Real Estate Live

Elizabeth Razzi
Washington Post Real Estate blogger and columnist
Friday, November 13, 2009; 1:00 PM

Post Real Estate columnist Elizabeth Razzi discussed the local housing market -- from condos and investment properties to contracts and mortgages on Friday, November 13, at 1 p.m. ET.

Razzi is the author of two consumer-advice books, "The Fearless Home Buyer" (2006) and "The Fearless Home Seller" (2007).

For more on local real estate, visit washingtonpost.com's Real Estate section.

A transcript follows.

____________________

Elizabeth Razzi: Hello, everyone! Lots to talk about today. And...in case I forget to mention it later, this will be our only chat this month. I hope to spend the Friday after Thanksgiving, which is when our next chat would normally fall, eating leftovers and gossiping with relatives!

_______________________

Woodbridge, Va.: Hello, Hope my question gets a response today; thank you in advance. Well, I am a 50-year-old woman and I have yet to purchase my own home. This is something I wish to do BEFORE the $8,000 tax credit expires. Currently, I am living in my sister's home and renting, just me. I will more than likely purchase this home. I know NOTHING (and I am reading up on it)about loans, closing costs, etc. Obviously I do not need a realtor, but my question is this - may I apply for a loan through the bank my sister is currently doing business with? Would I have a better chance at getting a loan? My credit is not the greatest in the world (FICO 666) but I know people who had worse credit than mine and bought several homes! I wanted to look around; however, my credit might not allow me to do that. I want to get this started as soon as possible. If it helps any, I am retired military. I have to say, the VA has not been much help. What am I doing that I shouldn't be doing and what am I NOT doing that I should start on right away? Thank you for taking my question. Your advice will be strictly followed!

Elizabeth Razzi: Well, first, PLEASE promise you will not rely solely upon my advice. In fact, even if you don't need a real estate agent to help you find the property, you need some professional advice. Talk to a local real estate lawyer, or ask some reputable real estate agents if they would help you with the transaction -- for, a greatly reduced fee, since they don't have to share it with anyone or do the hunting. You also sound like a perfect candidate for pre-purchase housing counseling. You can find reputable, free counselors through Fairfax County, or the www.HUD.gov Web site. As for buying the house from your sister and getting the $8k credit, you need to research that further. You're not eligible for the credit if you buy from a "close relatives," but the IRS' definition of that doesn't mention siblings. Check out their site: http://www.irs.gov/newsroom/article/0,,id=206291,00.html

_______________________

Arlington, Va.: Where can I find out about the specifics of the new homebuyer tax credit? The original income limit was $75,000 for singles, but I heard they raised the limit.

Elizabeth Razzi: We've got you covered! Here's a link (following momentarily) to Dina ElBoghdady's reporting on the credit. Also, the IRS has a good Q-and-A here: http://www.irs.gov/newsroom/article/0,,id=206291,00.html

_______________________

washingtonpost.com: House votes to extend and expand home buyers' tax credit

Elizabeth Razzi: Here's Dina's story.

_______________________

Washington, D.C.: Hi there. I need some help understanding a second home purchase. The first time my husband and I bought a house, we gave our realtor a check (maybe around $20k) every time she put an offer down on a house - we had to make multiple offers to finally get a house - and when we did that money (the $20k) became part of our down payment. So now we are hoping to move to a bigger house and use our equity in this house for the down payment on the next house (about $300k equity). Will we have to sell our house first to get the cash out and then hope we can find another house quickly? We don't want to (can't) carry two houses. Please help! I always find your chats so informative.

Elizabeth Razzi: Relax. You don't have to hand over the full down payment in dollar bills. That $20k was your earnest money (and a rather large amount of earnest money for a first-time home). For your next home, you will be expected to offer a check for some earnest money (which you risk losing if you back out of the deal), but it doesn't have to be the whole down payment. At closing, the closing agent will handle the paperwork crediting the proceeds from your home sale toward the down payment on your purchase. You'll never get the dollar bills in hand.

_______________________

Herndon, Va.: We have taken advantage of the low prices and bought a foreclosed duplex in Herndon that is close to the future metro.

Interestingly, the family seemed to have moved out in a real hurry. Along with large pieces of furniture, they left clothes, DVD player, and stereo equipment (all working). Even more surprisingly, they left family videos and other very personal items. The other items they left behind filled two dumpsters.

I'm guessing they went back to Mexico (I can tell from the videos they left behind that that's where they're from). I feel terrible just tossing the tapes and other memorabilia, but there's no way to get in touch with them.

Anyway, I thought it was an interesting story.

Elizabeth Razzi: Foreclosed homes tell a lot of sad stories. They may have moved back to Mexico; they may have moved into a shelter; they may have moved in with relatives who didn't have room for their belongings. Rather than throw it out, though, maybe you could donate the material to charity. Someone surely needs it.

_______________________

Arlington County, Va.: A condo in our complex went into foreclosure and to auction recently. Thinking that it could be a good buy, the condo board decided to put in a bid. They made all decisions in executive session. We only learned about it when a member of our association who works for the county happened to be at the auction. There was no discussion in public or any vote by the members, owners, in the condo association. Can the board secretly buy a condo and flip it or whatever without members approval? They did not get it because someone else out bit them. Thanks for your answer. Russ

Elizabeth Razzi: Whoa! That doesn't sound right. Executive session? I would spend the evening reading all the fine print in my association documents, and demand an explanation at the next board meeting.

_______________________

Baltimore, Md.: I am looking to purchase my first home. I have had some delinquency in the past. My lender stated that they only real credit I have is a credit card with $1000 limit. The balance is about $840, which I am working to pay down. I have student loans, but they are in deferment for the next couple of years while I am in school. My lender mentioned the possibility of opening another credit card with a smaller balance and paying it off each month as a way to increase my credit score. What is your advice on this?

Elizabeth Razzi: I'm wondering why you're so eager to buy a home right now. You're in school, with student loans hanging over your head, and most of the credit available to you already used. Rent. Graduate. Move wherever opportunity takes you. Save. Rebuild your credit. And do not let that $8,000 tax credit lure you into a burdensome decision.

_______________________

Sinking ship, Va.: What happens when a HOA fails? There is a 30% vacancy rate and delinquency in a development.

Can it be dissolved by the remaining owners? Does the county/city have to claim the sewer and road obligations?

Elizabeth Razzi: I don't know! I'm sorry for your struggle with this, but it's a fascinating situation. Please drop me an email at razzie@washpost.com.

_______________________

ready to jump in: Now that the homebuyer's credit has been extended through next June, my husband and I definitely want to take the plunge. A few questions: when should we plan to get pre-approved for a loan so that we can be "under contract" by April 30th? And is it reasonable to think we wouldn't have to schedule our closing until mid- to late June if we finalized a contract in April? Ideally, we'd like to limit the overlap on our current apartment lease, which actually goes through July (but we think we'd be able to work with our landlords on this, if we wanted to). Finally, is it true that you can use the credit towards the down payment, or is it unlikely that we'd be able to do that, given the paperwork?

Elizabeth Razzi: Yes, you can use the credit toward the down payment. That's the easy part. You seem to like cutting things close to the edge! You're not allowing yourself much time to get this deal done. And not taking occupancy at closing could cause trouble for you--the letter of the law and all that. Find out from your landlord what the penalties are for breaking your lease early. Get pre-approved for a loan now--or by January--and start looking. If you find a great home, you'll be in a position to buy it. Tying everything to the expiration of your lease is too much tail-wagging-the-dog.

_______________________

Alexandria, Va.: I bought my first home in 2008. Is there any sort of entity, LLC or otherwise (of which I would be the owner), to now purchase my home from myself and take advantage of today's favorable mortgage products/rates for first time homebuyers?

Elizabeth Razzi: No. And...if you're thinking you'll become an investor by buying another "owner-occupied" home (wink, wink), think again. Misstating your intention on a mortgage application is loan fraud.

_______________________

Earnest money: Man - I would love to have a buyer put that much money down for earnest money!! But that's from a seller's POV. Can't imagine what the realtor who represented them was thinking.

Elizabeth Razzi: I agree. On a $2 million house, sure. But a first-time buyer home?

_______________________

Washington, D.C.: I have never owned a home (though I am, ahem, middle-aged). I think I am scared and ignorant of the whole process. Is there a book(s) you'd recommend to help me understand it and know how to proceed?

Elizabeth Razzi: Well, I'd shy away from recommending my own book to you (see the intro above) except that it's so cheap on Amazon.com by now that you've literally got nothing to lose. And...I would guess that you work for my publisher, except for point number one. Also, the "Home Buying For Dummies" book is good, along with books by Ilyce Glink.

_______________________

Keys 3 days after closing: Wonder if we can get an update from the buyers last chat (I think it was last chat) who's sellers wouldn't give them the keys to the home until 3 business days after closing.

washingtonpost.com: Your intrepid producer is scanning the submissions carefully to see if we get any updates!

Elizabeth Razzi: Oh, I hope so! Are you out there?

_______________________

Arlington, Va.: Can you address the supply of single family homes in the region (that aren't in short-sale status?) I've noticed that the number for sale, especially below $350, almost seems non- existent, especially compared to where it was at this time last year. Are people not selling anymore?

Elizabeth Razzi: I have a blog post today (don't know if it's up yet) on this very topic. Yes, in some areas, including Arlington, there is very little on the market. And, well, there never was all that much to be found below $350k in Arlington.

_______________________

Olney, Md.: How important is it for resale value to have all the kitchen appliances the same brand name? I need a new refrigerator. My stove is old, but still working, and I do not use my dishwasher and do not want to replace it until I sell, which will be about 10 years from now. It is a condo if that makes a difference. Thank you.

Elizabeth Razzi: Same brand doesn't really matter. It is good for them to all coordinate--i.e. all stainless, or all white. And, if you aren't selling until 10 years from now, don't fret over appliance's effect on resale value. The fridge and stove, bought now, may still be in working order. But even a new dishwasher would likely go kaput by then.

_______________________

Arlington, Va.: This might not be the right chat for this question, but I'll give it a shot.

My husband and I moved into our first house this summer. We didn't notice this at the time, but the bathroom doesn't have an outlet or a vent fan. We've been using it for months without these things and it hasn't been a big deal. However, I'm paranoid about mold from all the moisture each day from the shower. Do you or any of the chatters have a recommendation for a good electrician?

Elizabeth Razzi: I can't recommend specific contractors. But you're right -- you definitely want to get this problem fixed. And make absolutely sure the fan is vented to the outdoors, not into the attic. You may need more of a small contractor than an electrician, because this could involve cutting into your ceiling, attic, even the roof.

_______________________

Re: earnest money: My husband and I put down $25K for our first home purchase less than three years ago -- the price was mid-800s, though, so it didn't seem to be outrageous.

Elizabeth Razzi: Even on an $800k house, $25k is a lot of money just to demonstrate that you're a serious buyer. But I know that during the boom years people did place very big earnest money deposits, to try to elbow their way past the competition.

_______________________

Arlington, Va.: I know you don't have a crystal ball, and I sure don't claim to, either. But I nevertheless predict that the housing market will slump again when the $8000 homebuyer credit expires, extension notwithstanding. From my perspective, that seems to be the only thing fueling the housing market right now. Yes, prices have dropped considerably, but you still have to factor in things like rising unemployment, which will keep the market slow for some time. As such, I think all this talk of the housing market finally bottoming out is quite presumptuous.

Elizabeth Razzi: Well, I wouldn't say the $8k credit is the ONLY thing fueling the housing market. Record-low interest rates and lower prices certainly are contributing. But unemployment sure is a big concern. Unemployed people--and those worried about losing their jobs--simply do not buy homes.

_______________________

Frederick, Md.: We're looking at a move in January and don't have enough equity to sell the house outright, so we're looking at keeping it as a rental for 3-4 years before selling it. Should we first set up an LLC to own and rent the property, or is this something we can do ourselves? We'll probably have an agency handle the rental because we'll be on the other coast.

Elizabeth Razzi: I dont' know if an LLC is necessary. It may depend on your other assets. Any lawyers/accountants out there with an opinion on this?

_______________________

Washington, D.C.: Hi. I'm hoping you can provide some advice for me. In 2004 I bought a one bedroom unit in a building that had been recently renovated and converted to condos. The company that handled the conversion bought a number of the units, which they did not renovate and kept as rental properties. As renters moved out, the condos were renovated and sold, but they still own six of the units. We are a small building, so because they own 6 units we are now in violation of a new rule stipulating that no one entity can own more than, I believe, 10% of the units. As a result, no one has been able to sell because the loans are getting denied by Fannie Mae. Owners have not even been able to refinance because of this. We have approached the corporate owner to try to resolve this problem, but they have refused to help us in any way. They have their own financing branch, so they would be able to sell their own units when the time came. My fellow owners and I are very upset that we are literally unable to sell and we are unsure of what else we can do. Can you offer any advice at all?

Elizabeth Razzi: I'm so sorry for your predicament. And I suspect you are stuck until the market recovers more. You may have to become a landlord if you want to move elsewhere. In 10 years, it could prove to have been a fantastic investment. Maybe.

_______________________

8000 K credit versus 7500 K: Since the 8K credit was extended to June, what happens to those of us who got the 7500K credit last year? Any chance it will be forgiven and not have to be paid back? And just who is going to oversee those who got it anyway? I know, the IRS, but too many can get around declaring it or just put is aside and forget about it. So why is it just not given as a credit like the 8K is to everyone? It doesn't seem fair to me.

Elizabeth Razzi: You're not alone in kicking yourself for taking the $7,500 bait (which has to be repaid!) instead of holding out for the juicier $8,000 one--which doesn't have to be repaid. I would be surprised to see that it gets forgiven, or that the IRS doesn't follow up on it. Big federal deficit and all that...

_______________________

Herndon, Va.: We are trying to get our townhouse ready for sale in Herndon, Va. We heard from a real estate agent that the Herndon market is doing better now, but don't know if this is true or not. There were a lot of short-sales before in a neighborhood a mile from ours, but they have all been sold (at a lower price). We don't have many comparable townhomes in the market right now, but in the near future a developer will be selling townhomes near us. My question is 1) will we have a better time selling in the spring with these other builder townhomes trying to sell, given that there will still be the first-time home buyers incentive? or 2) wait till these townhomes are sold, but the first-time buyers incentive runs out? We will probably be selling our home (3 years old) at around the same price as these other new townhomes, but we have upgraded our home a lot more than their base options.

Thank you for taking my question. I love your chat.

Elizabeth Razzi: Thanks for the kind words about the chat. And, yes, the market in that area is doing much better than it was. A lot of that old inventory has been bought up! I wouldn't wait until the developer sells out. That could take quite a while, and you never know what other good deals will come on the market. I'd put it on the market as soon as it's in good shape. You have some deciding to do about whether to wait until after the holidays to list (there are pros and cons to listing), but in general, I wouldn't wait too long.

_______________________

Alexandria, Va.: My husband and I put an offer on a townhome last night. While I'm sitting here waiting for a response one way or another, I'm wondering - how does one determine the limit of home improvements that will translate into higher resale?

Elizabeth Razzi: What a tense time, waiting for the reply! I dont' know if you're pondering the improvements you'd like to make after you own it, or pondering the value of the improvements the seller has already made. Basically, improvements that bring a home up to the standard expected in that neighborhood and price range increase resale value. Those that are over the top...are just luxury spending.

_______________________

Washington, D.C.: We recently bought our home (August). At the time, we did not qualify for the tax credit due to our income level. I understand they may be loosening this restriction. Is that true? And, if so, would we be able to claim it when we file in 2010?

Elizabeth Razzi: I believe the new income limits apply only to purchases made after the date the bill was signed into law. I plan to research a bunch of these fine-point questions and round them into a blog post for next week.

_______________________

RE: Tax Credit: I am confused about the differing dates for going under contract compared to closing date. What happens if your contract falls through? It seems this provision could lead to some unintended consequences. For example, if someone goes under contract in April, but closing isn't until June, what is to stop the seller from refusing to fix the problems that are found in May because he knows the buyer doesn't want to walk away from the contract and lose the credit?

Elizabeth Razzi: Aha! Good for you for thinking ahead. I hope the earlier chatter who is thinking of cutting it close to the deadlines reads your post. You're right, the deadline could lead to brinksmanship negotiating. Your best defense is to go to contract early enough that you could still pull off a different purchase if the first attempt fell through.

_______________________

doesn't seem fair?: You got a $7500 boost toward a new home. How is that not fair? Please don't tell me you are someone who complains about "big government", too.

Elizabeth Razzi: Thanks for the comment...

_______________________

To sell or rent from a few weeks ago here: Recap: Don't NEED to sell (as in not in danger of foreclosure or anything, just got married and moved into my husband's house) but was hesitant to become a landlord. Listed home for sale or rent. Got a tenant, prop management company will do the heavy lifting, and I can put the house back on the market in a couple of years when I owe less, and it's worth more.

Elizabeth Razzi: Thanks for the update. We all love to hear how the story ends!

_______________________

Alexandria, Va.: Hi Elizabeth, I've been a regular reader for many years and enjoy the questions and insights. I would like to know what the inventory situation is in the Alexandria/Old Town areas as it relates to Potomac Yards. Streets and infrastructure are in place. Is there demand to start executing the building plan? What kind of businesses do you expect to locate there?

Elizabeth Razzi: I don't know the specifics of that neighborhood. But if you're wondering what kind of businesses will come in -- and when-- you should keep in mind that the recession is still battering retailers and commercial developers. I wouldn't expect a whole lot of building soon.

_______________________

I'm not an accountant, but: Our accountant told us that if we set up an LLC for a rental house, we'd lose the tax deduction (interest, property tax, etc.) from our personal income. Since those expenses would be essentially a wash against any rental income, you're not getting benefit from an LLC that you could get as an owner.

Plus, you should sell now--even at a loss--if you think you're going to have more equity in 4 years...

Elizabeth Razzi: Thanks for advancing the conversation!

_______________________

State of Local Real Estate: What are your thoughts on the state of local real estate for newer condos (less than 5 years old) in desirable locations near a metro station, such as the Arlington area? From my observation, inventory or supply of 1BR condos are low with more demand than supply because of professionals such as myself. Though the home buyer credit and historically low interest rates are making these condos more affordable. The bigger question in my mind will be what happens to condo prices after the stimulus expires around May 2010 and mortgage rates start to inch back up while unemployment remains high? I don't want to buy more than I can comfortably afford, but also don't want to miss out on a buying opportunity. Thanks again for your thoughts on the state of the local real estate market for condos. Any specific thoughts on the prices for condos in this area based on your opinion of the current situation along with a historical perspective on the DC area during these economic cycles would be much appreciated.

Elizabeth Razzi: Okay, well no time for a Master's Thesis here, but I'll take a quick stab. A lot of new construction that was supposed to be sold as condos got turned into rental apartments when the market soured. That took away quite a bit of inventory. What will happen to prices when the stimulus expires? Doesn't EVERYONE, from lawmakers and economists to home buyers and renters, wonder about that?

Economic experts have told me that we still have a strong flow of young professionals moving to the Washington area--the typical buyer for close-in, one-bedroom condos. Traffic keeps getting worse, so the premium for being near Metro isn't likely to disappear. If you find a place that suits your lifestyle and your budget--and you plan to stay put for five years or more, it may be a good decision for you. BUT...you may also want to read the questions posted earlier about the condo owner who can't sell and the homeowners association in financial trouble.

_______________________

Arlington, Va.: I'm trying to rent my 1 bedroom/1 Bath condo and have only gotten a handful of responses from Craigslist, even though my place is quite centrally located. Do you have any facts on the rental market? Are less people renting these days?

Elizabeth Razzi: There are a lot of unsellable condos on the rental market; we've had a couple of comments about them in this chat. Also, take a look at your ad-writing skills. You may not be "selling" the idea as well as you need to. Oh, and, allow me one old-fashioned idea: Newspapers--either this one or one of the neighborhood weeklies.

_______________________

Plus, you should sell now--even at a loss--if you think you're going to have more equity in 4 years...: Huh? Why?

Elizabeth Razzi: How bout it? Why?

_______________________

Arlington, Va.: Not having a fan in a bathroom isn't inherently a problem unless you make it one. Many houses built in the 40s and 50s did not have bathroom fans. Our house was built in 1948 and has never had one and has never had mold issues. Fans are nice but if you don't have one just use common sense - keep a door or window cracked when you're in the shower, and keep the door open when you're finished so it dries out quickly.

Elizabeth Razzi: I think window is the key word there. The old bathrooms I've been in had windows--all of them.

_______________________

Gaithersburg, Md.: I must disagree -- 25k as a down payment on a 800k home is not a huge down payment. Seriously, if a home buyer is complaining about putting down a little over 3-percent on an 800K home, then maybe that person can't truly afford the home. If putting that small amount of money down is going to leave the buyer financially strapped, then you are living way beyond your means, probably already in a significant amount of debt, possibly already have owned a home that has been foreclosed/short sale on because you bought a place you could not afford, and should not be buying a home.

I have been saving for a long time to be able to put a 20-percent down payment on a home. This took me many years (just about to turn 50) and meant living on a strict budget while still enjoying life(not keeping up with the Joneses). But I am doing it. I am buying a home in Northern Maryland for just under 250K and I am putting down that 20-percent and will still have a good amount of money left in savings (I also have two retirement accounts that I have never touched).

Elizabeth Razzi: In just under the wire.....

_______________________

Elizabeth Razzi: Thanks, everyone, for brightening a dreary Friday afternoon! As I mentioned earlier, this will have to be the only chat this month, as I hope all of us have better things to do on the day after Thanksgiving. I'll have our updated chat schedule in the Local Address blog.

This Saturday we have a truly fun story about some local artists who take commissions to do paintings of people's homes. Some do oils, watercolors, pen-and-ink drawings. Some are quite beautiful! And columnist Ken Harney points out that the new "move-up" credit doesn't necessarily mean you have to buy bigger or more expensive. Have a lucky Friday the 13th, and a wonderful Thanksgiving!

_______________________

Editor's Note: washingtonpost.com moderators retain editorial control over Discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions. washingtonpost.com is not responsible for any content posted by third parties.


© 2009 The Washington Post Company