May 29, 2009 1 PM

Real Estate Live

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Renae Merle and Elizabeth Razzi
Washington Post Staff Writer and columnist
Friday, May 29, 2009; 1:00 PM

Reporter Renae Merle and author Elizabeth Razzi discussed the local housing market -- from condos and investment properties to contracts and mortgages.

The transcript follows.

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Elizabeth Razzi: Hello, everyone! We have to make do without Maryann today; she's in Tokyo on the second leg of an around-the-world adventure. She'll be back for our June 26 chat, no doubt with some great tales to share. Meanwhile, Post real estate reporter Renae Merle hopes to join us, if breaking news doesn't pull her away. Let's get started!

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Rockville, Md.: How in the world do you search for foreclosure addresses (not streets) without signing up for one of those fraudulent services that drain your credit card?

Elizabeth Razzi: Do tell! Have you paid a lot of money for foreclosure listings? (Seriously, shoot me an email at razzie@washpost.com) I would engage the help of a real estate agent in your targeted areas who can help ferret out the foreclosure listings. Anyone else have suggestions for our pal in Rockville?

Renae Merle: I agree. Foreclosure listings are available for free or a small fee on many Web sites. But your real estate agent will also have access to it. No way you have to go through some high cost service to get access to that kind of information.

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Columbia, Md.: Hi, ladies. Do you happen to watch Jim Cramer's show on CNBC? On it he mentioned home prices will bottom at the end of June. What do you think he is basing that on? Why would home prices bottom here in the Maryland area at that time? Are companies going to hire more people then? Are they going to give existing employees raises? Are banks going to start lending people more money than they should again? Are foreclosures going to suddenly stop occurring despite the pending ARM resets? Will the government give all first time buyers more breaks? Help me figure this out. Where is any possible upside to the housing industry in the next few years (let alone month)?

Renae Merle: I am not sure what Jim Cramer is basing his opinion on but it runs counter to what I have heard from almost every economist over the last few months. While homes sales appear to have hit bottom or be close to it, that is only because prices continue to fall. A lot of people think prices will continue to fall this year.

But remember, real estate is a local game and it's hard to judge what is happening in your neighborhood by the national trends. Maybe prices have hit bottom on your side of the town, but not on the other. A lot depends on how many foreclosures or short sales end up on the market over the next year.

Elizabeth Razzi: You're making me laugh, Columbia! Like I would know what Jim Cramer is thinking? What I'm pretty sure of is that the whole country will not hit bottom at the same time. And that bottom is likely to be very long and very bumpy. As your litany of questions makes clear, there's a host of economic issues affecting the housing market--including jobs and stagnant wages and worries. But there is a clear upside to the housing industry. Eventually there WILL be economic recovery; people WILL move out of their parents'/friends' basements and into homes of their own; people WILL get raises and new jobs, and immigration WILL resume. I just don't know when. And neither does Cramer.

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Need help in Arlington, Va: Dear Maryann and Elizabeth,

The Arlington County real estate assessment division says that my house is 1BR/1BA. But it's really 2BR/1BA. I noticed this because I'm getting ready to sell, and Zillow and other popular real estate sites are pulling the incorrect information from the Arlington Co. site. Our claim that it's a 2BR property is going to look suspicious because of the proliferation of this incorrect information!

The deadline for appealing the assessment passed several months ago, but it's the property information that I need to get corrected. I really can't wait until next year. Do you have any suggestions? (Also, I cannot find any Virginia code that explains what the legal definition of a bedroom is. I'd like to have that handy in case any buyers get confused. Is there such a thing?) Thanks so much. This kept me up for hours last night.

Elizabeth Razzi: Oh, please, get yourself some rest! Go into the County's real estate assessment office and explain that you want to correct the property record. If you have a floorplan that shows you have 2 BR, take it with you. Or take photographs. I wouldn't expect much of an argument -- after all, the correct record would probably boost your tax bill. And the building permit office can tell you exactly what Arlington considers to be a bedroom. And you can "claim" your property on Zillow and correct their info on beds and baths--and add all sorts of other details as well.

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Silver Spring, Md.: There is mold in my apt air conditioner vents and quite possibly the air conditioner itself. My landlord is willing to replace the vent, but not test the air conditioner. Is there any way I can get my landlord to test/replace the air conditioner or move me to a new apt at their expense?

Elizabeth Razzi: Are you having physical symptoms, like irritation to your eyes, nose or throat, that might be attributable to mold? If you do, and have seen a doctor, you should ask the doctor to write a letter stating that you are suffering from those symptoms, which might convince the landlord to test the air conditioner. Without symptoms, I would wait to see if changing the vents -- and the filter! -- relieved the mold problem. If it doesn't do the trick, then move to stage 2 of your campaign and ask for a transfer or air-conditioner cleaning. You might contact the county's office of landlord-tenant affairs for guidance. http://www.montgomerycountymd.gov/dhctmpl.asp?url=/Content/DHCA/housing/landload_T/landload_t.asp Anyone else have direct experience with this problem -- from either side?

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College Park, Md.: So is it true that you can now tap into the $8K tax credit in 2008 instead of waiting to file in 2009 and use it to help with closing costs or a larger down payment?

Elizabeth Razzi: Yep! The official rule, Mortgagee Letter 2008-15, just came out this morning. http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-15ml.doc

Renae Merle: My colleague Dina ElBoghdady is writing a story about this now and says:

First-time home buyers can now use an $8,000 federal tax credit to help cover their down payment and other upfront costs if they are taking out a loan backed by the Federal Housing Administration. The $8,000 tax credit was made available months ago as part of the Obama administration's effort to motivate would-be buyers and jump start the housing market.

But home buyers cannot claim the tax credit until they close on their homes and they cannot collect the money until weeks, possibly months, after filing their tax returns. To help buyers who need the cash upfront, the Department of Housing and Urban Development, which includes FHA, is allowing borrowers to apply the tax credit toward their home purchases by allowing certain entities to advance them the money. Under HUD's plan, lenders who do business with the FHA as well as state and local housing agencies will be allowed to extend a bridge loan of up to $8,000 to borrowers.

Borrowers who work with the housing agencies can use the money to pay the minimum 3.5 percent down payment that FHA loans require. They can also apply the money toward FHA mortgage insurance premiums and closing costs.

But borrowers who work with lenders can't use the money to pay for the 3.5 percent down payment. Federal law bans entities who have a financial stake in the transaction from contributing that money. But the borrowers can use the cash to add to their down payment money or to defray closing costs.

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First time buyer: Any tips for a first time buyer in selecting an agent? I've got recommendations from friends. What questions should I be asking?

Elizabeth Razzi: Recommendations from friends is a very good start. Pay attention to personal chemistry between you and the agent; it matters. But don't let chemistry dictate the decision, either. Ask for specifics about the marketing plan. When/where/how will your listing be advertised, online & (gasp at the thought) in print? How will you and the agent communicate? By phone, email, text? Talk to references from RECENT clients who have listed with the agent. Would they do it again? Pay attention to the agent's suggested price. Is it dramatically higher or lower than that of other agents? (If it's way above others' estimates, that agent may be trying to "buy" your listing, only to suggest a price reduction shortly thereafter.) Also, compare their commissions. Top dollar does not guarantee top service.

Renae Merle: Also make sure you share a common philosophy with the agent. For example, if you want to adopt a lowball everything strategy and your agent finds that kind of potential confrontation uncomfortable, then keep looking.

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Alexandria, Va.: Can you discuss the new proposal to allow the home buyer tax credit to be used as a bridge loan for down payments? Thanks!

Elizabeth Razzi: Actually, I've been here chatting with you instead of reading it. A couple of points I can see now: It will be a second lien; no cash back to the borrower. It may not exceed the total needed for down payment, closing costs and prepaid expenses. We'll be reporting more!

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"First time buyer"...: I think "First time buyer" was asking about...buying. Your answer was more about selling.

Elizabeth Razzi: Right you are. Sorry. But except for the price/advertising points, the advice is the same. Personal chemistry counts. Email/phone/text compatability counts. Recent references count. And even commission counts. Some out there offer rebates. An extra point for buyers to cover is how quickly the agent will alert you to new listings, and whether the agent will get huffy if you search for listings on your own.

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Washington, DC: I am thinking of buying a serious fixer upper (think $200k of rehab). I am a first time home buyer who wants a lot of space in a particular neighborhood, and I think this will be the way to get it. I know there are mortgages out there where you can borrow the underlying price of the mortgage, plus the cost of renovating the property. Any advice on these types of mortgages? What are the downsides over conventional mortgages?

Elizabeth Razzi: You're probably thinking of FHA purchase/rehab loans. They did exist outside of FHA as well, but in the current economic environment, I don't know if they're readily available. I think they're a good option. Some people may argue that they're more cumbersome, slowing down payments for construction. I also think the buy modest & remodel to the size you need is a good strategy. It worked for my husband and me.

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Arlington, Va.: I'm making the plunge into becoming a landlord. I don't want to, but there's no way we can sell our house right now. There are tons of Web sites for landlords, but nothing with Virginia-specific information. The best I can get is a link to a Web site with the "helpful" booklet put out by the state, which is basically just a printed version of VA's landlord-tenant law, and completely unreadable by human beings. Are there any local groups or publications with easy to understand information for first time landlords, which aren't riddled with "check your state's laws for accurate info" caveats?

Renae Merle: Here is a story I wrote about this topic not too long ago:

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/27/AR2009022701292.html

Also, I did a Google search and came up with this about Virginia Landlord-Tenant laws.

http://www.vdacs.virginia.gov/consumers/f-landlord.shtml

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Would love to buy a cabin: Growing up, my grandparents had this quaint (yes, small) cabin in upstate NY on a lake. I LOVED it! I never wanted to move to NOVA, and now that I'm here, having a cabin like that is really important to me. I haven't had much luck finding one that's small (such as 1100 sq ft), has lake access, trees, and a place where my dog can run. Do you have any suggestions on areas within two to three hrs of here? I'm fine with WV, VA, MD, or PA.

Elizabeth Razzi: Oh, man, if I knew of one I would have bought it. And if you find two, give me a call! Second homes at places like Deep Creek Lake used to be modest little things; now they're big, fancy homes. And the person with a modest budget can hope for a condo, maybe. Anyone know of any good spots?

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Arlington, Va.: Ladies, I'm hoping to buy my first home soon. I have great credit (790), no consumer debt, and have saved a down payment of 25k. My only liability is my 45k in student loans. If I hope to buy in the next eight months, is it better to put all my available money toward increasing the size of my down payment, reducing the size of my debt load, or some kind of split?

Elizabeth Razzi: Hi, Arlington. You have to look at how much your total debt compares to your total income. You'll have a tough time getting a loan if the total exceeds 36 percent of gross income--and you really might want to hesitate being so indebted, too. But I disagree with my Post colleague Michelle Singletary, who says people should pay off all their student loans before taking on a mortgage. If you can reasonably carry the debt load, it's not unreasonable to buy a home. (Also, some student loans carry very low interest rates.) You might want to add any available money to your savings, and build up a cash cushion to cover unexpected closing costs or after-purchase emergencies. Lenders like to see that you have savings after closing, too.

Renae Merle: I think it is also important to think through whether you will have enough in savings after your home purchase to be comfortable if there was an emergency. (And don't underestimate all of the decorating you will want to do.) Maybe you should consider putting all available cash (or at least a portion of it) towards feathering your savings cushion.

Good luck on the home purchase.

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Elizabeth Razzi: Our computers seem to be a little balky today, so we apologize if things seem slow. Or maybe I'm just being slow...

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Re: 2nd bedroom and assessment: I don't know what the exact rules in Arlington are, but in other places the general rule is that a bedroom has to have a second means of egress -- a door or a window so that if there is a fire, the occupant has another way to get out.

Elizabeth Razzi: Absolutely. Good point. And it has to be a window of a certain size, and not too high off the ground, too. The building permit authorities are the last word on that.

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Followup on ArlCo Real Estate: Hi, ladies. I called and spoke to an assessor who says that we'd have to get the condo association to actually change the records on file with the county. They'd have to pay a fee to do that, so it seems unlikely. The lady was friendly but unable to accept even the builder's floor plan as sufficient proof. Thanks for telling me about claiming the property on Zillow, though. I'll give that a try. Have a great weekend.

Elizabeth Razzi: You're welcome. Hey, if the fee isn't too big, maybe you'd want to offer to pay it.

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Washington, D.C.: I was told by several people when I began thinking about starting the home buying process that looking at places is "fun." I would like to report that it is not fun at all, not even a little bit. So for all you potential home buyers -- don't listen to what they say. The process sucks! I'm just holding out that being a homeowner is worth all the hassle!

Elizabeth Razzi: The more serious you are about buying, the less fun it seems to get. Thanks for the insight!

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Seattle, Wash.: I recently made on offer on a home and the seller replied after two days with a counter. I replied in agreement to his counter after two business days, considering it was memorial weekend. But he is going to sell it to someone else. Isn't he tied down to his counter? When do those expire if it's not mentioned in the offer?

Elizabeth Razzi: It's not a deal until you've signed it & sent it back. That's the risk you take when you take your time pondering an offer -- even over a holiday weekend.

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Arlington: So, I'm thinking of buying. I know I don't have enough for a 20 percent down payment. And the seminars I've been to say all I need is 3.5 percent, which I can clearly afford, and can probably afford up to 12-13 percent. But that extra down payment doesn't get me close to being out of paying PMI, so is it perhaps better to just pay 3.5 percent, and have the extra cash on hand?

Renae Merle: Putting down 10 percent won't get you out of paying PMI, but it does lower your payments a bit. It might also give you more options in the type of loan you can secure and what kind of interest rate lenders might offer.

Elizabeth Razzi: Cash on hand is a lovely thing. PMI is expensive, but it's not evil. And you should not wipe out all your savings on the house. Take a close look after your after-purchase cash flow to make sure you're making the right size downpayment.

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Austin, Texas: I'm wondering if you happen to know the average number of homes a first-time buyer looks at before purchasing? I'm just curious because our buyer's agent seemed annoyed that we weren't placing an offer after we'd been out looking three times, at approximately 15 houses. He's no longer our buyer's agent (we didn't sign a contract with him).

Elizabeth Razzi: The Realtors publish an average, but I don't know it off the top of my head. I do know that the number is lower for people who did pre-shopping on internet sites. Hey, 15 houses is not too many. But you might want to refine your needs/wants list so you don't waste time on homes that aren't suitable. By all means, look at all the pics on the Web sites. I like to do a drive-by before going with the agent, too.

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Washington, DC: We're interested in new construction in a close in suburb (this neighborhood includes some tear down and re-building but not large plots of vacant land that buildings are creating a new sub-division on). It seems like the builders are holding the property and trying to sell it based on the prints rather than finishing in advance. Is the price on that kind of house normally negotiable?

Renae Merle: I am not sure about what's going on in your case, but builders have been working hard to shrink the inventory of new homes on the market. That has translated into falling prices. There is no reason to believe this builder would not be willing to negotiate.

The hitch is that there are so many completed new homes already on the market, a builder is going to be less willing to build something in advance without some serious assurances. Another fallout from the housing crisis, I suspect.

The latest government new home figures are at the bottom of the story I wrote for today's paper:

http://www.washingtonpost.com/wp-dyn/content/article/2009/05/28/AR2009052801712.html

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Washington, DC: I have been working with a lender to refinance my mortgage from 7 percent for almost 12 weeks now, and I still haven't received a final response. I have perfect credit, require no appraisal (FHA Streamline), and am working with the bank that holds all of my accounts and original mortgage. I was just wondering if this sort of time frame is typical right now, or if I need to find another lender. I was told to expect six weeks, but this is crazy! Thanks ladies. I love your chats!

Renae Merle: Wow, that seems extreme, but I am not surprised. The Obama administration launched a refinancing program for people with little or new equity in their homes a few months ago and lenders have been backed up ever since. Plus interest rates have been so low lenders have been getting tons of calls anyway.

The question is: Have you locked in a good rate? Mortgage rates have inched up a bit lately.

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Washington, DC: We're looking to buy a house in a close in suburb and schools are of primary importance. It seems like there are a lot of great houses in our price range, but they are of varying distances from the school boundaries. How can we minimize our chances of being redistricted into a school we aren't as interested in besides limiting our search area to right next door to a school? Do people just spend their entire lives paranoid that they might be re-districted or does it not happen that often in neighborhoods without a lot of vacant land for new construction (e.g. Bethesda/Chevy Chase)?

Elizabeth Razzi: It's a roll of the dice. You might look up the minutes of old school board meetings to see if a redistricting is brewing. Keep in mind, it's not as if the adjoining school districts are always horrible choices.

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Is looking for houses fun? (Washington, DC): Oh, yes, looking for houses is fun. I looked at listings for a year or so before buying my first place, and since then sold that condo and bought a house. Even though I have owned my house for almost four years I still look at listings and help out friends looking to buy. BTW, I work for a nonprofit and it was definitely hard for something I could afford and still liked. But something about the process I just love. Maybe I should become an agent. There's definitely a lot of stress as well but I did really like the process, and am so glad to be a homeowner now.

Elizabeth Razzi: Thanks for that.

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Renae Merle: It has been great chatting with you guys. I write regularly on foreclosure mitigation issues and loan modifications and am always looking for feedback from homeowners. How is the Obama administration's loan modification program working? Have you had trouble securing a loan modification? Have lenders become easier to work with?

You can contact me at: merler@washpost.com.

Thanks, Renae

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DC: We just found out the roof on the house we are about to buy has some damage to it. It isn't leaking, but roofers won't certify it. The sellers are willing to give us half the cost of a new roof. Is there a way to get this in cash as opposed to money off the purchase price? Are lenders able to do this? We have some cash left after the purchase, but to put a new roof on will put a serious dent into it if we have to come up with the entire amount ourselves. Thank you!

Elizabeth Razzi: You should be able to get a credit toward the roof work at closing, but it would probably be credited toward closing costs that you otherwise would have to pay. If the sellers are making other concessions, like picking up closing costs for you, that reach 3 percent of the price, it could affect the appraisal.

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What's PMI?: Thanks.

Renae Merle: Sorry, I think that was me.

PMI is private mortgage insurance. It is required when a borrower does not put down a 20 percent downpayment.

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Another first time buyer: What kinds of things should I be doing to get myself ready for the search for my first home? I have some savings (not enough, but getting there), excellent credit, and no debt whatsoever. My fiance has excellent credit, some savings, but LOTS of debt ($160k from law school -- well over 100% of his annual income). Any financial tips that can help us when it comes time? Recommended reading?

Elizabeth Razzi: You might really benefit from going to a housing/credit counselor before you even get started searching. A lot of local organizations (look for some on the HUD.gov site) offer pre-purchase sessions. You need to look at how much his payments are on that giant debt, compared to his annual income. (And is that job looking secure?) You both may want/need to seriously and systematically chip away at that big debt and/or build up savings before you get serious about buying.

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Elizabeth Razzi: Thanks, everyone, for joining! In Saturday's real estate section Dina ElBoghdady writes about jumbo loans, and the different interest rates they're carrying depending on just how jumbo they are. And there's a really cool story about people who are enlarging their home -- by digging out the basement. I'll be blogging every day at washingtonpost.com/localaddress, and hope to find you there.

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Renae Merle: For the person preparing to start a home search, here is a HUD Web site that will help you find a housing counselor. Make sure the agency you choose is a nonprofit that does not charge excessive fees.

http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm

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