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 folks! Welcome to Real Estate Live! I've got a lot of good questions here...and some really hard ones...that I'll do my best to answer. I'm not sure I know as much as you guys think I do! But I appreciate the compliment. Let's get started!

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Arlington, Va.: I noticed someone posting a question regarding MAFC. I had inquired into their services in the past and found them very deceptive. The had given me a "market price" quote on my condo which was 100,000 less then the current market. Instead of paying 6%, I would have end up losing 25% on the sale. My advice, do some research on the value of your home by looking at the tax records and recent sales. Find a good realtor in the area. They will lose money going with MAFC.

Daniela Deane: I definitely agree with your advice about doing research on your own beforehand. That always serves you well. I don't have enough first-hand experience with MFAC to comment. Do others?

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Howard Co, Maryland : I just received my 3-year tax assessment. They also list an estimated market value. Which is less than what our homes are selling at. Do I need to file an appeal? We're at the affordable end with 300k town homes 3br/3ba, so the selling price ought to be near the appraisal amount (most people can't put down 20%). I know assessment values can lag behind market value, but they specifically included a market value?

Daniela Deane: I don't see what there is to appeal here...Their too low number? That seems a blessing to me, unless I'm missing something here. Did you see our front-page story this morning about Maryland assessments increasing sharply? The same sorts of assessments are expected for Virginia and the District too. Here's the ugly side for homeowners of skyrocketing values...skyrocketing property taxes too....We're going to hear more about this in the weeks ahead. I'm going to send you a link to a story we did about appealing your assessment. I'll send that right after this.

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washingtonpost.com: Scared? You Can Fight Back On Taxes (Post, Feb. 7, 2004)

Daniela Deane: Here's the link to that story.....

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Clifton, Va.: Daniela,

A growing problem in NoVa is new homes with gang tags. My sister is suing her builder because gang tags were scratched into her cabinets, etched into her limestone bathroom floor, carved into her fireplace mantel and showing through after being covered on the walls. She bought a new house in Gainesville. A buddy of mine had a home custom built in Loudoun and has the same problems, which he discovered on walk through. He refused to settle and involved in dueling lawsuits. His attorney knows of at least 30 similar suits in Loudon, Prince William, and Fairfax counties. The builder's sub contractors are hiring gang bangers to work for them.

Daniela Deane: This is fascinating to me...I wonder if I should do a story about it. Is it gangs getting into the houses while they're being built to put their tags on them? Could you email me your sister's contacts at deaned@washpost.com or your friend that was involved too? Thanks.

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New York, N.Y.: Hi Daniela! I don't know if my question is New York based or general enough for you to answer. When trying to calculate whether I can afford a property on a real estate agency website, I'm wondering what mortgage rate to type into the calculator (it adds the monthly co-op maintenance to the monthly mortgage estimate).

My three credit scores are all above 700, I'm a first-time homebuyer, and no major debt. Do I input a 4% rate? 6%? Does it vary that much by state? Thanks!

Daniela Deane: Hi! We're happy to have a New Yorker here! I just spent three great days in New York...what a fabulous city. Average rates closed this week at 5.77, down from 5.81 last week. To make it easy, I would type in 6 percent if I were you. That's if you're planning on getting a 30-year fixed rate mortgage. But you can also get an ARM or an adjustable-rate, which will give you a lower rate for a period of time. There are also zero-interest loans out there too, where you're just paying interest and no mortgage principal...those are cheaper. Or a 40-year can be cheaper. I think you need to talk to a mortgage broker/banker and see what product you want.

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Howard Co., Md.: The assessment value was fine, but they also listed an "estimated market value." That number was low. In fact, I've never seen an estimate market value listed on a tax assessment before?

Daniela Deane: I've never seen that on my assessment before....Call your jurisdiction and ask them what that is...and whether it has any bearing on your taxes. It doesn't seem as important a number as the assessed value number, does it?

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RE: Gangs: Totally interesting subject - I would LOVE to see a story on that! That's definitely something I would have a problem with at walk-through on a new home.

-- A reader

Daniela Deane: Weird, huh?! Why are they doing it, I wonder...Just to make their presence felt?

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Philadelphia, Penn.: Daniela,
Do you think, with Fairfax and Montgomery choked with traffic, we will see development pressure in Prince George's County, particularly outside the beltway?

Daniela Deane: I think Prince George's County will get more and more interest from developers, builders and homebuyers in the years to come. More and more people are being priced out of more conventionally popular areas. Prince George's County has a lot to offer, it seems to me.

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Clinton, Md.: The question (re: tax assessments) was very interesting and helpful. We got our tax assessment yesterday and it was lower than the recently sold homes in our neighborhood. I was ok with it though because I was thinking about the property taxes. Thanks for the info.

Daniela Deane: Let's hear it for low assessments!!!!! I want one too!!!

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Arlington, Va.: Hello Daniela:
Did I understand today's article correctly? I believe it stated that taxes on increased home values in Maryland and D.C. are capped, but that in Virginia, our taxes rise proportionately to the increase in value?

If this correct, do you know of any initiatives on the part of homeowners in Virginia that are seeking to cap taxes in Virginia?

Thanks in advance for your reply.

Daniela Deane: Yes, in the District, taxes on owner-occupied homes can only be raised 12 percent in a year; in Maryland, 10 percent. In Virginia, there is no yearly cap. So they could go up more than 10 percent a year in Virginia. I don't know of any initiatives. But a quick search on the Internet would probably tell you if any exist...You want to start one?

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Arlington, Va.: I'm in the early stages of looking to buy a place of my own. So far my search has come to the conclusion that you can get more for your money (nicer home/neighborhood) buying a home in Maryland (Silver Spring, Kensington) area than in Northern Virginia. Is this true? What are the other costs of living in Virginia vs. Maryland (i.e., taxes, etc. )

Daniela Deane: The taxes in Virginia tend to be lower than in Maryland, although not every single tax probably. As a general rule, though, they're lower. So many factors go into making a house worth what it's worth ... neighborhood, location, proximity to transportation, schools, amenities, type of houses there, etc... If you've found some good deals in Maryland, I'd say go for it!

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Bethesda, Md.: Well, thank goodness for the ten percent cap in Maryland. Otherwise my property tax would be going up...a lot!

Daniela Deane: Here's a happy soul!

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Arlington, Va.: Hi Daniela! I've got a couple grand just lying around from online poker, and I'm looking to buy a house. What would you suggest?

Daniela Deane: I would suggest going back to college, my son!!!!

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Washington, D.C.: RE: The person who wants a higher assessment -- my home in the District has quadrupled in valuation -- market and tax -- since 2001. As a result, my mortgage just went up $300 a month because the escrow no longer covers the cost of the tax. Be happy.

Daniela Deane: Yes, the darn escrow letters are arriving in the mail now...They're a real bummer...Do you want to pay $900 now? Or would you like to pay that in monthly installments? How about not at all!!!!

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RE: Assessments: People want their houses valued more but then whine about property taxes. Give me a break! Be happy you're even in your own house and paying taxes rather than getting out-bid or out-priced in this market.

Daniela Deane: You make a good point. But stop whining? NEVER!

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Silver Spring, Md.: A young couple with two incomes, equaling roughly $140K before taxes. What is a reasonable amount of mortgage to undertake, assuming a 5% down payment?

Daniela Deane: It's hard for me to say....Look at your finances and see what percentage of your income you're comfortable paying. All the old rules about percentages of income have gone out the window. You can look at some of these sites online, put in 6 percent, and see what kind of payment comes up. Or talk to a mortgage broker about what you can qualify for (which isn't the same as what you might be comfortable with).

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Alexandria, Va.: We are putting our townhouse in a great neighborhood on the market this weekend (sniff, sniff - it's our cute little first home), with an open house on Sunday. The weather forecast indicates that it will probably rain. Any thoughts on whether the rain will impact how the open house goes? Obviously, prospective buyers will miss out on how much nice sun we get through the windows, but I'm more nervous that no one will show up because they won't want to go out in the rain. Should we put off the open?

Daniela Deane: If it does indeed rain, that will put some people off. If you listen to agents, you might wait to sell your house in a few weeks, until the spring market...(which starts way before spring). Maybe you should give it a try this weekend since you're ready and see what kind of response you get. If not many people show up, you might decide to hold off a few weeks.

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RE: Stop Whining: I'm with that poster. Be glad you're not being out-bid or priced out of the market (says the young professional being driven insane living with her parents).

Daniela Deane: It's hard to whine about the kind of appreciation homeowners have enjoyed here over the past five years....But heck, some people will try!

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Arlington, Va.: Hi Daniela:
Yes, I'd like to do something about the issue of real estate taxes in Virginia. Last summer I received an escrow shortage letter from my mortgage company saying I owed $700. I just received another letter saying I had another shortage of $550, even after an adjustment over the summer. I think this is excessive, don't you?

Daniela Deane: I got the same thing....I was $700 under-paid this year....sigh....It is scary to think about how much more we might have to pay. And I live in Virginia...And (this is the worst part), my neighbor died recently and I could get a bunch of houses next to me staring straight into my back yard...NOT IN MY BACKYARD!!!!! Boy am I understanding how people feel when they get mansions next door to them..

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RE: Howard County: Clearly you don't understand the real estate market sufficiently. Daniela is right, you don't complain about a low assessment. You enjoy it while you can because there will come a point when the market slows down where assessments will be higher than market value due to high taxes and high interest rates (all of which are coming).

Additionally, property value is based a buyers willingness to pay (classic economics), not tax assessments. Limits on annual assessment increases will create a lag in assessment/market value parity. Thank goodness! The appraisal process is based mostly on comparable units (size, neighborhood, amenities, features) and barely relates to tax assessment. That is used to induce buyers by showing how low the taxes are. So use that to your advantage and go forward with your sale.

Daniela Deane: I got an idea: Let's start complaining about low assessments too! I'm liking this!

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RE: Silver Spring: FYI - My wife and I make about $130,000 together, put 5% down on a townhouse and pretty comfortably pay a $2700 monthly mortgage. We don't have any other loans outstanding, though (car, student, etc).

Daniela Deane: Well, thanks for that...anybody else want to lay their financial history out to us?

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Sterling, Va.: I am having a house built in Loudoun County. I'd be interested in knowing where in Loudoun the gang tags are showing up...

Thanks!

Daniela Deane: Is that poster still on?

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New York, N.Y. (again): Sorry! Just a follow-up question about those mortgage rates -- does a high credit score make a difference, or is 6% the best (minimum/the floor) and a lower credit score will only make it higher from there? Thanks!

Daniela Deane: A high credit score does make a difference in that you can get the best rate available....I said to put 6 in like that so you could get a ballpark figure....because it's likely you'll be able to get six. You also might be able to get 5.75 ...Average rates this week were 5.77 nationwide for a 30-year fixed...6 was the "around" figure for a 30-year fixed-rate mortgage. Am I making any sense?

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Philadelphia, Penn.: Hi Daniela,

I have a strange question. I am considering buying one of the many new condos being built in the D.C. area. When one buys a new condo pre-construction, what sort of deposit is required? I assume a mortgage does not have to be secured until shortly before closing. I am looking at condos that won't be delivered until 2006. Thanks!

Daniela Deane: Usually, it's a $10,000 deposit to start off with (something like that), going up to 5 percent of the purchase price over the period of construction. So you have usually paid 5 percent of the price by the time you close. Where are you buying?

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Washington, D.C.: Are you aware of any well-researched estimates about the possible consequence on D.C. housing values should there be a major terrorist incident downtown (e.g., dirty bomb or major chem-bio attack)?

Granted, it depends on the severity of the attack and how long it would take to clean up. But would the bottom fall out of the market or do you think the government would be able and willing to prop up homeowner (and other) real estate values until successful clean-up?

As our home is our family's biggest investment--like most--this is of concern.

Thanks.

Daniela Deane: This is not something I even like to think about, but.....people are thinking about it. Do you think our government really has a comprehensive plan in case of attack? My feeling is that we'll be winging it pretty much if something does happen....and hoping for the best. Off the top of my head, I would say that it really does depend on how bad it is, how many people are affected, etc. I don't think anybody knows the answer to this one.

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Ellicott City, Md.: Talk about NOT IN MY BACKYARD!!!....A friend lives in an older development (30+ years) where the well-maintained homes sell for $375,000-$450,000 and up. One house was owned by an elderly couple that could not maintain it. They sold it to a younger couple that did major improvements and upgrades and put it back on the market.

An owner of a contracting company bought it -- he could because he has the money to afford it. He has let 10 day laborers move in. The yard is torn up, full of trash, they are cutting down trees (not professionals - some electrical wiring is in danger). They are tearing out the brand new deck to make a 2-story addition to the back. 8 cars with temporary tags are in the driveway and yard, parked on the grass. The owner/buyer has turned this half million-dollar home into a crash pad for day laborers. This could happen to you.

Neighbors are in an uproar, but the County can't do a thing about it.

Daniela Deane: What a shame....It's very scary. On my street, we're trying to form a homeowner's association now so that we might have some clout, but I'm not holding my breath as to the power we'll have.....I'm pretty worried actually.

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Philly (again): Thanks for answering the condo question. I am looking at condos that are planned for the Rosslyn-Ballston corridor but have not started sales yet (yes, there are still a few to be built!) I just moved to Philly in May for a new job and really, really, really miss living in Clarendon and the D.C. area so the 2006 condo thing should work out nicely.

Daniela Deane: Come back!!!!!

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Alexandria, Va.: RE: Early Spring market...What are the initial signs we should heed that the pace of the last several years is continuing or slowing down? Inventory? Multiple bids? Longer days on market?

Daniela Deane: You've mentioned the key ones....The word was the market had slowed a bit last fall, then came the holidays, which are always slow...So if it's going to get hot again, we should start seeing that soon, like a month or so.

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Washington, D.C.: Daniela,

I'm interested in investing in a condo in a "transition area" such as Columbia Heights. Do you have any rough estimates of appreciation over the last year and expected appreciation for the future for say a studio, 1 or 2 bedroom?
Thanks.

Daniela Deane: I don't have any numbers on all those different configurations...Here's one staggering number though: Condos in the D.C. area appreciated 27 percent last year, according to an Alexandria research firm. And although economists are predicting moderation, they're still predicting double-digit (over 10) appreciation in 2005...In my book, that's still a good investment.

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RE: Terrorist attack: I settled on my Capitol Hill home just 2 weeks after the 9/11 attacks and my house has tripled in value!

Daniela Deane: Oh good......

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RE: Second home/vacation home: After reading the last few chats, it looks like the market has cooled down a little bit.
I can definitely see the signs staying up longer and even seeing price reduced sign in my North Arlington (Spout Run/Military Rd) neighborhood. I've been looking at properties in Rehoboth/Bethany and I'm discouraged still based on the high price. Do you think this means perhaps the price of those condos/homes may come down or should I just consider further away to Duck, N.C.?

Daniela Deane: It's whether you believe it's going to continue or not...My opinion is that properties in Rehoboth/Bethany are still going to appreciate. So if I were you, I'd buy what I could now if that's what you want.

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RE: NoVa Gangs: This would be a great story! And it's not that the gangs are breaking into the houses to make their markings; it's that the companies that are building these houses employ workers who are members of various Central American gangs. If a builder has such poor oversight that they don't notice various gang markings on their houses before delivery, then that builder needs a refresher course in business 101.

Daniela Deane: Fascinating.......

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Daniela Deane: Folks! I'm sorry I didn't get to all your questions....There's no way I could! Please join me again in two weeks, same time, same place, where we chew the fat about Real Estate!

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