Real Estate Live
Friday, February 20, 2009; 1:00 PM
Welcome to Real Estate Live, an online discussion of the Washington area housing market with Post Real Estate editor Maryann Haggerty and author Elizabeth Razzi.
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.
Razzi has 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 discussed 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.
Elizabeth Razzi: Hello, everyone! Glad to have you back for another chat. Don't forget to get your comments in early -- we always seem to run out of time at the end and can't get to some great stuff.
Maryann Haggerty: Thanks for joining us.
There's been a lot of housing news this week, as the administration had made public the outlines of its foreclosure rescue plan. We'll post some links to articles about that plan, but if you're reading this live, you may want to skip them for right now and instead get your questions and observations in early.
We have some big news today: Beginning on Monday, Elizabeth will be blogging on The Post's Web site. The blog, called "Local Address," will look at all sorts of real estate stuff. We hope it will be as much fun as these chats. More on that later. Now, let's see what we have today...
Washington, D.C.: I would like to refinance a house I'm currently renting. Is the refinancing process different for a house you buy then end up renting vs. refinancing for a house you still live in? Thank you.
Maryann Haggerty: If I understand you correctly, you are trying to refinance a house that you own and rent out to someone else. That means you are an investor, and investors do indeed get treated differently than homeowners. That's always been the case, but even more so now--loans cost more for investors, and these days, they require pretty high equity levels to refinance.
When you sign loan papers, one of the ones you sign attests that you live in and intend to continue to live in the house... Lying on that is a bad thing.
Elizabeth Razzi: Lying on those forms is fraudulent -- but that doesn't mean you're expected to live in that home forever. After one-to-three years as a resident you can convert it to a rental. It's been common practice for years that people got started as investor by keeping their old home, bought presumably at a more-affordable price, and renting it out instead of selling.
washingtonpost.com: Obama Proposes Package To Stave Off Foreclosures
Maryann Haggerty: Here's one recent foreclosure rescue story...
washingtonpost.com: Mortgage Rescue Eligibility Still Being Finalized
Maryann Haggerty: ...and another foreclosure rescue story, from today's paper. Bottom line: A lot is still up in the air...
washingtonpost.com: How the Program Would Work
Maryann Haggerty: ...and here's a good Q&A on the mortgage plan
Bel Air, Md.: I received a time share from my dad who thought it would be great for my family to use on vacation. The actual "property" is in Orlando. Long story short -- yearly taxes and fees are $ 800.00, whether we use it or not -- and we are not. Any tips on how to best sell this property? Thanks.
Maryann Haggerty: It is very very difficult to sell time shares. If you get lucky, you may be able to sell on the Web (eBay, craigslist, some specialized sites) for pennies on the dollar.
Your best bet may be to contact the property and see if it is possible to deed it back to them.
Has anyone had specific luck with this?
Elizabeth Razzi: That's the problem with timeshares. You're on the hook forever for those annual fees. Sell it for very cheap on Craigslist or one a web-based group such as the Timeshare Users Group (Google it). That will at least get you out from that annual fee. Make sure they officially take title!
Silver Spring, Md.: Have either of you been a real estate agent? What about another position related to the industry (e.g. mortgage broker)?
Maryann Haggerty: No, I've never been a real estate agent, mortgage broker or anything else associated with the industry. I have been a business writer or editor since 1981.
However, for a couple years in there, I was a notary public...
Elizabeth Razzi: No, I have never been a real estate agent, lender, etc. I have bought homes twice, sold once, remodeled a couple of times. Never owned an investment property or vacation home, though I don't see that there would be anything wrong with that. I have been a journalist since the early '80s, which did include four years (1984-88 to be precise) writing for a newspaper that was published by the National Association of Realtors for its members. I learned a lot about how the industry and government really work by doing that job. My professional experience also includes 11 years writing for Kiplinger's Personal Finance magazine and authorship of two consumer-advice books.
Northern Virginia: I've followed your chats for some time now and it appears you both have a bias towards pro-D.C. real-estate prices/values. Are either of you familiar with the traditional (i.e., pre-2002/3) fundamentals of housing prices? For instance, are you aware of the traditional relationships between home prices and median incomes or rent vs. buy ratios or inflation? Using any of these measures as a guide, it was apparent post 2003 and is still apparent now that D.C.-area prices (yes, even the beloved NW quad) are still over-priced and over-valued. Can you please disclose to your audiences what conflicts of interest, if any, either of you have? Do either of you have investment property in the D.C. area? Are you realtors/brokers outside of this column? Thanks.
Elizabeth Razzi: Okay, here we go. Check out my earlier answer for my C.V. And, yes, I'm quite familiar with pre-boom real estate in the Washington area. And that's a very big reason why I think it's rational for Washington-area home prices to have risen higher than the national average. Yes, things obviously got out of hand in the early half of this decade. But I remember well when Arlington was dominated by shabby used-car lots and vacant properties, when the areas around Metro Center and Chinatown were scary places to walk after dark. I even remember when sex shops were thriving two blocks away from the White House. There has been incredible urban renewal in the District and some of the close-in suburbs. Many older homes have been dramatically remodeled. And that adds value.
Maryann Haggerty: ... What she said.
(The only property I own is the house I've lived in since 1992, when it was across the street from an abandoned public housing project. Plus a share in a co-op that owns some historic cabins in Virginia.)
Silver Spring, Md.: This may sound like a ridiculous question, but what exactly qualifies a building to be "new construction?" I live in downtown Silver Spring, and purchased a new condo three years ago. I know it was new, because I watched the building go up from just a hole in the ground. Across the street was a high rise apartment building that used to be called the Springwood. It was converted to a condo, renamed "The Mica" in 2006, and is now listed as "new construction." I grew up in the area and know the building has to be at least 40 years old. It was not gutted -- the units were fixed up, but that isn't what I would call "new construction." All of the units that are listed for sale on the Post's website list the building as new construction. How can that be?
Maryann Haggerty: I'm not sure it makes any difference for legal reasons. Thus, for marketing reasons, they can call it what they want, I guess.
Elizabeth Razzi: It could make a difference for appraisal and fire insurance reasons. As for advertising -- the onus is on the folks who who place the ads to be truthful about their product.
Washington, D.C.: My husband and I own a home. We are currently seeking to upgrade to something bigger for our growing family, and the prices seem good. We would have to sell our current home. Based on the current trends what advise would you give about selling now. Thank you
Elizabeth Razzi: I would advise that if you want to sell, make a wholehearted attempt at it. Make it the most attractive offering in your community, in terms of looks, condition and price. Just don't try to test the waters with a high-ish price--that just doesn't get a home sold these days.
Maryann Haggerty: Also, sell before you buy, unless you have the wherewithal to carry two mortgages.
Lorton, Va.: An investor with multiple homes under-water. What is an investor to do?
Elizabeth Razzi: A smart investor ought to have the cash flow to carry those investments even if their values have declined. Your holding period could be much longer than you'd ever hoped it would be.
Maryann Haggerty: With luck, your business plan relied on rents rather than flipping, but even that could be a bit shaky in some neighborhoods.
Find the best tenants you can and treat them fairly to reduce costly turnover. Then hold on, if you can. If you can't hold on, at least be humane to the tenants, OK?
Stanley, Va.: This may be out of your area, but would refinancing be a good idea simply to change the company that holds your mortgage? In other words, refinancing for us right now wouldn't be much of benefit, other than we would no longer be with Countrywide, and that company makes me nervous.
Maryann Haggerty: Don't bother. You have no control whatsoever over who lands up servicing your loan, because it will be sold after you refinance.
Also, Countrywide is now Bank of America, which has received one of the biggest chunks of federal bailout money.
Elizabeth Razzi: Also, as someone who is writing checks TO the lender, you have no worries. That lender--or its successors--will be happy to cash your checks.
Alexandria, Va.: I whole-heartedly agree with someone (not in this forum) who said, "Congress must place enforceable common sense limits on salaries at all the banks that have taken taxpayer dollars." It burns me to no end how bank executives who were being questioned on the Hill not too long ago were answering to Congress but it did not seem like they were sorry. We will see how things develop in the coming months and years.
Elizabeth Razzi: Thanks for that comment. Anyone else with thoughts on this?
Herndon, Va.: Why aren't banks offering "assumable loans" like they did back in the 1970s?
Elizabeth Razzi: Two thoughts: One, people don't much want to assume older loans when interest rates are declining. And the whole industry has changed since the 1970s, with the development (for better or worse) of mortgage-securitization. It would be difficult to re-underwrite an old mortgage for new owners if that old loan has already been carved up into pieces and sold to investors.
Maryann Haggerty: Assumable loans disappeared long before securitization. Lenders don't offer them because they are a bad deal for lenders--one way the lenders got hurt big in the S&L crisis is that they were stuck with long-term low rate loans, but had to pay high interest to attract deposits.
Rockville, Md.: Hi ladies, it has been said that mortgage rates are going to be lowered (modified)for some to try to stop the fall in housing prices (and keep people in their homes). Isn't the lowering of interest rates (in the grand scheme of things) still lowering the price of housing? Will this be available in public records? Wouldn't first time home buyers (or any buyer) want to know if owners of properties in an area they are interested to purchase have had to re-finance or get help to stay in their home? This would affect property values. Hiding (or not fully disclosing) this information would not appear to be very ethical. Thanks for answering.
Maryann Haggerty: Such info is indeed available in public records--all mortgage liens are recorded.
It may not be available in all cases immediately on your computer screen. You may have to delve a bit.
Elizabeth Razzi: I'm not so sure a lowering of interest rates will be recorded on those registries. But this is a very unusual situation. Unprecedented, really. Traditionally, a seller would buy-down the interest rate by paying a few thousand dollars in points. That does equal a price reduction, and is supposed to be reflected in the records. But in this situation, we have the lenders lowering the interest rate, with some government compensation for doing so. That does not directly affect the home's value. The change in home value will come about only indirectly, by reducing the number of foreclosures that otherwise would have driven down prices.
Suggestion: Could you please do a "How To Become a Landlord in D.C." piece? The process is confusing (do I need a business license? an inspection?) and unclear and there is no one place or person who can explain it to you, trust me I have been trying to figure it out. In this market with people either unable to sell or unwilling to sell there are more of us considering becoming landlords and this would be some good service journalism. Thank you.
Maryann Haggerty: Suggestion accepted. (However, we always must address Virginia and Maryland as well as DC...)
Elizabeth Razzi: How refreshing! Someone who wants to become a landlord--by design rather than by default.
Fairfax, Va.: Why should anyone take paying their mortgage seriously anymore? The government will just hand out money almost irregardless of how irresponsible someone is. A CNBC news clip yesterday was calling for a "Boston Tea Party" on mortgage payments since those who actually pay their mortgage (or were bright enough to not buy something they couldn't afford) are getting the short end on every bit of legislation that exists. I WISH this was a joke question.
Elizabeth Razzi: No, clearly you're not joking. And you're joined by a lot of angry people. I saw that little tantrum that commentator threw on at the Chicago Mercantile Exchange (I think that was the place) yesterday. I'm just wondering why he wasn't so outraged when banks were getting bailout money. Seriously. Where was his devotion to capitalism and free markets then?
Maryann Haggerty: One of the biggest challenges facing those formulating the latest foreclosure relief plan was balancing the need to do SOMETHING with the desire not to reward the "undeserving." I'm not sure if they found the right balance. No one knows that yet.
Laurel, Md.: Did you see the "most affordable suburbs by state" article on Yahoo news? Well, surprise, surprise, Maryland's is north of Baltimore and Virginia's is south of Richmond. If you had to pick a most affordable suburb between Baltimore, Fredericksburg, I-81 and the Bay, what would it be?
Maryann Haggerty: I think it might be Laurel, actually.
Elizabeth Razzi: It might be whichever reasonably affordable suburb is closest to your job. A story I wrote for the Real Estate section last week talked about how higher transportation costs can sometimes overwhelm the home-price savings for some locations. We'll try to get you that link.
Charlottesville, Va.: Any word yet on whether the $8,000 credit can be applied to 2008 tax returns (i.e. treat an 09 purchase as occurring on 12/31/08)? The $7,500 credit allowed the tax payer to elect whether to apply it to 08 or 09. Thanks.
Elizabeth Razzi: No. Details are still coming out, but as it stands now, the $8,000 credit starts this year. If you bought last year and qualified for the $7,500 credit, you'll still have to repay it. A lot of people are unhappy about that.
Maryann Haggerty: The retroactive refundability (I think that comes close to what I mean to say) was one of the things wiped out during the conference committee, when congress types were trying to reduce the overall cost of the legislation.
And every other cut would, I assume, make someone else unhappy
Fairfax, Va.: In conjunction with working with a real estate agent, I also search for homes on trulia.com and zillow.com. Will my agent have access to find homes that I will not see listed on either trulia or zillow?
Maryann Haggerty: Trulia does not pick up all listings from the multiple listing services everywhere. (However, it may pick up FSBO listings that aren't in the MLS.) I'm not sure about Zillow. It's not like some of the other sites, real estate agent affiliated or not, are always 100 percent up to date either.
Elizabeth Razzi: You can find some for sale by owner homes on Zillow that your agent probably won't spot. Agents do have an edge on learning about listings that are about to come on the market--usually because they've been asked to come in for a listing presentation.
Northern Virginia: Ladies, I'm in the market for a first home, and there are several foreclosures that are available in my neighborhood. I read (on another site) that no private individual should buy a foreclosure because if the price were reasonable for the condition, it would already have been bought by the agent or an investor. Do you know if this is true, as a rule (I know every house, foreclosure or not, needs to be examined on its individual merits). I'm not looking to invest. I want a place to live for 5+ years, and at the cost of more than 33% of my salary (shocking mentality that kept me out of the housing market for the last 5 or so years). Thanks.
Elizabeth Razzi: It used to be the case that real estate agents and others in the business would scoop up some of the best deals. Some even got their licenses just so they would have first access to new listings. But business has been pretty bad for those folks over the past couple of years, and I would expect fewer to have the cash to make those deals. Besides, there are so many foreclosures out there now, there's plenty of supply to go around.
Maryann Haggerty: Private individuals are definitely part of the market for those houses now. Investors, including those in the industry, can't get the loans in many cases to buy those places.
That said, don't expect that you're going to get a steal.
Clifton, Va.: Ladies, there are banks and credit unions that do not sell mortgages and service them for the life of the loan. Neither Navy Fed or Pentagon sell their mortgages. You can also find a banks that do this.
Elizabeth Razzi: Yes, there are some. But the large majority of mortgages do get put into securities.
Maryann Haggerty: Make that the overwhelming proportion.
And guess what? From the individual borrower's perspective, it really makes little difference.
RE: Banking: I am not nearly as burned by the small number of bankers as I am by the massive number of people who intentionally bought houses they couldn't afford without using common sense. Now I (as a renter who was bright enough not to buy something I couldn't afford) am supposed to put my tax dollars into bailing them out of their irresponsible behavior so they can build equity. This effect me far more than whether some executive I will never meet get a couple of extra million from a 800 billion package.
Maryann Haggerty: I think back 4 or 5 years ago, to these same chats, and I don't recall a lot of people saying, "whoopee!! I'm going to irresponsibly buy a house I know I can't afford!" What I recall are a lot of people saying, "I know this house is a stretch, but I think I can make it as long as my health holds up. And with luck, my income will improve as I move along in my career."
Elizabeth Razzi: And I'm assuming you're not one of those renters who ends up getting booted from your place because the landlord lost it to foreclosure.
Silver Spring, Md.: Hi, we might need to move in the next year or two, and our house is worth less than we paid for it. How can I tell which projects have the most chance of recouping our costs if we put the house on the market? I have seen figures on kitchens and basement renovations, but what about ROI on basement refinishing, roofs, energy-efficient furnaces/CAC, landscaping, etc.? We would do these projects if we knew we are staying longer, and we might be staying longer, but we're not sure yet.
Elizabeth Razzi: If your house is already worth less than you paid for it, be very cautious about investing more. I would limit it to things that really need replacing (if the furnace goes bust or the roof leaks, you really have to replace them. But mind your pennies doing so.) Any fix-up money should be spent making small repairs, painting, tidying the lawn and generally making it an attractive yet affordable option for buyers.
Maryann Haggerty: And on your list, basement refinishing and energy-efficient appliances generally won't increase the home value enough to cover the cost even in the best of times.
Alexandria, Va.: I have been cutting costs and trying to save money for a down payment on my first home. I will have around $70K saved up when I am ready to finally buy. My question is this: Should I put all my savings towards the down payment? I feel like that would not be a wise choice and that I should only put about $30k-40k towards my down payment so that I still have a savings fund to fall back on in case something comes up. What are your thoughts?
Maryann Haggerty: You need to keep some of that savings fund.
Elizabeth Razzi: Absolutely keep some of your savings in cash. You never know when a job loss or health problem would make you need that cash. Take a good look at FHA financing, which requires as little as 3.5 percent down payment. Just make sure your monthly payments would really be affordable on your budget. There is nothing inherently evil about low down payment mortgages, as long as they are safely underwritten. Very few first-time buyers have enough cash to make a full 20 percent down payment, especially in an expensive market like Washington, D.C.
Washington, D.C.: How much room do renters have in negotiating rental rates these days in some of the half-filled new condo/rental developments? I regularly see ads for 1-3 mo. free, but I'd much rather have a lower monthly rate than my 12 month free.
Elizabeth Razzi: Sounds like a good negotiating strategy to me. Just ask for your 12th month free to be divided over the course of the year and see what happens.
RE: Assumable loans: The main reason they went away: no new-loan-fee income for a lender when you sell the house.
Maryann Haggerty: Actually, no. The main reason was double-digit interest rates in the early '80s.
Washington, D.C.: Maybe more of a finance question, but a friend of mine is about to walk away from her mortgage. Just stop paying. Instead of using her salary to pay the mortgage, she wants to save that money, wait for them to evict her and then rent a place. She can make the payments, but it's a struggle. I've told her she could probably get a restructuring of her loan, but that she has to try to stay current. Any advice?
Elizabeth Razzi: I find that plan reprehensible. It's thinly veiled theft. If she is truly struggling with the payment, she may qualify for the administration's new mortgage-aid plan. But she needs to stay current on the loan to qualify. If she does go through with the plan to walk away from her debts, her credit rating will suffer for years. And it should.
Richmond, Va.: Good grief, are people really that thick? Even though I pay my mortgage, if the economy further collapses, I'll lose my job. I WANT the bailouts so that I can keep my job. It's not about individual mortgages, but our entire economy.
Maryann Haggerty: Many people really like to vent.
Elizabeth Razzi: Better they vent here than mount a violent revolution--as one chatter proposes. Yikes.
Washington, D.C.: How soon after you buy can you refinance? Interest rates have dropped considerably since we bought in November. We put 20% down.
Maryann Haggerty: Sometimes you can do it almost immediately. Ask your loan officer.
Elizabeth Razzi: You may be able to save on fees by refinancing with that lender, too. The title search is still fresh.
Herndon, Va.: My girlfriend bought a home last year and doesn't want to take the tax credit (the one you have to pay back). She wants to upgrade the kitchen so it is comparable to other homes in the neighborhood but doesn't have the cash. I think she should take the money and put it towards the remodel, which would increase the value of the house. Does this sound like a good idea?
Elizabeth Razzi: I'm not sure I'm with either of you on this. I, personally, would take the credit, fully aware that it would increase my taxes a bit each year. I'd be benefitting from the mortgage-interest deduction anyway, so I'd be fine. But in this economy, if you're a new owner (it takes a while to adjust to the new budget after your purchase and don't have the cash to comfortably afford an upgrade, I'd sit tight and save my money for the time being.
Alexandria, Va.: So, now we know. There's no $15,000 free-for-all homebuyer credit (although they did increase the existing one for first-time buyers to $8K and waive repayment requirements). And Obama is going to spend $75 billion to try and stem foreclosures. So what, they're keeping prices artificially high with government intervention and subsidizing people who might get in over their head? How is this helpful?
Elizabeth Razzi: Real estate agents sure did love the idea of that $15,000 credit--and, in fact, it was put forth by a Senator who is a licensed agent.
Silver Spring, Md.: I put a $300,000 offer on a short sale three months ago. Three weeks after the signed contract went to the bank, I'm told the bank had 'verbally agreed' to short sale and is finalizing the paper work. I waited two weeks and then locked a 4.75% 30 year fixed-rate mortgage. That lock rate is about to expire and I've still heard nothing more from the bank. What are my options? I had a contingency for closing within 30 days of ratification (long past that now). Can I scrap this deal on grounds of the closing contingency and financing contingency? Is it wise for me to walk away and start looking for another house? Do you think housing prices have fallen enough in Silver Spring, Md. in past three months to offset the higher interest rates?
Maryann Haggerty: I think you need to start by aggressively following up with the bank, if you want that house. You also need to read closely to see what your contract lets you do, vis a vis walking away with the least penalty. It's going to depend on the precise wording of those contingencies, but it sounds as if they might be on your side. This might be worth an hour of a lawyer's time.
As far as the price change in that short window: Dunno.
Clifton, Va.: I am sorry if you purchased more house than you could afford, didn't read the contract, and now can't afford the payments after your teaser rate or got a no-doc mortgage from some bank. I don't feel my tax dollars should go to bail you out. You made the choices you did and sorry. You should lose the house.
Now if you have been laid off or lost your job, some temporary help is fine. I make my mortgage payments on time. I didn't buy more house than I could afford and I read my mortgage. So stop whining and just move out and learn from your mistake. Expecting tax payers to cover the poor decisions of homeowners, bankers, and Wall Street is grounds for violent revolution so we can kick out the ruling class who believe gov't is there to make everything better.
Maryann Haggerty: And I'm sorry, but I think this is more irresponsible than anything any mortgage borrower did.
Arlington, Va.: Hi there. I have been watching several homes that are priced above my budget but have been sitting on the market for 200-400 days, with no -- or sometimes, one -- price reduction. First, is there any conventional wisdom on why these folks haven't lowered the price? And second, is there a transaction cost associated with my agent submitting an offer (within my budget) on something priced outside my budget? Thanks.
Maryann Haggerty: The prices don't move 'cause the sellers haven't gotten the offer they want.
There's no cost to submit an offer, but don't waste your agent's time with a $1 offer or anything like that. It won't happen.
Elizabeth Razzi: Well, that's it for today, folks. But tune in Monday for the new Local Address blog! I'm hoping loyal chatters will be front and center in shaping the blog, adding your comments, wisdom and reports from the field in a new, daily venue. See you there.
Maryann Haggerty: Thanks for all the great questions. Sorry we didn't get to them all.
I hope you'll take a look at tomorrow's Real Estate section. We examine purchases of distressed properties, and also take a look at how to upgrade your house if you hope to live there as you get older.
And again: On Monday, we will debut Elizabeth's new blog, Local Address, at www.washingtonpost.com/real-estate. Please take a look and let us know what you think.
Have a great weekend.
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