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.

Haggerty is joined by Washington Post columnist Elizabeth Razzi. Razzi is the Local Address columnist for The Post's Sunday Real Estate section in Business. She's written about real estate and other personal finance topics for magazines and newspapers since the days of double-digit interest rates. She is also the author of two consumer-advice books, The Fearless Home Buyer (2006) and The Fearless Home Seller (2007).

Today, they'll discuss 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, all.

I hope you all have had a chance to see our special two-day Real Estate extravaganza, either in the paper version that was printed Saturday and Sunday, or in the Web version, which we should be linking to here.

In it, more than two dozen articles explored various aspects of the questions, "What's It Worth?" Because life is not simple, we didn't com eup with one simple answer.

But if you have questions, we'll try to answer them now.

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Elizabeth Razzi: Hi, everyone--Great to see you folks on a Monday for a change.

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washingtonpost.com: The Post's Housing Outlook 2008

Maryann Haggerty: Here's the link to the whole package.

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Silver Spring, Md.: What if you bought a single-family home at the peak of the market and are not happy in your location? We realized that we would prefer a condo in D.C. or in a walkable neighborhood near a close-in Metro station -- is it better to sell now and take a loss while you can buy low? Or is it better to hang on until you can recoup your investment, but pay a higher price in your new location? Our agent says he expects condos to go down more than houses and that if we wait a year it could work out better for us.

Elizabeth Razzi: Maybe it would be better; maybe not. It's simply a gamble either way. I personally would favor making the move sooner rather than later for a few reasons. You're not happy where you are. Condo selection is good. Interest rates are pretty low. It's not that certain that condo values in convenient-to-Metro locations will decline that much more. Developers pulled a lot of them off the market and turned them into rentals. Why not try to sell your Silver Spring home now -- at a competitive price -- and shop the condo market while you await a sale?

Maryann Haggerty: It depends on who much of a loss, etc. There are some numbers that may lock you in where you are, but you don't know exactly what they are without exploring. It depends how high you bought at. (And your agent thinks you should wait? Hmm ...)

Way those numbers against how much you dislike your house.

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Southern Maryland: In this market, how much below the asking price is insulting to the seller? Most homes on the market (in Southern Maryland) have been on there for months, but are still over priced.

Maryann Haggerty: This one tends to attract strongly different reactions.

First, let's begin by saying that there is no set percentage. You need to look at comparable sales -- some people are asking for the moon, others are more realistic. You wouldn't bid a mechnically exact percentage off either one.

That said, if a property has been on the market a while, I really don't see why anyone should get emotionally wounded by a bid that's 10 or 15 percent below asking. The seller can always counteroffer. Or say no, flat out. And if the answer is no, the buyer has no right to get huffy and emotional, either.

Elizabeth Razzi: And what if they do get huffy or emotional? That shouldn't worry you much. Besides, they always have the option of countering your offer, and keeping the negotiation rolling.

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Bowie, Md.: We our starting to look for a house and wondering what is best to look for economically speaking: gas, electric or oil for heating and such?

Elizabeth Razzi: Interesting question. But with utility prices so crazy the answer isn't as clear as it used to be. One source of info for you is the U.S. Dept. of Energy.

Generally, though, electric heat tends to be very expensive, especially in a climate like ours that can have severe winters. Gas has usually been more economical than oil, and more convenient because you don't have to order refills. Gas heat also gives you the option of gas cooking, which most chefs prefer because it's so quickly adjustable.

Maryann Haggerty: My house is all electric (It was built during a gas hookup moratorium in the 1970s, when gas was short. And expensive.)Consistently, over more than a decade, this has been the most expensive way possible to heat. Gas and oil swing somewhat in relationship to each other, but gas is by far the more popular here. (Oil is dominant farther north.)

I yearn for gas.

My sister in law was pointing out the other day that even in this climate/latitude, small solar panels might help, and that have come way down in cost. I'm tempted to look into that.

In the meantime, we keep lots of afghans and other throws around the house.

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Washington, D.C.: I'm in a situation where I put a contract on a house that was a short sale. The seller signed off on the contract. Then, the bank requested more financial information from the seller and now the seller's agent cannot get in contact with the seller at all. It took me six weeks just to get this far. What is going on? And, what should I do?

Elizabeth Razzi: Welcome to the funhouse. It certainly doesn't look like a sale is going on. The lender probably wants to know if the seller has assets that she could tap to pay off the mortgage in full, instead of leaving the lender with a loss. Perhaps the seller moved out? It's hard to say. What doesn't seem to be happening is a sale to you. I'd cut bait, withdraw my offer and look for another home.

Maryann Haggerty: Yeah, we keep hearing stories about how very difficult these deals can be to close.

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Washington, D.C.: When the terms of a mortgage are revised and the value of the home is written down, is that new home value made public? In other words will readjusting mortgages lead to downward price pressure on other homes in the neighborhood?

Maryann Haggerty: Interesting. I don't know. I would think the new mortgage needs to be recorded, but how will that affect comps? Generally, they weigh arms-length transactions, but??? Anyone actually have real knowledge?

Elizabeth Razzi: Appraisers and tax assessors used to say that they did not take such distressed transactions into account when setting values. But I think that's been changing, at least in neighborhoods where they are in abundance and are really setting the price.

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Annapolis, Md.: I am about to buy a house not for an investment, but because I need a house. I am renting an in-law apartment for $1,200 a month and will be moving to owning for $2,800 a month, partly room to stretch, partly the closer commute, partly the tax break. So please, tell me I'm doing the right thing.

Thank you.

Maryann Haggerty: Can you afford $2,800 a month? Do you like your new place?

Once you get past the inevitable buyers regret -- and it is inevitable with any purchase this big -- will you be happy in your life?

Thre's your answer.

Elizabeth Razzi: Try your new-homeowner budget on for size. Get it as close to real as possible, and put the extra cash in the bank to cover new-home necessities, like trash cans, doormat, whatever. Keep in mind you can adjust your employer's withholding to reflect the mortgage-interest tax break. That will free some cash each month to cover the mortgage. But a $1,600 jump in monthly living costs is a big jump. Count your new commute costs, food, cable tv, EVERYTHING....

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Washington, D.C.: Wow, I bought my first condo three years ago with five percent down and an interest-only three-year ARM/two trusts. I had hoped to be onto a bigger condo by now, but it won't sell and my three-year ARM ends next month. Is it worth it to take another three-year ARM out with my primary mortgage holder and hope that I can sell within the next three years or bite the bullet and try to get a fixed mortgage?

Maryann Haggerty: You have to explore the loan market and do the numbers. You may find it's tough to get that fixed-rate loan at all (you have little or no equity.) If you do lean to an ARM, work out whether you'll be able to afford the maximum if it readjusts.

Elizabeth Razzi: Be sure to look into FHA mortgages as a refinance. And is there any way you could pay off that second trust? I'm hoping you made more than interest payments over the past three years, but I'm not optimistic.

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Washington, D.C.: My husband and I are interested in a condo in D.C. that's priced about $25,000 more than we want to pay for it. Comps show that similar units in the same building sold for $25,000 less than their asking price in Summer 2007. In other words, comps sold for prices similar to what we'd like to offer. Should we submit a low offer or wait to see if they drop the price? It's been on the market for a little over two weeks.

Maryann Haggerty: If you really really like the place, I would go ahead and submit the offer--you don't know how they'll react.

Then again, if NO ONE else bids, you'll likely see that asking price come down.

As I typed those two answers, I realized: It really feels like six of one and half dozen of the other....

Elizabeth Razzi: Go for it. Make an offer for what you think it's worth ... maybe a smidge less. Either they'll take it (yay) or make you a counter-offer. You have nothing to lose either way.

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Fairfax, Va.: I bought my first home in August '06 with a traditional 30-year fixed loan. I am now regretting that I bought so soon -- interest rates were higher then and so were the home prices. With the price I paid in 2006, I could have bought a bigger/better place today. In any event, there's not a whole lot I can do now ... does anyone have an educated guess when the market will stop sliding downhill and plateau?

Maryann Haggerty: The educated guesses are all over the place. The most upbeat say mid to late this year, the consensus seems to be sometime in 2009, the most downbeat never.

I don't make predictions myself.

Elizabeth Razzi: The problem is there's so much more going on in the economy and financial markets than a simple supply/demand imbalance in the housing market. Nobody knows how long it will take for the credit markets to start functioning normally. It's an unprecedented situation. Sit tight, enjoy your home ... and wait this one out.

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Arlington, Va.: I'm a bit puzzled by your response to the earlier question re: the trend of condo prices in the D.C. area. The housing report itself states that "more than 16,000 new units" are being marketed in the D.C. area. With all this supply hitting the market (at the same time demand is dramatically falling), can there really be any question as to where prices are going?

Elizabeth Razzi: "DC area" is a very big place. And there still are a lot of people moving here, looking for close-in, easy-commute living. Prices have come down on a lot of condos, and many have been taken off the market. There still has been strong demand for nice condos in the District. With gasoline prices forecast to rise farther still, that will support demand. I go back to my other points ... they're not happy where they are, and interest rates are low now. Could higher interest rates offset a further decline in condo prices? Can't predict that -- but it's something to consider.

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Arlington, Va.: I see that Arlington is the clear winner for SFHs according to your breakdown. That is generally true, but with one caveat. Be very careful if you're looking at a SFH on a busy thoroughfare (Washington Blvd., Wilson Blvd., the huge new one on North Ohio Street that cut down a bunch of old growth trees, etc). I've seen a number of homes on busy streets in Arlington just languish, with multiple price drops and no action.

Maryann Haggerty: A location on a busy street is what has traditionally been thought of as an "incurable defect." It has been a while since I have seen any numbers that show how much such a location subtracts from the value compared with other physically similar homes on quieter streets.

One of the weird characteristics of the boom years was that people were buying nice, big, luxe houses practically on top of freeways. I have to think that those traditionally undesirable locations are among those where value does not hold up.

Elizabeth Razzi: I agree -- With all the selection at hand now, buyers don't feel a need to compromise. Why buy the big, nice house on a busy street when you can find a similarly big, nice house on a quiet one?

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Washington, D.C.: We currently rent and are looking to move into yet another rental. We've looked at a lot of houses to rent and there is this one that we like in particular, however, the landlord prefers that the next tenant lease for two years. We are still gauging the market, that is why we're going to rent again. But do we rent for one year or two years? My fear is that if we signed the two-year lease, then we may not have any flexibility to purchase when we would like to in the next two years.

Elizabeth Razzi: Is the landlord giving you a nice incentive to commit for two years? What does the lease say about terminating your tenancy early? I'd push for a one-year lease, myself. As you said, there are a lot of houses to rent out there.

Maryann Haggerty: All lease terms are negotiable -- especially when you're dealing with a private party. So negotiate what the penalty for terminating the lease might be and what the upside on a two-year lease might be (ie, rent remains stable for two years.)

But a reminder: Be nice with your landlord at this point. You don't want to develop an acrimonious relationship from day one with the guy who's in charge of maintenance on your home.

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No correction/retraction yet?: "For example, a quick search for condos or houses priced at $350,000 or less in Fairfax County showed only six properties. Six!"

I'm curious to know what search engine you used so that I will NOT use it in the future, as there are a lot more properties on the market in Fairfax County at or less than $350,000 than just six.

Elizabeth Razzi: I had trouble believing that myself -- which is why I searched again just before the column went to press -- and it showed five. Clearly there are more homes on the market -- as many agents have pointed out since the column ran yesterday. A search for Fairfax County properties priced between zero and $350,000 on McEnearney's website this morning showed 2,521 listings. Long & Foster's website continues to show five. Weichert's site does not allow searches by county, nor does Realtor.com. I will be talking about the 2,515 listings I missed in next Sunday's column.

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Falls Church, Va.: Age old question: I own a condo and have an age-old question for you. I would like to upgrade to a single family home. Should I buy first, then sell, or vice versa? And do lenders provide loan pre-approval based on one's ability to carry both mortgages concurrently, or one's financial situation once the old home has been sold?

Elizabeth Razzi: Age old answer: Only buy first if you have enough cash to carry mortgages on two homes for as long as it takes to sell the old one. That's what lenders will be looking for, anyway. In this market, I would definitely sell the condo first. It could take much longer than you expect.

Maryann Haggerty: Making two moves can be a pain, but you may find that there is enough flexibility in setting closing dates, etc., to minimize or eliminate that hassle.

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Bidding for a house: I recently discovered that anyone can search property records online in D.C., parts of Maryland Virginia. I have found it very useful to see how much a homeowner paid for their house and the size of the mortgage(s) they took out to make the purchase. I think it's another piece of the puzzle in determing how much to bid for a home.

Maryann Haggerty: That info is easily accessible, as you have found. However, what the seller paid for the house often turns out to be a very minor part of pricing psychology, if it plays in at all.

It misses the point to say, "Well, he only paid $XXX. He should be happy with $YYY, after all that's a huge profit." In what year? And what else has he put into the house over time? How does that compare with the rest of the market. There's so much the purchase price won't tell you.

Elizabeth Razzi: It can sometimes tell you that they probably don't have much room to bargain -- at least comfortably. And some investors will try to ask the seller to help finance the deal, by taking part of the payment over time.

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Appraisals: I bought a townhouse and am now under contract. The bank just did the appraisal and the home appraised at the exact price for which I purchased it. The appraiser looked at three homes in the neighborhood, two of which sold for a bit higher, and one which sold a bit lower. But in looking at the report, I see that the appraiser went in knowing the purchase price of the home I bought. Doesn't that kind of defeat the purpose of getting an honest appraisal on what the home should sell for? Or did I just get lucky that I spent the exact right amount?

Maryann Haggerty: They do tend to come in very very close, don't they?

Some people question the validity of the entire system. Others would be willing to say that by offering X amount, which is within a reasonable range of recent sales, that you have in effect set the fair market value.

Elizabeth Razzi: I've asked appraisers why they should want or need to know the contract price and haven't heard any convincing arguments for the practice. It seems to me the appraiser should be the last to know the contract price.

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Capitol Hill, D.C.: I see on your 2008 housing report that prices fell in Southeast Capitol Hill and Southwest. Can you explain this trend?

Maryann Haggerty: Southwest (Zip code 20024) is very easy: There aren't enough single family and townhouse sales there to be worth counting--the trend is just too small. But there were just enough so we had to show it on the map.

Southeast Cap Hill (20003): My guess on this one is that at at the eastern edge of the Zip code, I have seen a lot more houses for sale, and these are less expensive than the ones closer to the Capitol. Areas that used to be very shaky are now full of young gentrifying families.

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Anonymous: My husband insists on selling our SFH in Centreville FSBO. I keep telling him that in this market, that is a recipe for disaster. What do you (the experts) think? by the way, he also refuses to offer a buyer's agent any more than a two percent commission.

Maryann Haggerty: Well, it depends how much time and effort you want to put into it. And also what your thinking about price is. Will you be significantly below other comparable houses with agents? Or will you be trying to pocket the whole commission you save? Buyers likely are going to expect a cut of your savings in some form.

You can always start FSBO, but with the understanding that you'll reconsider your stance at a set point in the future, if that becomes necessary.

As far as offering on two percent -- that's likely to restrict your market immensely.

Elizabeth Razzi: His refusal to offer a buyer's agent more than two percent makes me think that maybe he's not the best one to market your home. That's penny-wise/pound foolish. IF you're going to try to sell FSBO in this type of market, you have to have a knack for selling things; be willing to spend some real money dressing up the home and advertising it. And you're going to have to offer a very attractive price. Many buyer's agents don't like working with FSBOs -- even at a better than two percent commission, because they fear having to hand-hold both buyer and seller.

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Manassas, Va.: I was dumb enough to be talked into buying a house from Centex homes for $700,000. The same model is now selling in the mid-$300s as a resale.

Is there anyway that I can suit the buider for having sold houses that were totally overpriced? I was told at the time from the realtor that the builders profit was 20 percent when in fact I have learned that the builder was making as much as $400,000 on a $700,000 sale.

Elizabeth Razzi: There are no laws against making a profit. And could you imagine if the tables were reversed, and builders went after buyers for extra cash because they sold for too little? And you shouldn't assume that resale in the mid-$300s is in the same kind of condition as your home. There could be all kinds of repairs needed if it went to foreclosure.

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Anonymous: RE: Southern Maryland: In this market, how much below the asking price is insulting to the seller?

I put a offer on a house that has been on the market close to a year, $20,000 below the asking price. Is $25,000 impossible and anything can happen is this market. There is no other offer on the house.

Elizabeth Razzi: Re-phrase the question to how much below "market" price is insulting to the seller. If you offer a price that's backed up by recent comparable sales but it's 5, 10, 15, or 20 percent lower than the asking price, the seller has no justification for feeling insulted. You've made a fair offer.

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Rockville, Md.: How much can I afford on a new house? I am single, makes slightly over $100,000 a year and has no debt. Thanks.

Maryann Haggerty: Depends on how much you have saved for a down payment, and what your credit rating is like. You can find a lot of very good calculators on line. (try bankrate.com and similar sites.) You'll have to guesstimate a bit at taxes and insurance.

Elizabeth Razzi: Don't take a loan officer's word for it, though. It's not that they're fibbing, it's just that they will tell you the maximum loan amount for which you qualify. Their calculations don't count expenses that you may not be willing to cut, such as elementary school tuition or daycare. Use the calculators, and then take that housing expense number and feed it into your own very, very detailed budget. If you can, try to live on that budget for a few weeks.

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Arlington, Va.: Ladies: What are your thoughts on people getting priced out of the market? My husband and I are young professionals, we have about $100,000 for a downpayment (we inherited a good portion of it), and make a living above the median in this metro area. However, to buy a three-bedroom house (TH or SFH) in Fairfax, we're looking at a $350,000 to $400,000 mortgage, which means a monthly payment of approximately $3,000. We think we can swing it, but things will certainly be tight for the first few years and we'll postpone starting a family during that time. But, what do others do? I assume many are not lucky enough to have that type of downpayment or monthly income. I just think it's absurd to spend $3,000/month on housing, especially if the house needs a lot of work like many do.

Maryann Haggerty: That's the big problem, isn't it? Prices are still so high.

But so are rents. This is an expensive place to live.

Elizabeth Razzi: This has been the situation for the 25 years I've lived in this area. Most folks have to compromise on size, amenities or location. It's the price of living here.

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Arlington kitchen remodel: I know there may not be one answer to this question, but we purchased a 1950s condo last year that is in desperate need of a kitchen remodel. We plan to stay there for at least another three to four years until we have children and outgrow the condo. How much does a kitchen remodel really add to the value of a condo? We aren't talking a $15,000-20,000 remodel -- it's just a narrow galley kitchen, although I am sure it is entirely possible to spend that kind of money. In the condo community we live in, updated kitchen does not seem to make TOO much of a difference in the list price, but perhaps that is just because the market is doing so poorly. Can you provide any insight?

Maryann Haggerty: You put your finger on the big point: How many other units in your complex have renovated kitchens? If they all have, you'll eventually need to renovate to keep up. If only a few have, well, it's a lot less of a factor.

But also take your own needs into account. How bad is your kitchen? How much will an updated kitchen improve your life.

Oh, and sit down when you get those price estimates. It is VERY EASY to spend $15K renovating a galley kitchen.

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Elizabeth Razzi: Thanks for the questions & comments. See you in the Sunday business section, folks.

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Maryann Haggerty: Wow. Time seems to have flown.

There are many good questions we have not been able to get to; sorry. Some we'll answer in print over the next couple weeks.

Thanks for joining us.

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