Real Estate Live
Friday, July 24, 2009; 1:00 PM
Post Real Estate editor and author Elizabeth Razzi discussed the local housing market -- from condos and investment properties to contracts and mortgages.
The transcript follows.
Elizabeth Razzi: Hello, everyone! Glad to see not everyone has left town already for vacations. Oh, and did you hear? Merrill Lynch is telling its investors that the recession is over. I suspect someone on this chat might have an opinion about that? Let's get started.
Richmond, Va.: Last year we bought a townhome in Alexandria. About 3 weeks after settlement we received a notice of violation that the deck and fence were not supposed to be stained. We did not stain the deck, it was stained about 4 years earlier by the previous owner. The previous owner never received a notice of violation; however, the architectural guidelines do clearly state that decks should not be stained. Our resale package indicated that the property had not been inspected. In spite of our letters of appeal, the condo Board is insisting we remedy the situation. We are afraid we will have to replace the deck and fence (at considerable expense). Do we have any recourse?
Elizabeth Razzi: Your recourse might be to sue the seller for the expense of bringing the deck in line with the association's rules. And go over your association documents carefully. Is there anything about a reasonable timeframe in which violations need to be flagged? Anyone else have experience with this?
Prince Geores County, Md.: I want to sell my home, but with foreclosures I have noted houses have sold for less than what I paid 8-9 years ago. At it's peak my house appraised for virtually 100% more than i paid. Recently in my neighborhood there was a house listed for $425K, which would have been the upper end for an older homes (40-50yrs) in my community at the peak. It is a little larger home with a double lot, nice landscaping. It's been on the market for at least 3-4 months. I have a double lot, but probably 700 SF smaller house, more modern kitchen and updated baths. I noticed the list price dropped to $399K, and within the past week it is listed as under contract. I would do flips if i could sell for $350! Is the market coming back?
Elizabeth Razzi: Prince George's County covers a whole lot of territory. But, yes, there has been more demand from buyers in many neighborhoods, especially at prices in the range you're talking about. Why not talk with two or three real estate agents who are experienced with your neighborhood? Ask them how predominant foreclosures are among the homes that have been selling. If non-foreclosures have been selling at reasonable prices, that means there will be some good comparable sales that bolster your price. You really have to find out the specifics of what's going on in your neighborhood.
Washington, D.C.: I am shopping for a mortgage and noticed that "recording" fees vary wildly. What are these fees? Is there another way for lenders to skim some money off of the top?
Elizabeth Razzi: Recording fees should only vary by jurisdiction, and perhaps by the price of the home. Lenders don't control these fees. They're a form of tax charged by local governments for recording the deed--and o increase revenue.
Rockville, Md.: Elizabeth, you wrote in today's (July 10, 2009) column that Trulia is reporting that home prices are stabilizing in the D.C. area. I looked in Trulia but couldn't find any such report - please give me the link to this very important report!
Elizabeth Razzi: When there's a link available for something I reference in the blog, I absolutely love to link to it. But not all information comes from linkable documents. In that case, the information came from Trulia's press office. For anyone who didn't happen to catch that blog post, it said that fewer of the homes being sold had had price reductions.
Deale, Md.: I was shocked to open my property tax bill and find that the amount I owe is more than double what I expected.
I purchased my home in August 2008, and expected the taxes to be similar to the 2009 amount. I called the state, and was told that I should have been told by my realtor that Homestead Tax Credits received by the seller do not transfer to new owners. Nothing was said in this regard (and I can find very little about it on the Internet).
I used the 2009 property taxes as one of the factors in choosing to make an offer on this home. I had no way of knowing that the 2009 amount was artificially low by more than 100%, and never would have made an offer on this property if I had known the true amount of the property taxes.
I've bought and sold several properties in Maryland and have never heard of property taxes doubling from one year to the next.
Please advise? Thanks in advance.
Elizabeth Razzi: As soon as I saw your question, without even glancing at the dateline, I knew that it had to be a Maryland chatter. Tax assessments are handled very differently in Maryland, and new owners are sometimes stunned at their new tax bill. (I believe you're supposed to receive a disclosure about that before your purchase is final.) The old owners benefited from a homestead credit that limits their tax increases; you'll have to re-apply--and start at current values. The three-year assessment cycle, in which each home is assessed once every three years, trips people up, too. Here are some links:
First Timers in Arlington, Va.: My husband and I are first time home buyers who have been actively looking for a single-family home (3br/2ba+) in the Annandale/Falls Church/Springfield areas since January. We just submitted our 8th contract and it looks like we're going to get outbid once again. We're making good offers, often above list price (depending on the property) but it seems like there's always someone with more money. We have FHA financing and are looking in the $300-$340k range. Anything we can do other than being patient. I'm kind of getting sick of hearing, "the right house is out there!"
Elizabeth Razzi: Oh, my, that sounds like a story straight out of the Boom Years. But back then people stretched with scary interest-only loans and things like that. Those things are gone now--and we're all better off for it. You might try expanding your target area even more. What do you think is going on here; are the listing agents putting them on the market below their likely sales prices?
Silver Spring, Md. 20904: Dear Elizabeth: I have begun my pursuit of my first house purchase; however, due to some commitments, I may not be able to pour my maximum energies for that goal until mid-October 2009. Do you think that there might still be a good chance to find a deal by that time in the Silver Spring area?
Elizabeth Razzi: Dear 20904, Sure, there will still be homes on the market in October. But you would be cutting it close to qualify for the $8,000 first-time buyer tax credit. To get that, you have to CLOSE no later than November 30.
First timer: My offer on a house was just accepted by the owners. However, it's a short sale (only one bank). What should I expect during that process? Thanks!
Elizabeth Razzi: A lot of time to work crossword puzzles. Ask the seller's agent if they had gotten any kind of okay for a short sale from the bank before listing. Has your agent had any success with a short sale before?
Arlington, Va.: My condominium was a conversion from an apartment building. The developer who purchased the building and then sold the condos hired the association lawyers, and these lawyers were retained when the homeowners took control of the building. The lawyers have made a number of statements that I believe show their loyalty to the developer, and not the condo. Any thoughts on whether it is a good practice to retain the lawyers from the developer days? I believe our board should get new legal staff. Thanks.
Elizabeth Razzi: Well, if those lawyers drafted the documents for the developer, now they're in a position of defending their own work. That hardly benefits you. I like the idea of fresh lawyers, myself.
PG, Maryland: Hi. I wrote in a few months ago--my parents bought a house about 5 years ago, and subsequently realized that there were alot of issues--the front porch had settled, causing water problems; the windows didn't offer any temperature retention; and there is questionable insulation in the walls. You responded that this was the reason to hire an inspector.
The thing is, my parents DID have an independent inspection. The inspector did find a few other issues, which the seller fixed prior to the sale of the house. But he didn't make a comment about the cheap windows or anything else. So my question is, how do you agree on standards with the inspector, especially if you don't know much about house construction?
Elizabeth Razzi: Well, inspectors really have to limit their search to things they can see. You can't really figure out how much insulation is inside a wall without taking a saw to part of the wall--and home inspectors don't have a seller's permission to do that. Simiarly, cheap windows aren't really a defect. Broken windows are a defect; broken sashes are a defect. They're just cheap windows--or the single-pane windows that are to be expected in an older home.
Washington, D.C.: My husband and I have started looking and going to open houses in our general area (AU Park/Wesley Heights/Chevy Chase/Spring Valley) and are shocked at how quickly houses are selling and generally how few houses there are on the market. We talked to one agent who said if a house is on the market for more than two weeks, it's either b/c its overpriced or in serious need of renovations. What do you think of this? We thought there would be plenty to choose from but are finding if we don't act quickly, houses are gone.
Elizabeth Razzi: I have been hearing a lot of people say the same as you. And it seems--just anecdotally from what I hear (and I eavesdrop without shame--that the pickup is spreading to more neighborhoods. You named a couple of perennially hot neighborhoods, though. There's no surprise those homes are moving fast.
Martinsburg, W.Va.: Things do appear to be looking up in our neighborhood. There had been 7 houses for sale on our side street during the past year - now we're down to 2 or 3. And nearby developments are starting to build again.
Elizabeth Razzi: Thanks for the report from the field!
No stain (How crazy!): You don't have to replace it, just sand and paint
Elizabeth Razzi: Well, maybe. And be cautious if it's an older deck built with pressure-treated lumber. Until recently, that stuff was sold with arsenic and other nasty stuff inside.
Takoma park, Md.: It is a fact, that real estate agents in my area; are buying up low end, first time buyer, short sale, forclosure property as investments. They are not even reaching the market. When they come into Wiechart, Long & Foster, and Remax listing; an agent snapps them up. This is distorting the market and driving up the prices. It is also making the economy look better than it actually is. I realize this is not illegal, but I think it is highly unethical, and lying to the taxpayer. Is there anything that can be done here? This is a fact, I have had three agents, three companies admit this to me.
Elizabeth Razzi: But what is wrong with an agent buying it as an investment? They have to disclose to buyer and seller that they are agents acting for themselves. And a lot of them get licenses because they want quick access to listings. Anybody else want to weigh in on this one?
Bethesda, Md.: Why are renters treated like second class citizens both socially and through the tax code as well? One would think with housing being so expensive in this area, counties and states would allow people to deduct a portion of their rent from their state taxes. Perhaps you can bring back the online apartment chats and do more stories on the lack of affordable rentals in this area.
Elizabeth Razzi: Hi, Bethesda. The request for an apartment chat has been noted by the folks a few pay grades higher than mine! I know this is not a popular idea, but there also are tax subsidies for rentals. They go to the landlord, though. In theory, at least, they benefit the renter by keeping rents lower than otherwise. Owners of rental real estate can deduct interest and property taxes (just like homeowners). And they get depreciation deductions, too.
The $8K Credit: I wouldn't be at all surprised if that credit is extended for a year, between the yellow-jacketed lobbyists and the blue dogs in Congress...
Elizabeth Razzi: That's going to be interesting to watch this fall. It wouldn't make sense to renew it too early -- That would be like saying a Macy's One Day sale will really last all week. The urgency to buy NOW is lost. I really can't wait to see how this one plays out!
First timer again: My agent's closed short sales before. We put in a contigency on getting the bank approval in 20 days (hoping that it'd happen in more like 60). I don't have a very good impression of the seller's agent.
Elizabeth Razzi: I'll bet the bank doesn't feel bound by that contingency. You might want to keep looking, just in case.
Alexandria, Va.: Is there an optimal amount of time to wait once your house has been on the market before lowering the price? My house has been listed for a week and has not yet received offers. Other houses in my neighborhood have sold recently within one-three weeks. I don't have any specific reason to need to sell quickly, other than being ready to have the whole process over.
Elizabeth Razzi: If you thought the original list price was fair, a price cut after one week sounds pretty panicky to me. Give it three weeks and then re-examine the price.
Lake Anna, Va.: I will be selling a property next spring, and it needs work: landscaping, painting, and debris removal is most of it. Although I haven't seen this very often, I am thinking of putting an announcement in the newspaper asking for bids to do the job.
Is this a good idea?
Elizabeth Razzi: Let me guess -- you've made a career as a federal contractor! Putting out a Request for Proposals would be a little silly for a debris-removal job, don't you think?
Deducting rent from state taxes: At least Minnesota does allow that (or did a few years ago.)
Elizabeth Razzi: Really? I never knew that.
Washington, D.C.: Why does this chat occur on Fridays, before the Real Estate section comes out? Wouldn't it make more sense on Mondays, so we can discuss the previous weekend's Real Estate section?
Elizabeth Razzi: Well, I suspect it's because we're darned busy putting out the next week's real estate section on Mondays!
Field Report from Florida: Comments on a couple of things from last time: 1) After spending way too much trying to keep it afloat, we've had a short sale approved by the lender, and getting the approval took less than ten days from when we submitted the package. The key? A cash offer from the buyers. I've heard a lot of 6-month-no-answer horror stories, but it seems as though cash gets their attention. The good news is that at these prices, many buyers have enough cash.
2) Be very very very very careful buying a condo in a vacation spot, whether it's here or Rehobeth. People aren't paying their condo fees on second homes, and the properties are falling apart -- and the associations are levying big special assessments on the few residents who are paying. Same goes for a lot of gated communities, by the way, including one community in Miami that had the water shut off for nonpayment of a $100,000 bill.
3) A while back I commented here that if you're buying a rental property, be sure you'd be willing to live in it... we're moving over there when the short sale closes.
Elizabeth Razzi: Thanks for that report from the heart of Foreclosure Country. You've got it especially rough down there.
Greensboro N.C: Renters rights!
Elizabeth Razzi: and thus the movement starts.........
Fairfax County, Va.: RE: Deck Staining-- This is PRECISELY why condo boards and HOAs are the biggest waste of money in homeownership. I HATE them, and wish there were more places in the area that didn't necessitate them.
First, the poster should contact their realtor and figure out why the discrepancy in the unit was not picked up by the condo board before the purchase. My guess is that the condo budget was looking fine over the past few years, but is in the red this year so board members are looking for ways to balance their budget, hence more strict enforcement of condo rules.
Second, the poster should look at themselves and figure out why they didn't read the condo docs carefully to make sure the unit they were purchasing was in compliance. Condo docs are pretty annoying and complicated to read, but they're typically pretty clear when it comes to the by-laws. The last property we purchased, there were a number of variances we saw between the property and the rules, and just got a disclosure from the board stating that the unit was in compliance at the time of purchase.
Finally, the poster could contact a lawyer, but they're unlikely to have any recourse because it was the purchaser's responsibility to have read the condo docs and ensure the unit was in compliance before the purchase was finalized. They may be able to find a sympathetic judge or take the matter in front of an arbitor, who might split the costs between the previous and new owners.
Personally, I'd get myself on the condo board ASAP so the docs could be fixed or at least find out why staining a deck and fence are forbidden when it obviously would extend the life of the wood. Power-hungry, money-grubbing condo boards and HOAs are becoming even more aggressive in the current economic climate, and small variances that were once overlooked are being cited. Perhaps a story about this would be a good idea so that more people are not caught off-guard by a notice in their mailbox that the color they painted their front door is 2 shades too dark.
Elizabeth Razzi: There are few issues that draw such heat as HOA issues. Thanks for the comments.
Bowie: The Professor Gates incident this week motivates the question...
If I own a second home, and hence it's not my residence on my driver's license, what documentation should I have handy in case the police show up?
Elizabeth Razzi: Well, if it's a vacation area, I like to keep the rental lease in my purse or the car for that reason. A set of keys helps. And, seriously, manners help a bit--on both sides of such exchanges.
Renter Tax Deduction: The historical reason for the mortgage interest deduction is that ALL interest used to be deductible, because it is income to the party to whom it's paid. The tax reform of 1986 eliminated all other interest-tax credits except the mortgage credit, because people are essentially stuck in long-term mortgages they entered on the assumption of the credit.
I believe 5-year car loans that were in force at the time of the tax reform could still be deducted as long as the particular loan was in force.
Elizabeth Razzi: Right you are -- All interest used to be deductible, even credit card interest.
For PG Maryland: When buying an older house (say, over 20 years), I would make sure to have an inspector that has a construction contractor background. A few years ago, I had two pipes burst in our house that cause 75% of the house to be damaged. The inspector that came out to do the evaluation from Allstate was a former construction contractor and did claim adjustments for Allstate. I kept his name and number and called him when we built our new house. I had it written into our contract that I would be able to have a walk-through inspection before the drywalls went up and have a private inspector at the final walk-through. He found several things at each walk-through that was well worth the $65 per walk-through fee. If I was buying an older home, I would definitely have him or someone like him do a private inspection with me (I would do this independently if he was not certified by the state to do real estate inspections). Talk with friends and find someone who had a good result from a major house construction contractor and see if you can get someone like that to help you next time. My mother has been in the real estate industry for almost 30 years and I've seen too much not to be wary. And I believe that most sellers are good faith sellers that just don't know about the problems. But as the buyer, I need to know about the problems.
Elizabeth Razzi: Good advice. Thanks.
District Heights, Md.: Need help in locating a builder in Florence-Myrtle Beach, South Carolina area.
Elizabeth Razzi: Sorry, I'm no help there. Chatters?
Wheaton: I'm a first-time home buyer and I went with an exclusive buyer's agent. I interviewed several, checked them out and decided to go with one. I toured several houses -- maybe too many -- and have put in an offer on one, that was accepted.
Since then, my agent has gone crazy. He takes everything personally now. If I ask a question (I'm a first-timer, after all), he thinks I'm questioning his character. He missed the inspection because the inspector offered to inform him of it and forgot, but my agent keeps harping on me for it, even though I've apologized multiple times. He offered to cut his commission and then denies saying that. He sends me six or seven e-mails a day harping on minor oversights, or things I didn't inform him about fast enough, or how I'm robbing him blind by mentioning he'd cut his commission. I've been professional in my responses, but each one opens up a flood of new e-mails over old issues.
I talked to my lawyer, who said there's nothing I can do, and even if I dumped the agent, he'd still get his commission. I don't close until the end of next month. He's supposed to be working for me, and I don't feel I can trust him. He's a company of one, so I can't ask to be reassigned to a new agent or even complain to his boss. I'm at a loss. Can you help?
Elizabeth Razzi: Sorry, Wheaton. There may be an Anxious Real Estate Agent Flu going around. Yours is the second such story I've heard recently. At this point, there's not much to do but keep it businesslike. Communicate in writing (email?) whenever possible. And yoga might help.
Washington, D.C.: I am in the process of buying a condo in D.C. The seller didn't use an agent, and I didn't have a contract with an agent, but had worked with one earlier to put in offers on other condos that weren't accepted. So, I have reviewed the standard contract a couple of times. I'm about to sign the contract for this unit (we've agreed on a price and have records of that, just need the formal contract to be ratified), and it is the same as the others. Other than the appraisal, inspection, and financing, are there any major steps along the way that I could be forgetting about as someone doing this without an agent? The seller's been great in the process, which has made this whole thing easier! Thanks!
Elizabeth Razzi: Before you sign a contract, spending a couple of hundred dollars to have a real estate lawyer look it over would really do wonders for peace-of-mind.
Arlington, Va.: I am in the process of buying a condo directly from the seller, with neither party using an agent. I have reviewed the contract, and it is standard, based on other contracts I have seen. Other than the appraisal, inspection, and financing contingencies, are there any big things that I should be aware of as a buyer not using an agent?
Elizabeth Razzi: You must, must, must carefully review the condo association documents, especially the parts that outline the rules for what you can do as a resident (say, no bicycles on the deck or no trucks parked on the property) and the financial statement. Get the advice of an accountant or someone else familar with balance sheets if you aren't comfortable picking apart the financials yourself.
Atlanta: Renting vs. owning -- The thing is that what I pay in taxes, of course I can deduct... it's like deducting what i pay the state in taxes. And as for the interest deduction, either I could deduct it yearly, or deduct it from the price of the home that I sell it at, eventually, never paying taxes on the sale of my home (which people don't really do, anyway, but still).
Owning a home isn't a piece of cake -it's A LOT of work. And so the owner benefits from that work - but let me tell you, I'm not going to make more than 2-3% on my home - few people do. Even when they 'sell for more than twice what I paid for it.' They don't include ALL the costs of owning the home, which are MANY. They typically don't make so much on the sale, no matter what - even in times when housing was going up like crazy... since again, ALL the costs of owning (including homeowner's insurance, my alarm, whatever) are rarely included in the stats you see.
It's a money suck, that's for sure.
Elizabeth Razzi: One point -- Owners can deduct interest paid every year. AND,when they sell their main residence, they can keep as much as $250,000 ($500k for a married couple) free of capital gains tax. That's a pretty big benefit.
More on deducting rent from state taxes: Massachusetts allows you to deduct rent you've paid from your state taxes, too.
Elizabeth Razzi: More news from around the country.....
Great Falls, Va.: Hello, we just put an offer on a house that both the seller's agent and our agent believe will appraise for less than the asking price. The seller's agent indicated he has spent hours talking to his clients about this; even so, they counter-offered with their original asking price. I understand some new rules are going into effect that alter the appraisal landscape, potentially in favor of buyers. Is this correct?
Elizabeth Razzi: There are new appraisal rules in effect. Whether they benefit the buyer is open to debate. Columnist Ken Harney has written pretty extensively about it.
washingtonpost.com: Lowball Appraisals Spark Uproar (Post, Saturday, July 4, 2009. )
Elizabeth Razzi: Harney's column on appraisals.
For Lake Anna who needs a contractor: You could try servicemagic.com. It's a free service, where you post your job(s) and only interested contractors bid on it. The contractors are pre-screened and insurance is verified. If you ever have a problem, Service Magic will do the disputing for you. I don't have any connection with them, other than a happy customer.
Elizabeth Razzi: I suspect Service Magic is a chatter.....
Elizabeth Razzi: Time flew! In tomorrow's Real Estate section, Terri Rupar reports on what buyers are getting themselves into when they buy a property "as-is." And Jon Starkey has suggestions on ways to dress up your home for $1,000 or less. In lieu of a chat on Mondays, as suggested by one chatter today, may I suggest you keep the conversation going in the comments after those stories--or on the Local Address blog. See you in two weeks!
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