Real Estate Live

Welcome to Real Estate Live, an online discussion of the Washington area housing market with Post Real Estate editor Maryann Haggerty.

Maryann has been with The Post for 18 years and has served as real estate editor for the last five years. She's been a business and real estate editor and reporter for about 25 years. In all that time, she still hasn't figured out where you can find a lovely but inexpensive house in a charming neighborhood.

She's online twice a month to answer your questions about the local housing market -- from condos and investment properties to contracts and mortgages.

For more on local real estate, visit washingtonpost.com's Real Estate section.

The transcript follows.

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Maryann Haggerty: Hello, folks. Have you had perhaps a little --TOO MUCH-- of your home this week?

New numbers out today show that housing starts dropped sharply last month (we'll find you a link to that). Also, numbers out yesterday from the National Association of Realtors confirmed what many of us already new--sales prices of homes in many regions, including this one, were down last year.

Let's talk about what all this means for us!

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Springfield, Va.: My neighbor across the street sold his house for $515,000. If I can only get $480,000 right now for my house, should I sell? Or should I wait to see if the market improves in a year or two to sell at a higher price?

Maryann Haggerty: Do you want to move? Or do you want to stay? Market timing for the sake of market timing is a fool's game.

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Washington, D.C.: Two years ago I signed a contract to reserve a condo in a new, large building that is still under construction. The building is expected to be ready to move in this fall. About 1/3 of the units are still for sale. Should I assume that the builder would kick in for the unsold units' condo fees, or would those units' condo dues go unpaid until the units are purchased? I'm not sure what the industry standard is, and I'm curious how fixed expenses (like the master insurance policy and the salaries for front desk staff) will be covered.

Maryann Haggerty: The standard is indeed that the developer pays those fees until the unit is sold. (He is, after all, the owner.)At the point when control of the condo association passes from the developer to the real owners, the lawyer for the association (who should be different from the lawyer for the developer) should remind the new association officers to check and make sure those fees were really paid in real money, not IOUs in the petty cash box.

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D.C.: I'm someone who is hoping to be able to buy my first home/apartment in another couple of years. I know absolutely nothing about mortgages, where to start, figuring what I can afford, etc. What book for the first-time buyer would you recommend to a newbie like me?

Thanks.

Maryann Haggerty: There are a zillion books out there. Get to a library or bookstore and see what's on the shelves and what seems to fit your learning style. I have come to rely on "Home Buying for Dummies" as a good, clear, reliable first step.

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New York: Hi! Sorry if you answer this all the time, but I'm finally ready to buy my first place and I just don't know how to start. I know the first step is mortgage "pre-approval" but where to look/proceed without getting my credit score all banged up from too many inquiries flooding in all at once? How should I narrow down the search? Thanks so much!

Maryann Haggerty: Don't worry about those inquiries banging up your credit score. The system is set up so that it accounts for shopping around. Start with your own bank and credit union. Also contact a reputable mortgage broker recommended by friends/coworkers. The Web also makes comparison shopping easy.

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Arlington, Va.: I've been reading countless stories over the last couple of weeks about problems in the sub-prime lending market. Sub-prime lenders are failing almost weekly because of high default rates on loans. There is talk of tightening lending standards, raising borrowing rates, and reducing loan supply.

In your opinion, is this a sign of bigger problems to come? Are sub-prime borrowers a large portion of recent D.C. area homebuyers? What about all the ARMs that will reset this year -- could this cause additional difficulty in refinancing? Any spillover risk for the prime market? What should I make of all this?

Maryann Haggerty: There are indeed some very big problems lurking in the sub-prime market. Because of soaring house prices,loans such as option ARMs, interest-only adjustables and no-money-down piggybacks were very popular in this region over recent years. These are the very loans that are sparking concerns now.

Traditionally, the scummiest of sub-prime lenders have preyed on the poor, making unscrupulous second mortgages and the like. (For example: "Own a house? You can get a loan!". This latest round of sub-prime loans, however, seems to have involved a much much higher proportion of home-purchase loans. Regulators believe that many borrowers who took them out didn't really understand the consequences.

We shall see whether these borrowers can really pull off the necessary balancing acts.

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Springfield, Va.: I know that prices will not appreciate as much as it did during 2001 and 2005. On average, what do you think the percent range of appreciation will be from now on?

Maryann Haggerty: Historically, real estate appreciation rates have very closely tracked inflation rates.

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McLean, Va.: Hi Maryann,

It seems like the housing market is still correcting itself. I'm currently looking to buy a house and like to compare the listing price of a home to the assessed value on the county Web site. Some houses are listed way above the assessed value and sometimes it's on par. Is a good way to see if the houses are overpriced or priced right?

Maryann Haggerty: To repeat: The assessed value of an individual house has little or nothing to do with its market value. The assessors try to get as close they can, but they do so by trying to fit everything onto sort of a bell curve. An individual house could be right in the middle of its group, or it could be an outlier. People who believe their house has been under assessed never appeal. And many who may believe they have been over assessed don't think an appeal is worth the effort.

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Manassas, Va.: Dear Maryann,

Prices down here are dropping like flies. Some builders have cut their prices as much as $200,000.

I am in the process of selling my home. It has been on the market for over six months and has not sold. It shows beautifully. I have dropped the price almost $100,000 less than what Prince William County has it assessed to be worth. I have also agreed to pay the purchaser's closing costs.

Any suggestions on what else I can do to move this property?

Maryann Haggerty: Sit down with your agent and review how you have been marketing your house, in comparison with other houses on the market (your competition). Are you among the nicest houses at your price point--in other words, a good value? Are you making sure that all prospects know that?

In extremis (I've never done this myself), my columnist Robert Bruss recommends renting with an option to buy.

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Rockville, Md.: A HUGE issue I see in the housing "pyramid scheme" we have seen in the past few years is that there are very limited new first time home buyers who can afford to buy a home now. Prices have gotten so out of control that the only people who can truly afford to buy are people who already have homes to "trade in". An example: if you are GS-12 in the federal government making roughly $75,000 a year, there are basically no homes/condos you can afford to buy in the D.C. area (in a decent area). What are your thoughts on this? Where will first time home buyers come from?

Maryann Haggerty: First-time buyers will buy when their resources and the prices of the housing stock come into alignment. There are many ways that can happen. Here are some that have been in play:

--First, a bitter truth: A GS-12 with one income probably can't afford to buy a house here. In this market, it takes two incomes, whether spouses, friends, whatever.

--In recent years, easy mortgage terms allowed many people to make purchases that more traditional terms would have prevented. How the mortgage market shakes out, particularly the sub-prime market, will weigh heavily.

--A significant portion of the first-time buyer market has consisted of immigrants.

--Prices may need to remain stagnant for a while for incomes to catch up.

--Or we will lose people because they can't afford housing.

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Arlington, Va.: Hi Maryann,

I'm thinking of buying a studio in D.C., but have been cautioned by others regarding the ability to resale. What are your thoughts?

Maryann Haggerty: Studios have indeed traditionally suffered on resale compared with larger apartments. The exception in this area has been studios in college-student-heavy neighborhoods; those have always had a special appeal.

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washingtonpost.com: Pace of Homebuilding Drops in January, (Post, Feb. 16)

Maryann Haggerty: Here's the story on the latest housing statistics that promised...

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Washington, D.C.: Other than putting my house in the MRIS, what should I expect my listing agent to do? Put ads in the paper? Have open houses?

Maryann Haggerty: In no particular order: Put the house in MRIS. Put it in the paper. Put it everywhere on the Web. Hold open houses. Hold broker opens. Work her network. Get great photos to go with all your listings. Prepare memorable, but simple, information sheets. Work closely with you to make sure the property appears as spiffy as it can, at the appropriate price. Conduct showings for buyers who don't have agents.

What am I forgetting?

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Los Angeles, Calif.: In your opinion, is this a good time of year for buyers to start looking? We are moving to D.C. this year from Los Angeles. Our agent tells us that the stuff on the market now is the "dregs" left over from last year. And we tend to believe her -- everything we've seen so far has serious flaws. When does the spring season really begin to pick up?

Maryann Haggerty: This is a matter of debate. Once upon a time, spring began sometime in March/April. The start over the last few years moved closer to the beginning of February ("after the Super Bowl," many agents said. A lot, frankly, depends on the weather--if it weren't for three days of total ice-over, I would expect a noticeable jump in new listings this weekend. It could start as early as next weekend. Or it could be a couple more weeks.

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Charlottesville, Va.: I am moving to Pittsburgh, and was going to rent, but the housing market is relatively cheap ($50,000 for a decent house in a decent neighborhood) so I am thinking about buying, and flipping. Down payment will be no problem, but I will have no work history, and I was wondering if you had any suggestions on how to go about getting a house. Lastly, any tips for a new buyer in such a situation would be great. Thanks!

Maryann Haggerty: Markets such as Pittsburgh can make a Washingtonian's head spin. It's possible to find a decent house with payments less than your car payments.

Of course, one of the reasons for that is that there's not a lot of demand from buyers. That makes buying and flipping not so easy.

Still, one way to do that is to find a lender who doesn't care about such niceties as work history. They do exist--though I would hope that folks making no income/no asset verification loans these days at least think about creditworthiness. Assume such loans will be at high rates.

way is to do something that involves seller financing.

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Nokesville, Va.: Maryann,

We just moved into new community back in September 2006, I noticed that prices has gone down quite a bit in our community, is there a statute of limitations for what you pay for your house versed your neighbors.

Maryann Haggerty: Absolutely not. You paid what you thought it was worth. They're paying what they think it's worth.

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Upper Marlboro, Md.: Ms. Haggerty,

I would like to know how these people afford these $500,000 dollar homes. My wife and I make over $140,000 a year together and still wouldn't be able to afford a $4,000 dollar mortgage, with two cars, two children one which is in daycare. We like to have money for other things like food for one. We have look at several listings but sellers of existing homes are greedier than the builders. Is this mess going to end or should we move to another country. Where are the foreclosures I can't find them either or has the banks jump on the band wagon of greed?

Maryann Haggerty: People afford it in a lot of ways. Some make bigger down payments--from savings, from parents' gifts, from profit on previous homes. Some find cheaper loans, such as adjustables or interest-only loans.

A $4,000 monthly housing payment is steep at your income, but even the most conservative lender would easily allow $3,250. Even that, of course, makes for a tight monthly budget. That's where carrying your lunch and recycling the zip lock bags comes in.

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Washington, D.C.: Hello Maryann,

This sentence in your introduction caught my eye: "In all that time, she still hasn't figured out where you can find a lovely but inexpensive house in a charming neighborhood."

What do you mean by inexpensive? Two years ago, I moved into, what I think is Washington's best kept secret. The Lamond-Riggs neighborhood, east of the Fort Totten metro. The houses are very well-priced, even today. There are single homes, but the majority are semi-detached brick houses from the 50's. The neighborhood is well planned, with wide streets, and a lot of trees -- most certainly charming! Check it out sometime.

Maryann Haggerty: What do I mean by inexpensive? I don't define it, because everyone who asks me that question has a different definition depending on their circumstances.

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Lorton, Va.: I am a landlord and my tenant left without paying the rent and water bill. Now Fairfax County has sent me a letter stating I should pay the water bill by a set date else a lien will be placed on my property. I don't get it since I didn't sign up for the service and the tenant was responsible to the payment. I have tried to contact the tenant to no avail. What should I do? Thanks.

Maryann Haggerty: Pay the bill! They WILL put a lien on the house. That's how water companies work. And they also won't provide service to the property--which makes it kind of tough to rent out in the future.

Then take the tenant to court to collect both the rent owed and the water bill you paid. Getting him to pay up may be a bit tougher, of course, if you can't find him...

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Falls Church, Va.: Hi Maryann,

I have looked at a couple of apartment to condo conversions in Virginia and noticed that, while the developers do not want to negotiate on the price of the units, they are willing to provide $10,000 to $20,000 in subsidies to assist with closing costs, condo fees, etc. However, I have also been told that, in Virginia, state law prevents these subsidies from exceeding 6 percent of the price of the condo. Is this right, and are there similar laws in D.C. and Maryland? Also, can I put any of this money towards the actual cost of the condo?

Maryann Haggerty: I don't know if it's state law. But I do know it's something even more unbendable--lender rules. You won't be able to get a mortgage with a seller contribution of more than 6% to the transaction. At some point, the seller needs to actually cut the price, which cuts the size of the mortgage.

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Insulting:"That's where carrying your lunch and recycling the zip lock bags comes in."

No amount of thriftiness could get me a house in this area. I find this remark insulting.

Maryann Haggerty: Except that it's not. It's realistic. People DO buy houses here. Not all of them are two-lawyer families. To be able to do so they make day-to-day decisions about living within tight budgets. They make those decisions knowing that rental costs, too, are outrageous here.

Personally, I calculate I save $120 per month by carrying my lunch to work. That's the amount needed to pay each month toward $19,000 of mortgage principal on a 30-year, 6.5% fixed rate loan.

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Ashton, Md.: Five years ago, I bought a home with my brother as a cosigner to qualify for the loan. I came up with all the down payments and closing costs. Since, I've lived in the house and made all the mortgage payments. In addition, I got married three years ago. Now, I am trying to ask my brother to grant quit-claim deed, so that I can transfer the deed to me and my wife. However, my brother is not that willing. What are my options? Thanks in advance.

Maryann Haggerty: I'm assuming (though you don't say)that when he cosigned the loan you also put him on the title.

Sit down and have a serious brotherly discussion. Thank him for helping when you needed it. Tell him you are, of course, ready and able to refinance the loan immediately to relieve him of any financial obligation. And ask him what he wants. Did he think he would be entitled to some portion of the house's appreciation in the long run? Is there a fair amount you can offer to pay him now?

If he absolutely refuses to deal, you can file a partition suit to remove him from the deed. Be forewarned: A judge mat solve your problem by ordering that the house be sold and he be given a sizable portion of the proceeds.

So instead, maybe you want to ask one of your parents to play referee in the interest of many more years of pleasant family gatherings?

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Arlington, Va.: What financial criteria should I look at in determining whether a rental property would make a good investment? Positive cash flow? What percentage?

I've seen some properties listed for sale advertised as "great investment" properties, but based on some quick calculations it looks like the mortgage payment and taxes would be almost double the current rental income. How can people claim that is a good investment?

Maryann Haggerty: The percentage return you should expect depends on the return you can earn elsewhere in your portfolio. Small scale real estate ownership is a high-effort investment that in a rational portfolio demands a higher return than, say, bank deposits. (Don't make me explain IRRs, ok?)

There are lots of good books out there that will walk you through the elements of determining whether the numbers work. But unless there's a reason you can count on strong appreciation--say, the property has fix-up potential--expectations begin with positive cash flow as a minimum.

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Maryann Haggerty: It looks as if I have to go. Thanks for your time; I'm sorry I couldn't get to more of your questions. I want to leave you, however, with some conversations about real estate I had this week, both of which left me thankful that the market here isn't even scarier.

The first was a conversation with a friend who has to move to New York for job reasons. She is beginning to realize how difficult it is to find a small two-bedroom co-op in Manhattan for much under $1 million.

The other was a conversation with a friend who lives in New Orleans. Her house wasn't damaged much and she no longer has co-workers sleeping on the couch, so things are a lot better than they were a year ago--but still a lot worse than I like to think about.

On that note, have a nice holiday weekend...

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