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: Hello everyone!!! Welcome to Real Estate Live, where we mull over this amazing real estate market we've got, among other things. I'm happy to say I'm off on a week's vacation tomorrow! But who cares! Let's talk real estate.
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University Park, Md.: Is it wise to cash out some equity to payoff bad debts?
Daniela Deane: Well, compare the interest rates you'll be paying and you may be able to answer that yourself. Prime is at 5.25% these days and most home equity lines and loans are tied to the prime rate. It's not as good as it was, that's for sure, but it's still relatively good. My home equity, for example, is at prime, so I'm paying 5.25% on that money right now. That goes up and down of course. If you're thinking of paying off credit card debt, it would seem smart to me. BUT and it's a big BUT... that doesn't mean you can just go out there and start racking up more credit card debt. Then it's no good at all. Do a comparison of the rates you're paying... and will be paying...and look at your spending habits honestly and I think you'll have your answer.
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Washington, D.C.: What's your best advice on selecting a realtor? My husband and I are at that point and looking for a D.C, licensed and D.C. based realtor. Yet, most of our friends live in Virginia. So, personal referrals are hard to come by. Any suggestions beyond looking in the phone book?
Daniela Deane: Check to see what realtors are active in the area you're looking in. You can do that online at the various listing sites, you can check in the newspaper to see who's listing what there and you can cruise the neighborhood and look at signs too. (Although there aren't that many signs these days). You can also talk to people who live in the neighborhoods you're interested in and ask them who's big there or who's been working there a long time. Often these realtors will live in the neighborhoods they specialize in. The stock advice is then to interview 3 realtors before you pick one. See who you click with, who impressed you and who you just liked.
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Alexandria, Va.: My wife and I are considering a move to River Place in Arlington. River Place is a co-op. The units there seem affordable and the location is excellent. What is the difference between a co-op and a condo and is there a downside to owning a co-op?
Daniela Deane: Co-ops are different from condos in several ways. The main way is the way you own the property. In a co-op, you own shares in the entity that owns the property, a bit like owning stock, rather than the property itself. Co-ops boards can say yay or nay to a buyer so it's not as straightforward to buy. You get screened basically by the co-op board. Not as many lenders do co-op financing, although you can find them certainly. Co-ops usually have stricter rules, like rules about renting the property out, for example. Some co-ops don't let you rent at all; others let a percentage rent. Co-op fees tend to be higher than condo fees too, but they often include much more, like utilities, for example. So before the fee scares you off, check to see what it includes. Some of our most beautiful buildings are co-ops here. And in Manhattan, so many apartments are co-ops. Just do your homework and know exactly what the rules are before you buy.
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Arlington, Va.: Daniela, I live in North Arlington in a two-bedroom bungalow that is now ridiculously priced. I could make a lot of money if I sold, but alas, wouldn't be able to afford to buy again in the same area.
The problem is that we need more space. Two bedrooms aren't enough to allow for children (eventually) and guests. In addition, the kitchen is small.
The lot is large enough for an addition -- to add two bedrooms to the back of the house and, below, an expanded kitchen and utility/laundry room.
But the casual quotes I'm getting from builders are in the range of $300K for the addition. This seems really ridiculous. I had been thinking under $100K.
So, my question -- what is a realistic price for a quality (but not palatial) addition and do you have any design/build firms you'd recommend that aren't going to start at $300K for the work?
Daniela Deane: I don't usually recommend companies (even though the companies would LOVE that I do, as you can imagine). I can say this: Remodeling costs have skyrocketed because of the incredible demand they've seen. So many people are remodeling rather than trading up because they can't find anything to trade up to. And they need so much money to make a significant trade-up. All that has meant booming business for remodelers in this area. And booming business means higher prices. Get a few different quotes. Most companies will give you a free estimate. Try a few of them out and see how much they differ. They can differ substantially and they can have very different ideas for your house as well. You're probably on the right track, remodeling in North Arlington. But you need more information. $100,000 is very little in remodeling dollars these days, as crazy as that sounds.
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Maryland: RE: Using equity lines to pay other debts...
Be careful. If you use an equity line to pay off a credit card, for example, you are swapping unsecured debt for secured debt. Be very wary of putting your house at risk in the event that your debts get or are so out of control or if you think you don't have the self control not to run up those cards again.
Daniela Deane: Yes. It's something that shouldn't be done lightly. But people do it all the time.
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Arlington, Va.: I apologize in advance if my question seems very dumb or naive.
My wife and I purchased a condo in N. Arlington in the midst of the recent boom. Near as we can tell the value has gone up about 100K. My wife now wants to buy a house and rent out the condo. The equity in our condo represents almost all of our assets.
So is it normal, advisable, or even legal, to get a home equity loan on one property to purchase a second home?
Daniela Deane: This question is not dumb...or naive... I just finished a story on second homes that's running this weekend. Second home buying is exploding in this country. And a lot of the second home buying has been financed by the huge build-up in equity that mostly baby boomers have had in their primary residences. That means they're selling their primary homes, but also in many cases, borrowing off those homes, like what you're suggesting. As regular readers of this forum know, that's how I financed by condo buying, by tapping into the equity I had built up in my Arlington home. Now, I don't have as much equity in my home as my neighbor, but I've actually spread out the equity over various properties that have appreciated handsomely. It can work definitely. But so much of it is based on this incredible market we've enjoyed....
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Rosslyn, Va.: First, know that there are a LOT of rentals in River Place. It's very popular with students at Georgetown and GW -- much overcrowding of units and use of the fire alarm as a late night town crier. Second, the land on which River Place sits is leased, and that lease is set to expire around 2050. That also makes a co-op there more popular as an income producing property rather than someplace to sell to an owner/occupier.
Daniela Deane: Thank you for the information on River Place. Obviously our previous poster needs to gather a lot of information before making a decision.
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D.C.: I have a follow-up question on selecting an agent (buyers agent in our case).
We have interviewed a few excellent realtors and one question we keep mulling over is How busy is too busy for an agent? We want someone who is active in the marketplace and has lots of experience, but we also want someone who will be available to work with us and not compete with other clients. How many buyers/clients can one agent realistically handle at the same time? 3, 5, 10?
Thanks and great forum...
Daniela Deane: That's a very good question and one I don't have a specific answer to, as in a good agent can handle 5 clients or 10 clients...Depends on the agent, doesn't it? Some are great at multi-tasking, juggling several balls, etc., others are not so good. Have you got a feeling already as to which of the agents you've interviewed has time for you? Did one answer your calls quicker? spend more time? any clues at all? You want chemistry, that's for sure, BUT it would also be good to get a buyer's agent who's in tune with the area you're interested in, who might know of properties coming up for sale before they do, things like that. This can be a tough market for buyers. Remember that when you sign a deal with an agent, you can always put a time limit on it so you don't get stuck with someone you don't like for a long time. Good luck finding a place! And let us know!
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Centreville, Va.: I need information about capital gains. We are in our mid-fifties and will be retiring in 5 to 6 years. We own two homes. First home, where we lived for 14 years, has tripled in value is currently rented. The second one where we are living has been doubled in value. I would like to continue living in the current home at least for next ten years. I am worried about paying for capital gain on these houses when we make changes.
Daniela Deane: Ah, capital gains... If we didn't have to worry about capital gains taxes, I could sell my much-appreciated condos and pocket all the money!! Wouldn't that be nice?? I hate taxes! Basically the rule is this: If you've lived in a property 2 of the past 5 years, you can pocket capital gains of $250,000 for a single person and $500,000 for a married couple without paying tax. If you haven't lived in it at all, you're up the old proverbial creek without a paddle! One colleague of mine at the paper who has bought several properties over the years (smart man) says he's trying to talk his wife into living into each of them for two years apiece and then selling... I've certainly considered that with the condo I've had the longest (and which has appreciated the most). Consult a tax advisor for more detailed info. You can also look on the IRS's web site, irs.gov where they spell it all out!
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Alexandria, Va.: Count me among the ultra-shocked after opening my property tax assessment last week. It's up 75% in three years. I know my condo was undervalued when I bought, but I keep wondering if these local governments are now swimming in cash, and if so, what the heck is it going toward? I don't want to sound whiney, but I sure haven't seen a 75% increase in Alexandria's amenities.
Daniela Deane: I almost had a heart attack when I opened my Arlington assessment recently. (Up 22 percent over last year) and the D.C. ones haven't even come yet... I'm steeling myself for that. I was on the Kojo Nnamdi show last week on this very topic and one of the guests was an official from Arlington County's assessment office. He admitted that the county's budget hadn't gone up as much as the assessments had (in fact the next day Arlington announced a nickel reduction in the property tax rate). He did say though that local governments count more and more on real estate taxes to fund their activities as other forms of revenue have dried up. What is there to say about this? I guess we must all be sure to exercise our constitutional right and vote for people we feel will use this money wisely in our favor. I don't know what else we can do frankly. Appealing our assessments seems to me to be hardly worth it, because the amount of money the average appealer gets knocked off, in Arlington anyway, was really chump change, according to the guy on the show...We gotta be happy that our properties have appreciated so much, I guess. I'm pretty confident that the value I received in the mail is the value I could get, if not a bit low. How about you? How was your value?
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Washington, D.C.: Second home story! Give us a quick preview anything about Outer Banks, N.C.?
Daniela Deane: I'm sorry. The story is about ski resorts, and features Wintergreen in particular, as a way to get into second home buying. It is ski season, after all. But...it's clear that all over, second home buying is really taking off. And certainly in the outer banks too. So be happy!!!!
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Falls Church, Va.: I have a strange situation about noisy neighbors, and apparently I'm the noisy neighbor. I live on the top floor of a condo and my new neighbors directly below are already complainers. They've been here a month and they've complained three times. The first time, I was vacuuming at 11 a.m. The second time, we were watching a movie at normal volume at 8 p.m. The third time, my husband was sick and they complained because he "coughed too loudly." I've lived here for close to ten years and have never gotten a noise complaint once.
I checked my condo regulations and we did not violate any rules. We have carpet on the floors, the vacuum is not extraordinarily loud, and frankly, I resent the newbies telling me how to live according to their preferences. I don't want to start a war with the new neighbors, but how do I get through to them politely that this is condo life?
Daniela Deane: Shoot! That's a dilemma... I don't see a whole lot you can do to bring the noise level down if you already have carpet (and padding?) and aren't making noise at unreasonable hours... You are allowed to vacuum at 11 a.m., by golly! Why not try to approach the person like this: I'm sorry I'm causing a problem for you. I want to be a good neighbor. This has never been a problem before. I already have carpeting and am trying to limit my noise to reasonable daytime hours. Help me figure out what else I can do to make this situation better. I know this involves swallowing some pride, but an aggressive approach just isn't going to work with this person, I fear. I feel for you, Falls Church. This really isn't fair. But perhaps my ultra nice approach can break the ice. I don't know what else to suggest.
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North Arlington, Va.: I agree with why remodeling is so popular here. You do want to be careful though... that you're not the first to remodel beyond the bounds of your neighborhood. If there are, say, modest Cape Cods around you, you don't want to be doing any 2 or 3-story additions or you'll be waiting a long time for the neighborhood to catch up so you can see a fair value for your improved house.
Daniela Deane: Yes, you have to be careful not to over-improve. But in so many neighborhoods these days, that's not a problem anymore...And you have to keep in mind how long you're going to live there and what you need in terms of space and living conditions too. In 10 years (providing you'll be there that long), everyone else will have improved too. Or in this climate, everyone else will have been torn down. (My house is a teardown now, I fear.)
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Columbia, Md.: Hello Daniela,
Are there any special programs out there in Maryland to finance for low priced investment property, preferably with little or no money down? I really don't want to tap into the equity of my primary residence. Nor do I want to buy a property where I also have to qualify for some huge rehab loan of $90,000 with a deadline for renovation.
Daniela Deane: Hi! I don't know of any off-hand, but that doesn't mean squat. Do an online search to start (that's where I always start nowadays) and check your county and state sites as well as anything else a search unearths. Why don't you want to tap into your equity? Are you sure you're ready to make some of the sacrifices that come with investing?
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Manassas, Virginia: The continuing spike in the price of real estate... when is this madness going to end? People down here are walking around like zombies. They cannot afford the overpriced homes they live in along with $12,000 year family health care, etc.
Daniela -- When is this run away train going to finally wreck and let things get back to normal? Most people look at their home as a place to raise a family, not an ATM machine.
Ken in Manassas
Daniela Deane: I like the idea of my house as an ATM machine, now that you mention it! Shoot! It's better than the regular one, which is attached to my piddly bank account! Seriously...I have no idea when it's going to end. Most economists tell you it's gonna go on for years here as long as the employment picture stays healthy and people want to move here...And interest rates stay low...30-year fixed rates averaged 5.62 percent this week, up from 5.57 last week. So still very low... it's all amazing, isn't it? It really is.
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Happy Homeowner: Hi Daniela!!!
This may be off topic, but for all those discouraged house hunters, we just found our dream house in Cheverly, Maryland. We could not believe it, after looking for over a year, we stumbled upon Cheverly and it is like a dream come true. We've been following your chats and just wanted to pass along this undiscovered gem, now that we settled!
Daniela Deane: Yey!!!! You're not the first poster to sing the praises of Cheverly... I'm happy for you. I really am.
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Lyon Village, Va.: My partner and I have a townhouse in Arlington Village. We extracted equity from it last year to purchase our new home in Lyon Village. We thought about selling, but with the momentum toward revitalization of Columbia Pike we decided to sit on the townhouse property. We'll be giving up the capital gains tax break, but we know our townhouse and the area, and the extra appreciation will be well worth it.
Daniela Deane: I think Arlington Village is a sweet little development on Columbia Pike… and Lyon Village is simply amazing now, with what's happened to Clarendon...Hey, two good properties!!! Gooooooooood for you. I'm happy for you. (Or am I jealous??)
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Dupont Circle, D.C.: Hi Daniela,
How do you feel about the Brookland neighborhood? I'm a first time buyer, currently renting in Dupont Circle. 1 bedrooms in Dupont are a bit out of my league financially, and I'm finding that Brookland is much more affordable. Do you think a 1 bedroom in Brookland is a better investment than an efficiency in Dupont?
Thanks very much - love your chats.
Daniela Deane: Hey there. I'm going to send you the link to a story I did on Brookland a few years ago. It says more than what I could say in this little box! Here it is:
Brookland Beckons (Post, Jun. 30, 2001 )
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Washington, D.C.: I have a deposit down for new construction in D.C. and am trying to budget my money for closing. How much are typical closing costs? I have been told everything from $5,000 to $12,000. Please help a worried first time homebuyer!
Daniela Deane: Hi. Closing costs usually average 3-5 percent of the purchase price. I'm also going to post a link here to a story I wrote on closing costs 18 months ago. I hope it helps.
What Will Your House Really Cost? (Post, Nov. 8, 2003)
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RE: Your hairdo: I definitely vote for the look on the inside page... very becoming.
Daniela Deane: Ssssh! One of my colleagues told me I really gotta do something about that... I'm thinking of getting some new pictures shot... after I get back from my vacation! with my tan!
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Alexandria, Va.: Daniela -- My husband, one year old and I live in Cameron Station in Alexandria. We LOVE it... we can walk almost everywhere, including a Home Depot, library, pharmacy, and more. The reason I write is that we live in a townhouse and will at some point need a larger home -- preferably a yard too. Do you know of any communities in NoVa that are either being built to accommodate walking or that are good for this?
Thanks!
Daniela Deane: Yey! A happy poster! Well there are a couple neighborhoods in Alexandria that are like that, aren't there? Right near you... more and more developers are going for the town center type developments. Spend time driving around and looking around while you enjoy walking around in Cameron Station, preparing for your next move! I wish I lived in neighborhood I could walk to some shops actually... I made a mistake in that regard.
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Daniela Deane: Folks! I've enjoyed this last hour so much. I hope you have enjoyed it too and found it reasonably useful. Come back again in two weeks, same time, same place, and know that I WON'T BE THINKING OF YOU NEXT WEEK WHILE I'M IN BARBADOS! Bye!
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