Maryann Haggerty and Elizabeth Razzi
Washington Post Real Estate Editor and Columnist
Friday, June 8, 2007
1:00 PM
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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Fairfax, Va.: We've installed some raised garden beds in our yard to make gardening easier on the back and realized that once filled with soil, they are rather a long-term commitment. We are not planning on selling anytime soon, but would there be any impact, positive or negative, on having raised beds (in wooden frames) in one's yard at selling time or would it just depend on a buyer-by-buyer basis?
Maryann Haggerty: I think it would be buyer-by-buyer. I have seen homes marketed to gardeners (one that sticks in my mind had asparagus beds. Talk about a long-term commitment!)
Anyway, when the time comes to sell, you'll just want to make them look as pretty as possible. If you let them deteriorate, ie, if the wood rots, then they become a minus.
Elizabeth Razzi: That's absolutely right. It all depends on how good they look and where they are located. To be safe, you should assume that any buyer would NOT be a gardener, and so before the sale you might wish to plant the beds with attractive--and most important--very low maintenance perennials.
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Elizabeth Razzi: Hello! Isn't this the very best way to launch a weekend?
Elizabeth Razzi: I have a question for all of you! Has anyone out there had experiences using some of the new online real estate services, such as zillow.com, trulia.com, or the others? How have they worked out for you?
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Maryann Haggerty: Hello, all. It feels like summer out there today, doesn't it? Let's dive in and see if we can answer your questions today...
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D.C. Suburbs: I'm sure we're not the first people to go through this so any advice would be great. My boyfriend and I each own our own homes and we plan to marry soon. We will live in my place before buying a place together within about two years. Are there any tax implications with selling his place, finding a new house, then selling mine within two years? We hope to use the profit from his place as a hefty down payment. Should we sell his before we are married for any tax reasons? Anything else we need to consider?
Elizabeth Razzi: Congratulations on your plans! There sure are tax implications, but I think you'd find it well worth the money to consult with a lawyer or CPA, as the deadlines are strict. ("Publication 523" on www.irs.gov offers an overview, but doesn't fully answer your question. An important thing to remember is that you can claim the capital-gain exclusion only every two years. And since you both are bringing assets into the marriage, a little professional guidance could really help you get started on the right track.
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Tysons Corner: Hello and Happy Friday! After moving around the greater D.C. area for the last five years, my fiancee and I are renting a house here that we really love -- great structure, nice property lines, a fantastic neighborhood. The owner seems willing to explore selling the house to us in the future, but the comps and tax assessments in the area are a bit high for a first-property purchase (even for a mid-30s couple with no children as yet). As an interim step, what do you think about rent-to-own agreements, and how would I go about exploring this possibility with the landlord in the event that it seems like an advantageous option? Thanks!
Maryann Haggerty: Yes, rent-to-own can work. In essence, it is a way to force yourself to save toward a downpayment.
Maryann Haggerty: Whoops. I hit the wrong button there. Anyway, our columnist Bob Bruss is a big booster of lease options. You can read his explanation of the pros on cons on his Web site:
http://leaseoptions.bobbruss.com/leaseoptions/
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Washington, D.C.: What is the latest on the Old Convention Center site and how will it affect local real estate values? While it brings in business and walkable activities, it also adds to an already saturated condo supply in that area not to mention potential congestion.
Maryann Haggerty: I'm not sure how, in the long run, you can have TOO MUCH development at a site like that--it's the absolute middle of a city. That's where density belongs.
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D.C.: Thank you for taking my question. I am a prospective first-time homebuyer, and I had been thinking that this might be the year (after nine of renting) to take the plunge on a one-bedroom condo. Prices seem to have stabilized, but now I see the interest rates going up. Would this summer/fall be a wise time to buy in your estimation?
Elizabeth Razzi: I'm convinced it's impossible to accurately time the market. It's like guessing which number will catch the ball on the roulette wheel. The best way to judge the situation is by looking at your own finances--and by bargaining hard when you make a purchase, especially if it's a one-bedroom condo. There's still a glut on the market, and you can't afford to overpay. Look at your finances and your plans. Do you expect to live there at least five years? Then it's probably safe to buy. If you may be moving elsewhere in just two or three years, then renting would be the safer choice. Good luck.
Maryann Haggerty: I'll agree--market timing is difficult if not impossible. You just have to make decision based on your own finances and needs. If you try to catch the exact top, bottom (or middle) of any market, you will only drive yourself nuts.
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La Plata, Md.: Maryann: Love your Real Estate talk. Can you please provide your thoughts on no interest loans? I have a 10-year no interest primary trust loan for $477,000 at 5.25 percent and a secondary trust loan for $60,000. The second trust costs me 7.4 percent interest. I purchased the all brick, two-acre, 3200' home for $595,000 and have put in wood flooring and granite countertops, with upgrades worth around $30,000. I only plan on staying in the D.C. area for five to seven years. Some people think I was crazy to take this loan out, but I feel as though I am still paying off the loan since I do pay interest on the second trust, albeit not as much as I would on the Primary Trust. I estimate the house is worth around $650-$675 with all of the improvements and two years of small growth. Your thoughts?
Maryann Haggerty: I'm a bit confused by what you mean by no-interest loan. Do you mean an interest-only loan, where you don't pay down the principal?
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Washington, D.C.: Maryann: I am starting to save for the down payment of a condo (since I finally paid off my credit card debt -- yay!). I am realistic and know that I probably can only afford something simple. I want to put down a decent down payment so that I can lower my monthly mortgage and also because I want a standard mortgage. I will be a first time home buyer in the District. What percentage of the purchase price should I should be saving toward? I know it used to be 20 percent, which I would never be able to do, and that others have done no money down. What is standard now?
Maryann Haggerty: I'd say a rational down payment for a first-timer would be between 5 and 10 percent. That keeps costs in control. Allow yourself another 5 percent for closing costs.
Elizabeth Razzi: Ask lenders about FHA-insured mortgages, too. They require as little as 3 percent downpayment. The loan can be for no more than $362,790 in this area, but that might be enough to cover you.
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Washington, D.C.: Today's New York Times features an article about a study out of Madison, Wisconsin that shows that houses sold through real estate agents generally do not fetch higher prices than for-sale-by-owner properties. The article seems to suggest that at least in that city, sellers are better off going it alone and not paying commissions. While there is no national data available, do you think this study may apply to D.C., too? In our area, is it really worth it to hire a real estate agent to sell my home? Thanks for taking my question!
washingtonpost.com: Here's that article: One City's Home Sellers Do Better on Their Own
Maryann Haggerty: That was an interesting article. The study was full of all sorts of caveats. In brief, two econ professors looked at sales patterns 1998-2004 in Madison & found that average price of a house sold with and without an agent were about the same, as opposed to real estate industry studies that have found the agent sales are higher priced. One of the big caveats is that Madison has a very established local FSBO site and a LOT of FSBO sales. That means that people are very used to dealing with this, whichisn't the case in a lot of other places.
Frankly, I don't know whether you should go with or wihout an agent. I think that is a decision that has as much to do with your own priorities and personality as it does with any study.
Elizabeth Razzi: So much depends on the individual. Is someone who is so pressed for time that they don't make their own coffee or wash their own car going to take on the job of selling their own home? It's more likely they'd rather pay someone else for the service. On the other hand, if you're the sort of person who always sells your used cars on your own, rather than trade them in, and you don't shy away from the marketing and bargaining tasks involved, then why not try the FSBO.
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Washington, D.C.: Considering it is a "buyer's market" especially with condos in the District, what kind of concessions can buyers expect/ask for when shopping around?
Maryann Haggerty: If you are buying an existing house or condo, expect to bargain over price and ask for help with closing costs.
If it is new construction, try bargaining on price & closing costs, of course, but also ask for any relevant upgrades, free condo fees for a while, maybe free parking--whatever strikes your fancy or whatever appears to be the norm in competitive buildings.
Elizabeth Razzi: You also could ask the owners selling an existing condo to pay for a year's worth of condo fees.
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Clarendon, Va: Why is the The Post not doing a better job of covering the current state of the condo market in the Arlington/D.C. area? It's a pretty bleak market with multiple foreclosures happening, lots of units not selling and buildings being not sold out or not even half or a quarter sold out and lots of owners trying to sell or investors trying to get out. Condos are a big reason prices we're blown out of proportion here and yet we've heard nothing about the "negative" aspects of them now or the massive amount of units on the market.
Maryann Haggerty: I'm afraid you and I don't seem to be reading the same Washington Post. For almost two years now, we've been reporting about overbuilding, etc., in the condo market locally--and will keep doing so as this cycle plays itself out and whetever the next cycle is begins. Here, for instance, is a story from about two weeks ago...
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washingtonpost.com:
Maryann Haggerty: Here...
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Gardening: I'm horrible at gardening, but I'm thinking of selling soon. I was thinking about hiring someone to just pretty things up, but would landscaping firms bother with my tiny townhouse yard? Or would they want me to pay the same as a half arce lot for their time?
washingtonpost.com:
Maryann Haggerty: There seem to be a lot of smaller landscape firms out there that will gladly tackle a small yard. In my Capitol Hill neighborhood, a big yard is maybe 12 feet by 8 feet--and thre are some beautifully landscaped ones. They often have signs in them saying who did the landscaping. If you see a good one, give them a call. You can also get recommendations the usual ways--friends, garden centers. And the American Society of Landscape Architects has a searchable database (www.asla.org)
In my experience, they will price things several ways: X amount for a consultation, Y amount to do the work...
Elizabeth Razzi: I've had good luck with some of the local garden supply stores that offer landscaping consultations. Some will l charge a one-time fee, and credit that fee toward the bill for plants. Ask around!
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RE: Bob Bruss: Missing his new columns and hope to have him back soon. I've made a big ole pile of money thanks to him.
Maryann Haggerty: We also hope that Bob will be back in the next week or two. He had major surgery this spring and has been recuperating. He reports that he feels a lot better now.
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Washington, D.C.: I'm a first-time buyer but having no luck finding anything affordable in D.C. I'm not seeing a lot on the market right now which concerns me because in the past this is the time when homes pop up on the market every minute. I'm glad you are having this discussion because I have been considering holding off buying because the market is just very unstable.
Unfortunately, it seems in order to buy something in D.C. that you have to spend at least $550,000 or more anything below this is either too small or a dump and if you buy something in a not so pleasant area that they say is "suppose" to be an up and coming area will take too long for the property value to increase where you can make a profit that will get you a larger home. This is were I would like more insight about the D.C. housing market. I don't think if I buy a small property that I will be able to sell it in two years to get the place that I want and need. I want to lock into a home so that I can invest in another property but so far I can't find anything that I can afford yet alone will be able to sell in two years. Where do you see the market?
I'm considering moving to the P.G. County, Md., area but the new homes with the high utilities that is all the talk now and the local tax which is added to the mortage makes buying a new house unaffordable. What to do? (Buy or not buy).
Elizabeth Razzi: I think two years is too little time to own a home. As you note, the market is "unstable," so why invest for such a short time. There's a very real risk that the price would not rise enough to cover the broker's fees two years from now.
Maryann Haggerty: Agreed. Two years is a speculative time frame.
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Potomac, Md.: We just put our house on the market. Are there any forecasts for the market over the next six months? We need to move to Boston. How do the two markets compare?
Elizabeth Razzi: I don't find forecasts to be all that accurate over such short periods. You will find that you're moving from one of the most expensive housing markets on the East coast--to one of the other most expensive ones. That said, I believe Boston's market has taken a harder hit in prices than the DC area. Our region has the second-lowest unemployment rate in the U.S., and that has kept the market from being even softer than it is.
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Loudoun: The value of our home has probably gone back to our purchase price in 2004, if not slightly less ... but the plus side is there are other, larger homes in our neighborhood for sale at great values for us that we could now afford to buy ... is it worth buying one of those on contingency, and be willing to live with some loss on our own home after comissions, etc. Or do you think we'd be throwing good money afer bad as homes could continue to decline in value? We certainly don't have to move, but we wouldn't mind a home with better features. I'm not sure if we should wait out selling for a few years. Or ten, or twenty. Thoughts on trading up homes in this market?
Maryann Haggerty: Well, do you like your neighborhood? Would you be happier in one of those bigger houses, even though you would lose money on the sale of this one? I have absolutely no idea how much home prices will change in your neighborhood, especially given that I don't know your time frame.
Elizabeth Razzi: I think you have a pretty reasonable plan there. Yes, your home price has fallen, but so has the price of the more-expensive home, probably by a greater percentage. If there is a lot of empty new construction in that move-up home's price range, you can expect prices to remain soft for a longer time. You might even explore putting your home on the market now, at a realistic price, and take it from there.
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Arlington, Va.: My friend used Zillow and basically he felt a lot of the listings we're manipulated and totally inaccurate.
Elizabeth Razzi: Manipulated by whom?
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D.C.: If I were to buy a condo in D.C. after years of living in a single-family ... would I be disappointed (relatively new construction) in the sound muffling? Would I hear the neighbors? Would they hear my stereo (mostly jazz etc., but do I need to keep it so low I can't hear it?)
Elizabeth Razzi: That, indeed, is a big deal when you move to condo. Newer construction tends to be better insulated for sound than older buildings that started out as rentals. Ask your real estate agent if you can tour the home in the early evening, when most residents have come home from work. You'll get a better indication of the noise--and the parking.
Maryann Haggerty: Noise is THE biggest complaint about multifamily living. You just can't avoid it completely. As Elizabeth says, try to visit the unit at times when you are likely to hear noise. But also realize that you will have to do some defensive decorating--rugs, wall hangings, furniture make a big difference in perceived noisiness. You also want to avoid putting your stereo & TV right up against the walls, particularly if you like a lot of bass...
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Oakton, Va.: In response to the Zillow question, I was on the Web site the other day looking at our current property, not only did it list it for way less than our county and private assesment, but the sales prices for other homes in our neighborhood have been at least $100,000 more than what it showed for ours. (and these are very recent sales) It also does not take in consideration features such as materials and updates in or aroud the home. I just feel it is not accurate ... just a thought.
Elizabeth Razzi: Thanks for that thought. Have you considered updating the information on your home's Zillow entry, or would you rather not?
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Bethesda, Md.: RE: Good time to buy? You need to have a clue about your temperament. A friend of mine divides people in the housing market into 'nesters' and 'pioneers' -- nesters tend to stay put, pioneers tend to move around. If you're a nester, the state of the market doesn't matter very much, but if you're a pioneer, the state of the market can make a big difference.
Elizabeth Razzi: So true. Pioneers always take risks, but presumably they find a payoff!
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Please settle a debate: Let's say there is an existing condo community 20-35 years old adjacent to a new community being built. Do you think the new community sales prices will provide a boost to the older condo homes sales prices or "suffocate" the existing homes with no very little market appreciation being realized?
I say buyers will have a mental block with buying a 20-35 year old home next to brand new homes regardless of their price range.
My friend thinks the new homes will help the old homes because the demand will increase for the older homes because a larger number of people wont be able to buy the new homes being built will result to the older product.
I counter by saying retail development boosts everyone's market value but new residential only boosts the new homes and does very little for existing residential product.
Your thoughts? We are very curious to hear another viewpoint.
Elizabeth Razzi: My guess--and it is only a guess--is that the new community won't affect the old one at all. There is probably a huge price difference between the 20-35 year-old community and the brand new one. They will attract different buyers entirely.
Maryann Haggerty: New development puts an absolute ceiling on the prices of the older stuff nearby, as a rule. This is easiest to see in a neighborhood of similar houses--older ones will simply not sell for more than new ones.
If the new development is significantly nice, though, it also tends to pull up the more modest older stuff, by making the neighborhood more desirable.
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Hillsboro, Va.: Comment on the "Madison, WI" article:
I think that most buyers go with an agent in this area and agents are going to swing wide of houses that are not for sale through a broker. It is not in their interest after all to encourage "For-Sale-By-Owner".
Of course, with the advent of the internet, an agent not showing a client a house because it is "FSBO" is taking a chance that the buyer will see the house anyway.
Elizabeth Razzi: It's a very big chance the buyer will have seen the home already. And if I were a buyer, I would make it clear to my agent that I expected to see all the homes that fit my criteria, regardless of whether they were listed on the MLS or being sold FSBO.
Maryann Haggerty: Yes, I think you need to make that clear. (And you also need to understand how your agent will be paid in the case of a FSBO. In many circumstances, the seller will pay the agent's 3% or whatever. But if the seller absolutely refuses to cooperate, what does your contact with your own agent say?)
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Columbia, Md.: Hi, Maryann and Elizabeth. Do you know if there are any special deals or assistance from the local govt. or builders themselves in the area for single, first time buyer who makes under $50,000 a year? Back in 1999, I had heard that Alexandria was selling condos for half off to 'low-income' people back when condos were $100,000. Is there anything like that right now?
Maryann Haggerty: That should indeed qualify you for a number of local government programs. Check with your county government. (I don't know if it's possible for us to find a link to last Octobr's chart of various government programs, but will try...)
Just as an example, a single person with $50,000 income would indeed qualify as low income (but not "very low") under DC's housing assistance program. Assistance avaialbel and income limits vary by locality.
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Timeframes: I purchased a two-bedroom room foreclosure condo in 1998 for $80,000, I tried to sell it a year later for a small profit -- no bites. I rented it out for six years (to the same tenants) -- and then sold it for $225,000 in 2004. I had to pay capital gain taxes but I still made a nice profit.
Lesson learned ... timing is everything!
Elizabeth Razzi: Sure is. Now the big question for you: When do you plan to buy real estate again?
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Gaithersburg, Md.: I'm curious ... when you talk about condos, are you generally referring to apartment-style condos? We have a townhouse-style condo and while we don't have any immediate plans to sell, this negative talk is making me nervous.
Elizabeth Razzi: I think most people refer to apartments when talking about "condos." In this area, some townhouses are owned in a condo format (that is, you own the interior only), but many (if not most) are owned in the traditional way. Those owners own the interior, the roof, the bricks, and a little bit of grass outside the front or back door. In most places, the townhouse market was not as overbuilt as the condo apartment market.
Maryann Haggerty: Yes, even though technically condo is a legal definition, not an architectural one, in this market, we mostly mean aparmtent condos
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washingtonpost.com:
Maryann Haggerty: This is Elizabeth's column from last week about Zillow.
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Woodbridge, Va.: I like Zillow as a tool, but I wouldn't use it exclusively. If you're not buying or selling immediately, but are just idly curious about what your house is worth, or the one you pass on the way to work, it's great.
Elizabeth Razzi: Here's a bit more on Zillow:
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Alexandria, Va.: What are your thoughts on Loudon County, particularly Ashburn. It seems that buyers have a huge advantage there, since houses are staying on the market longer and owners are reducing their prices frequently. If you don't mind the commute (tried it and is essentially the same from where we live in Alexandria -- a little over an hour), you can get so much for your money.
Elizabeth Razzi: I drove all over Loudoun county a few weeks ago, just to get acquainted with the market. There certainly is a lot available out there, and some beautiful communities. It's important to remember that many residents of Ashburn and those areas don't commute all the way to Alexandria or the District. The Tysons-Dulles corridor is the destination for many. However, for those who do commute all the way in, it could get truly ugly once construction eventually begins on the Metro through Tysons.
Maryann Haggerty: It depends where you're commuting to, of course. But those Loudoun commutes can be real killers. Did you see the article in today's paper about how Little League games are being messed up because parents all come home so late?
You really have to weigh the pluses and minuses for your own family. Perhaps one parent making a killer commute means that the other parent can afford to stay home with the kids, or take a near-by part-time job. Maybe that makes the tradeoff worth it...
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FSBO: I sold two homes via the FSBO route at the listing prices (I did a lot of research before coming up with a price). However, I did list it in the MRIS and offered the buyer agent three percent.
Elizabeth Razzi: What service did you use to get it in the MRIS (the local Multiple Listing Service)?
Maryann Haggerty: There are a lot of limited-service agents out that that will handle the MLS-only part of it.
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RE: Zillow, Oakton: I did update my home on there site. It did not change the value that it listed it at. I am just concerned that when we list our house that some of these buyers will use some of these sites to assess what they think my home value should be.
Elizabeth Razzi: Interesting. You definitely have to prepare your arguments explaining why your value is higher than Zillow's estimate. A point by point listing of your home's valuable features--and the addresses of some homes that you know are truly comparable to your own--will help.
Maryann Haggerty: Yeah, interesting thought. People will use any info available--good or bad--to negotiate. As a seller, you should be prepared to demonstrate with real cops why you think your value is real
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Elizabeth Razzi: Have a great weekend, everybody. Thanks for some great questions!
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Maryann Haggerty: Well, we're running out of time. I hope you all pick up the Real Estate sections in the newspaper Saturday and Sunday. Saturday's section features an article about an increase in Latino home buyers in Southeast Washington. And on Sunday, Elizabeth looks at which parts of the market slow down in the summer--and which don't.
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Washington, D.C.: Is there a way to get the list of bank owned homes for sale instead of signing up with these foreclosing companies who just want your credit card and SS# to do whatever with it?
Elizabeth Razzi: Call several local real estate brokerages and ask them who handles a lot of bank-owned properties. Often they list them for sale the same way other homes are marketed. Keep an eye out in the classified ads for real estate auctions. Call up the auctioneers, get their schedules, and review the properties on their websites.
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Reston, Va.: Thanks for the chats, they have been very helpful. I took your advice last year at this time, about location, location, near-schools location, and bought a two-bedroom condo. At the time, there were three identical units in the same development on the market for over five months without a single offer. I negotiated the purchase accordintly, got significant closing costs from the seller, and all in all paid about 10 percent less than was paid in the last one or two years.
That said, I've noted with interest, per my realtor's info from MLS after closing, that condos in our development are a bit "warmer" now than last year, and the same units as mine have sold back at the one or two year ago price range (yes, even taking into account concessions like closing costs). Go figure. I am not taking this to mean anything about the market, just the truth in location, location, school location!
Elizabeth Razzi: Your experience should be reassuring to the Gaithersburg reader with the question about condos v. townhouses. It always seems the best locations are first to pull out of any slump.
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RE: Zillow: I recently sold my house without an agent and used Zillow a lot to look at prices around the neighborhood. I found it a really good way to see what was selling, what had sold in the past, and to compare the qualities of those properties with mine. I didn't use its "make me move" service or anything like that, however.
Elizabeth Razzi: Interesting. I wonder, were there any tasks associated with the sale that you found difficult to handle without an agent?
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