 100K or more below Arlington or Silver Spring. Lovely Norman Rockwell like setting and neighborhood, on the metro line with low crime and its own police force.

My question is regarding using an attorney for settlement. I want to be careful and use an attorney if one is needed. What are the upsides and downsides of an attorney at closing? Thanks!

Daniela Deane: Congratulations! Cheverly is one beloved place these days ... every chat, I get someone commenting on it. To answer your question, did you use an agent on this transaction? And did your seller too? And do you have a settlement company picked out and appointment to close? Usually you don't need a separate attorney as well. The settlement company handles all the legalities of closing (that's why you get to pay them!).

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Los Angeles, Calif.: Ms. Deane,
I have a complex problem that no one seems to be able to help me with. Perhaps you can?
I am looking to buy a home here in L.A., which, as you know, is incredibly expensive. I don't think I can afford to do that unless I sell my townhome in Fairfax, Va. The tricky part is, that home is an investment property, and I know there are certain (taxable) rules pertaining to profits made from an investment property. From what I understand, I have a specific time frame in which I must convert the profits from the investment property toward another home, to avoid substantial taxes. I've heard that it's six months (yes?). My concern is, with the housing market such as it is in L.A., it might take me longer to find something I can afford AND don't get outbid on. Do I have all my info correct? Should I sell my home and hope for the best? Any general thoughts on my rare situation, and bringing it to a successful conclusion? >Thank you!

Daniela Deane: Hi L.A.! I'm going to post a link to a story on the Starker Exchange rules that we published a couple months back. Basically you have 45 days to identify another property but a full six months before you have to close on it to qualify for the Starker, also called the 1031. I'm gonna post the link under this answer. Also check out irs.gov...Speaking of IRS, it's getting close to April 15, isn't it? Aha!

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washingtonpost.com: Housing Counsel: The No-Tax House Sale (Post, Feb. 26, 2005)

Daniela Deane: Here it is ... I see some other questions on the Starker and on principal residences. Some of those are answered in this story.

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Arlington, Va.: Hello Daniela,

I live in Arlington Virginia and purchased a house with my wife in July '04. We are now in the process of a divorce -- she wants her equity ($150K is her half) (a gold mine -- increase $110K in 11 months). We have two children 10 and 6 (split custody) and I want to keep the house. Do I have to sell/refinance now, or wait until the court decides which would be Mar. '06? I can afford the current house payment without her $'s, however; I can't afford to refinance at this time and give her equity. I did have it appraised, and if I delay the sell/refinance until 06 (Jul '06 for tax 2-5 year rule) would her share of the equity increase based on 06 or be based on when the appraisal was done and her last support -- the house could rise another $60K and I don't want of give her any of it. Also, is it possible to hang on to the house until the youngest child turn 18 -- some states have this law.

Thanks, Rick

Daniela Deane: Your question makes me so sad. And drives home the point that divorce is a financial and emotional mess. I'm so sorry you're going through this. You need to schedule some time with a divorce lawyer, I would think. I don't know all the answers to your questions, but you certainly need to find them out before you do anything. Get a Virginia attorney. And the best of luck to you.

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Herndon, Va.: What's your opinion on the real estate market in Prince William county? Can you please point me to some reports about that area? Thanks.

Daniela Deane: My opinion is that it's hot, a lot like everywhere else around here. Our special real estate section that is coming out March 23 has county by county breakdowns on prices. I invite you to pick it up next Wednesday! A lot of work has gone into it, I know that! I think you'll find it very informative.

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North Springfield, Va.: A builder is building 13 houses in our neighborhood. The houses (which are yet to be built) were on sale for $900,000 or so last year has just went up to $1,000,060. And for each house sold, price goes up $40,000.

We're thinking of flipping it. Buying one with a $100,000 down and building of the house will begin. Once house is built, we will then sell it. The $100,000 will come out of euity in our current home by way of cash out refi.

I would like to hear your thought on this.

Thank you.

Daniela Deane: You can do that, certainly, and a lot of people have, although builders and developers are making that much harder to do. A lot of times now they won't sell to investors, only people who say they're moving into the property. This strategy also presupposes that prices will continue to go up, which is obviously what you believe. That's all fine and good in an appreciating market, not one that's moving down, of course. Remember the capital gains tax implications involved with selling a non-principal residence without buying something else fairly quickly (the Starker exchange I referred to earlier). That cuts into your quick profit ideas...

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RE: Divorce guy: I would be concerned that the house could go DOWN. She may well be entitled to half it's EQ value today. Then he's really in a pickle.

He shouldn't be greedy, either, if the house goes up and he doesn't refinance because he can't afford to, well then, he's asking her a big favor to wait, isn't he? Not fair to then say "you can't have the extra bit it's gone up." She could push it and make him refinance or sell now.

Daniela Deane: Here's some comments to our poor poster who's getting divorced...Have you tried marriage counseling?

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Bethesda, Md.: RE: Attorney for settlement? I'd think that since a contract has been signed (presumably by the poster's agent) that most of the legal issues are over and done with. Might want to get an attorney to look at the contract to see if there's anything bizarre in it.

Daniela Deane: Isn't that what I just said? That you don't usually need an attorney for settlement? Or are you just repeating it in your own words?

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Washington, D.C.: I'm interviewing agents and finding that you were right to recommend we interview agents. The first one came in ... seemed somewhat knowledgeable about the area. She was of the opinion that a $10K kitchen upgrade was the only way I could sell my home and get current market rates (it's the kitchen that was in the house when I bought it in 2002 and was probably last updated in the early 90s) and I'm of the mind that I don't want to spend thousands of dollars creating a kitchen someone may or may not like when I can't guarantee dollar for dollar return on that investment. The next agent came in who was VERY knowledgeable about the area, the community and its residents, she knew about projects soon to be finished in the area that may cause my property to appreciate a bit more in the very near future and frankly advised me to hold tight for a couple more months before listing my house. I liked that, cause that indicates she was willing to forfeit the commission on the sale of my house. In any case, I haven't signed with either of them, but I do, now, see the reason to interview agents.

Daniela Deane: Thanks for sharing your experience and your compliment... I certainly would've liked that second agent better too, if I were you ... I love it when they act like they don't want the commission!! She'll probably end up getting that commission just because she acted like she didn't care! Smart one, that one!

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Washington, D.C.: Here's a twist on the home tax assessment issue. I got my assessment for my new home (small, 3br, dba remod in S.E.) and it's much lower than I anticipated. While the actual assessment went up 30k for 2006, it was still 50k less than I paid! I know the market is ridiculous and I do like my home, but is this an indicator that I was ripped off as opposed to paying top dollar? My home was the first to sell in my area in over 6 mo and even when I had the property appraised pre-settlement I thought it was over-appraised. (of course, I bought anyway because I thought someone else would get it).

Daniela Deane: Just be happy is all I can say. You've bought now, so that's a done deal for awhile...You're not gonna sell now because of any of this, that's for sure. (you gotta hold real estate, remember?) You got a low tax assessment! Wonderful! Be happy about that too. A lot of us didn't. I don't see a whole lot of reasons for you to be torturing yourself here.

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Maryland: The divorce guy doesn't need answers from any of us ... regardless of what seems "right" or "fair" in a case like this, ultimtely it is decided by the parties involved or the judge if they can't come to an agreement. In Maryland, she CAN make you sell it to give her the proceeds to which the judge deems her entitled.

Daniela Deane: Ah! Is our divorce guy still reading? I want him to give marriage counseling a try, or another try, darn it! For the kids!

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Ashburn, Va.: Good afternoon! I really love your chats, and have learned a great deal. I am looking to move to Norfolk in the next few years. There is huge condominium project being planned for that city's downtown. Construction is due to begin in early 2006 with a delivery date of early 2008, which is when I plan to move. What is usual downpayment for new construction and how does the financing does work? Thanks!

Daniela Deane: That sounds like a very interesting investment if you can afford it. But I know very little about Norfolk. Anyway ... around here, you usually put a deposit down, like $10,000 or so, to put a contract on a place that will be built. Then you end up paying up to usually 5 percent of the purchase price before they finish, and you close, and pay it all! So a total of 5% up until closing. Although each developer and builder can make their own stipulations, obviously.

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Washington, D.C.: Hi Daniela,

I have a question ... if I'm selling my primary residence without living in it for 2 years and without qualifying for the exceptions for the $250,000 tax exemption (I'm single), what is the tax rate on the capital gain? I've done some research on my own and it seems like the rate is 28%. But I just wanted to confirm. Thanks.

Daniela Deane: It's about that, yes ... I thought it was more like 25%. Then there's also the tax from your local jurisdiction, like the D.C. capital gains or the Virginia or Maryland capital gains tax too. Together, it's a nice chunk of change that you have to hand over to Uncle Sam.

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Md.: Just remember when interviewing buyer agents to be kind to them. I found a great one through a friend's referral. He spent a lot of time with me in a neighborhood I loved. That didn't work out and I ended up building somewhere else entirely, but when I signed the initial contract for the house to be built I listed him as the referral agent. He still got paid for all the time he spent with me and it didn't cost me one penny (I would have paid the same price regardless).

When I need to sell this one, he's getting a call -- and I'd use him to find the next one as well.

Thanks to all the true PROFESSIONALS out there who really do look after the homebuyer.

Daniela Deane: You gotta be an agent!!!!!

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Arlington, Va.: If I have a house -- been in it for one year -- and made good eqiuty ... can I sell and roll into another primary residence with no capital gains?

Daniela Deane: Don't think so...unless you have some personal circumstances (like a job change) that require you move ... check irs.gov for what qualifies there ... If it's an investment property (i.e. not your primary residence), you can do a Starker exchange for another investment property. Read that story I posted earlier about tax changes. It talks about when you can do both a Starker and a capital gains tax exclusion together.

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Wash., D.C.: Daniela,

So, I've decided to take the plunge -- leave renting in D.C. to buy something in Va., but everything is so expensive! I knew it was a tough market but hadn't realized just how difficult it would be. Looking online, there seems to be nothing in my price range(low $200,000s) in an area I want (Arlington, Alexandria...) and I'm afraid I'll have no choice but to sacrifice a lot just to buy SOMEting. Is this really the case? Does everyone in my income bracket have to do this? How disappointing!

Daniela Deane: If you really want to buy, you're going to have to make some compromises...People are compromising on what they want all the time, I found when I wrote that story that's coming out next Wednesday. Compromising on all sorts of things. I hope it works out for you, whatever you decide.

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Ohio: Hello Daniela, I love your real estate chat. Since I am way up here in O-hi-o, I am fascinated by the D.C. area's real estate prices. Please tell me, do the $250K, $300K, $350K, etc. homes come with large yards?

And, just to make everybody yell, I'll admit that the 2000 sq. ft. home we built last year cost us $176K. A steal by your standards! :-)

Daniela Deane: $300,000 will buy you a one-bedroom condo in a nice part of town these days ... Can I say one thing though? We get to live here instead of Ohio! I'm allowed to say that, aren't I?

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Reston, Va.: Daniela here's one for you. My fiance and I both own homes. We'd like to purchase a single family home but we'd like to do it on one salary of roughly $80k. Should we sell both of our individual townhouses or sell one and keep one. We're in Western Fairfax and property values just keep increasing on own homes so we're a little reluctant to let both go. Your wisdom is greatly appreciated.

Daniela Deane: Try to hold on to what you can is my advice ... If you can hold on to one, that's great. Not too much stress renting just one unit (most of the time anyway) and you'll still have kept one ... that would be great if you could swing it.

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Alexandria, Va.: Hello! I have a reservation on a 2 bedroom, 2 bath townhome at the Parkside at Alexandria complex on Van Dorn Street (formerly known as Jamestowne Village Apartments). This is a condo conversion project and I'll be paying $300K for the place. What are your thoughts on this property? Specifically the ability to sell it or rent it out after a year?

Daniela Deane: I don't know enough about this property to comment. Sounds like a good investment to me though at first read.

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Washington, D.C.: Hi Daniela,
Love your chat. Last May I bought a condo in Columbia Heights. Like many people, I looked at a lot of places where interest was so high that my realtor told me the place would probably go for more than the asking price and more than my price limit. From looking at the D.C. sales database, I've since learned that they actually went for a reasonable (haha) price. I feel like I overpaid for my basement apartment, when I could have gotten something nicer in my price range. Granted, home values are rising just about everywhere in D.C., but I'm still a little ... umm, bitter? Can you give me some words of wisdom?

Daniela Deane: Remorse and second-guessing after buying is a very common emotion. I did a story about it recently! (shoot, I've done a story about everything recently, it seems). The "experts" I talked to about it said it tends to fade with time though. I really don't see the need to torture yourself here. You got a place. You're not going to sell right away because that would be like shooting yourself in the foot. Lots is planned for Columbia Heights. Soon, it'll be greater Dupont, if you ask me! (okay, maybe not real soon, but you know what I mean.) Try to be happy. There's not a lot to do about it now, beyond that, is there? ...

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Arlington, Va.: Hi Daniela,
I just want to share my experience. My lender just informed me he's willing to qualify me for about $650K for my next home purchase. Just two years ago, no, even one year ago I wouldn't have thought I could've afford anything over half million. Ah, the power of booming market.
So I guess it's bye-bye Arlington ... and hello Fairfax!

Daniela Deane: Lenders will loan a lot to people these days...Be sure you're comfortable with the payments you'll have to make. Only you know your own comfort level and how many ramen noodles you can eat ...

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Glenn Dale, Md.: One thing that isn't mentioned when talking about the increase in value of housing is that a lot of the houses on the market are the new 'mcmansions'. It makes a difference. In our area, the older houses sell for about $225-250,000; the new ones start at $500,000. There are a lot of new developments springing up all over (which is why we want to move.) Statistically, a report would say that the value of housing in our area has gone up X percent, but it doesn't mean that the value of my house has gone up that much. The numbers are artificially inflated by all the new housing.

Daniela Deane: You are so right...It's hard to track everything separately though. I think a new house in my neighborhood is approaching $2 million now ... does anyone want to give me $2 million for my rambler though! Don't think so! Unfortunately!

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Daniela Deane: My editor says it's time for me to say goodbye to my fans and say hi ... to her! and the editing of my story for this weekend! Thanks for joining me. I'll be back in two weeks, same time, same place. Until then, try to be happy! (And I will too!).

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