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Elizabeth Razzi
Washington Post Real Estate blogger and columnist
Friday, February 5, 2010; 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.

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.

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Elizabeth Razzi: Hello, everyone. I'm chatting today from my family room, which, when you think of it, is on-the-scene reporting for a housing writer. The local grocery was surprisingly well stocked this morning, considering that I aborted the trip last night when I couldn't find a parking space. So, I am pre-emptively hunkered down, fully stocked, and telecommuting. Let's chat.

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Washington, D.C.: Why doesn't the Post do some real real estate journalism and start digging into how banks are able to hide bad loans by not foreclosing on non-paying mortgages and not showing the loans as bad on their books here in Washington, D.C.? And how about looking into how many empty homes that have been foreclosed on are being held off the market by banks (which is their right of course), but at the same time refuse to provide any information either to regulators or the public (via the Post) about this?

Sure, it's easier to write about the latest kitchen remodeling or gush about one neighborhood or another, but what happened to hard journalism? It's a big story, the Post could dig it out, but there's nothing in your pages about it. If it weren't a hard story to get we'd expect the local advertising supplement to do it, but it is hard to find out about, and that's why we need the Post.

Elizabeth Razzi: So...you don't like remodeling stories. Duly noted. But you've answered your own question. Nothing says a bank MUST foreclose on a house or that they MUST put it back on the market when it doesn't think it can get a good price.

Regulators can see the lack of income stream from bad loans. Are you alleging that banks are hiding bad assets from their regulators? Then let's talk. Call me at 202-334-7533. But if you're just grousing that you can't find enough cheap foreclosures to snap up for your portfolio, well....bummer.

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Wrote about "dud" agent: I wrote in about an agent/broker that did NADA to sell my place. When I went to get the keys there was a note about how sorry they were to not have found a buyer. I was going to toss it, but kept it for 'evidence'.

The new agent is very active, and has been stymied only by the weather from having an open house - this weekend was the second miss... Hardly his fault.

BUT, my question is this: The place is still under contract with the same company to rent, with zero interest of course; the rental agent is nearly as useless. Do you know how I can get out from under that w/out paying them off? The contract runs out in June, which is way off...I've considered contacting the owner of the brokerage, but he's the dud agent's father, so I'm thinking that may not be useful. THANKS

Elizabeth Razzi: Take a magnifying glass to that contract. Does it specify what activities they should be performing? Have they performed those actions--every single one? Go to the owner of that brokerage and demand to have the contract canceled due to non-performance. You might ask your family lawyer to make such a request on letterhead. Be demanding; make them happy to see you go. What do you have to lose?

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Prince George's County: When you refinance your mortgage, what closing cost can you write off on your taxes?

Elizabeth Razzi: Basically, your tax deduction is points--or prepaid interest. But they're handled differently, for taxes, than when you buy a home. Refinance points (each point = 1 percent of the loan amount) must be deducted over the life of the loan. So, you divide the dollars paid for points by 30 and deduct that much each year. BUT..if you refinanced before, then those leftover, not-yet-deducted points all become deductible for the year of the new refinance. As for recording fees, etc., I believe they are not deductible as taxes, but you need to doublecheck that.

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NoVA: I am bewildered at the current state of the housing market. After resisting buying during the "boom years," I now find myself in the market for a home. I am able to put down 20% cash on a home up to about 800k and I have pristine credit and want to do a 30-year traditional loan. I feel that I deserve more of a "nicer" house since I waited. But, what I am finding in the housing market has disenchanted me. It appears that real estate persons and sellers are ignoring the fact that the market is supposedly down. When I find a place that I want to buy, I am met with outright disgust at the thought of offering lower than asking price. I have been to new home developments where much of the same is happening. I have had new home builders take worse credit, NO money down or 3.5% FHA loans for more money over my 20% down, perfect credit, 30-year financing offerings time and time again. Am I missing something? Aren't I the one that is suppose to be in the driver's seat?

Elizabeth Razzi: Well, it is a very strange housing market, that's for sure. I'm sorry you're finding so much frustration. But your reward for waiting out the boom is that you're not stuck in a home that has declined in value. (Not a bad reward, btw.) But if sellers are finding buyers willing to pay more than you are....then, of course, they will hold out for the higher price. Wouldn't you? And if those competitors are able to get a loan with lesser credit than you have....they will pay the price with higher rates. If they have less down payment, they will pay the price with mortgage insurance. There's two-way traffic out there, and buyers and sellers each have their own drivers' seats.

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deducting refinance points: Only divide by 30 if you have a 30-year refi, correct?

Elizabeth Razzi: Correct. I was trying to make the most-common example. If you take out a 15 year refi, divide by 15, etc.

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Washington, D.C.: Went to Zillo to find the sale price of a nearby home. It only offered calculated estimate. Is there some free site that posts actual sale prices by address? Guidance sought.

Elizabeth Razzi: Zillow has its own special formula to estimate values, and they can vary a lot. A couple of sites are starting to add sold prices to listings. Trulia, Redfin and and Sawbuck do. Anyone know of others?

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Bethesda: Recently got my new Assessment. House value went down $100,000 since the last one. Does that mean a huge reduction in next years Montgomery Property Tax?

Elizabeth Razzi: It all depends on what Montgomery County does with its tax rates. If they leave them alone, yep, you can expect a lower tax bill. Renae Merle will lead the Real Estate section with a story about tax assessments throughout the metro area in tomorrow's newspaper. Of course...if a couple of feet of snow hit, please find the story on Washingtonpost.com.

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Open House: I spent about $500 advertising an open house for Sunday...does the Post have a "snowcheck" policy?

Elizabeth Razzi: I don't know. We work hard to keep news and advertising separate at the Post. Please bring that up with the advertising department.

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Washington, D.C.: I've been shopping for a house in the NW, D.C. and Chevy Chase areas, and I'm often confused about how the selling agents pull comps to help come up with the list price of the house. Aside from the condition and quality of the home, I'm more interested to know what the guidelines are in terms of how far out of the neighborhood/area and how far back in time it makes sense to compare the selling prices of homes in an area.

It seems that agents often list homes for more than what they are worth, but it's hard to know for sure without knowing the guidelines for how the banks/assessors come up with the comps for appraising a home.

Elizabeth Razzi: The most relevant comps are the most recent ones, and the closest ones. They need to be truly comparable in terms of house size, style & condition as well. A good agent will be able to explain why each comparable is relevant to your home's price. And they need to talk about actual, sold prices as well as listing prices. Pay attention to sold prices as a percentage of listing prices; you can expect to follow that pattern. And you have to look at the asking prices for other listings (in your neighborhood and the others where your buyers would likely search) competing with yours. Wouldn't hurt to go tour a couple of their open houses, either.

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Silver Spring, Md.: We're batting around the idea of buying a house to rent to others. We have no experience with this, nor do family members. Can you recommend a book or other source of info about the pros and cons. The money sounds good, but I have visions of a tenant from hell . . ..

Elizabeth Razzi: The For Dummies books are usually pretty good. Also, for advice on the legal aspects, see what they have to offer on Nolo.com, a consumer-oriented legal publisher. Become completely versed on the tenant-protection laws in Maryland and Montgomery County. And my little bit of advice to all landlords: You won't go wrong if you see yourself as being in the service business--providing rental housing. If you see yourself as a hands-off real estate investor, you will be unpleasantly surprised.

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Anonymous: Actually when a bank forecloses on real estate it only has a limited time to sell it. Used to be two years. OREO (other real estate owned) is tracked closely by regulators. From a former bank examiner.

Elizabeth Razzi: Interesting. And what happens if it doesn't sell?

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Dumfries, VA: Have you heard anything about what's going to happen with FHA loans? We won't have 20% to put down, but we will have 10%. Our credit ratings are in the 700s, but since we can't put down 20%, we've heard we won't qualify for a conventional loan. We are hoping a house will come on the market in the spring we want to buy, but will be extremely frustrated if FHA goes bankrupt or the interest rate goes too high. So, has anyone let you know what they've heard about financing through FHA?

Elizabeth Razzi: FHA is not going to go bankrupt. They have a reliable--practically automatic--cash source in Congress. The fees paid at closing when using an FHA-insured mortgage are probably going up. Borrowers with really poor credit, under 600, would be required to make a 10 percent down payment, instead of FHA's usual 3.5 percent. That shouldn't affect you. It wouldn't be a bad idea to get pre-approved for an FHA loan now, just so you know where you stand, and you're prepared to act when you find the home you want. Good luck.

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Washington, D.C.: My biggest frustration with the Post is the apparent absence of any attempt to provide any real local perspective. We all know real estate is about location, location, location, and I imagine the vast majority of your readers are local, so why is there no attempt to make real estate reporting relevant to local readers? From most of what we are offered, we might as well be in Kansas (or LA, Detroit, or Miami). There a few stories of local significance, but these are rarely, if ever, referred to in the RE Section or covered in the online Post. Information of local relevance is routinely ignored, i.e., stats and analysis from NVAR and CRA-GMU. In short, the Post squanders the opportunity to provide useful data to its readers and seems content with fluff. Nothing wrong with an occasional fluff piece, but your area readers are some of the most educated and intelligent people in the world. It would be nice to be treated that way. Will this ever change?

Elizabeth Razzi: Duly noted. Thanks for the feedback.

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Fixer upper: We have lived, you might say "frugally', but we say realistically most of our lives. We won't buy HDTV until our old set dies a natural death, we cook all our food and make our own espresso, take good care of our 1999 Ford and an old Mercedes for which we paid cash. The kids graduated from private schools in DC and college debt free, which they attended sans scholarships. We have no credit card debt. We have recently retired and are planning to buy a fixer upper with a large back yard suitable for vegetable garden either in Herndon or Woodbridge and turn it into OUR dream house: paint the walls the color we want, redo bathrooms and kitchen to our taste and needs and so on. Yes, we are planning to pay cash, but all low end or so called "foreclosed" homes on the market now, according to Google searches, have been purchased in November in low hundreds, repainted, recarpeted, (we don't want any synthetics in our home), outfitted with SS appliances, hideous cabinets & granite counter tops in the kitchen, and listed at twice the price. What makes things worse is that we HATE all of the so called "improvements." Is there any way we could find a true fixer upper at a reasonable price without paying the middlemen? Most of the foreclosed homes we liked had been snapped up the day they went on the market. We have a great RE agent, but we are buying a "cheap" house, we hate imposing on her time too much.

Elizabeth Razzi: You're competing with bottom fishers (investors), and they move fast. You and your agent will have to be very aggressive to buy such foreclosures. You might have better luck trying to buy from sellers who are not in the short/sale foreclosure situation. You'll pay more, but you may find something more in line with what you want. Any agents out there have advice for Fixer upper?

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For the "Landlords": Rule #1: Verify, verify, verify.

Verify employment with pay stubs, not just a phone call.

Check credit at their expense -- in fact, have them pull their own credit report and give it to you.

Verify their current tenancy with check receipts as well as their current landlord. Et cetera.

Tenants are, for the most part, wonderful customers...but the one that's a horror show usually has been one before.

Learn from somebody else's troubles, not your own.

Elizabeth Razzi: Good advice. Thanks. And may I add that they need to be equally stringent with all applicants, for fairness sake.

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washingtonpost.com: FHA plans to require borrowers to produce more cash for down payments (Post, Jan. 20)

Elizabeth Razzi: Here's Dina ElBoghdady's story about changes coming to the FHA program.

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Herndon, VA: Good afternoon on this snowy day!

We are about to put our townhouse on the market. We spoke to a real estate agent last week and got a price estimate. We were discussing open houses with her and she suggested that we do not have an open house since open houses are not typically where houses get sold. Mostly only nosy neighbors come. Is this true?

Thank you for a great chat.

Elizabeth Razzi: Good afternoon to you, too! This is a point of a lot of grousing and arguing among real estate folk. Many say open houses don't sell THAT house; they sell that agent. Your agent probably doesn't want to spend the money advertising an open house, and a huge chunk of weekend babysitting it. But what about your interests? I think at least one open house is a good idea. If you have something to sell, don't you want people to see it? And all those nosy neighbors...they're exactly the folks who may have friends who want to move into the neighborhood.

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Anonymous: As you well know everything sells if you price it right. The bank incurs and accounts for the loss on the loan at time it forecloses. Whatever money it gets when it sells the property it can reclaim it as income to offset those losses. It isn't allowed to sit on the property and wait for the market to improve. That is the whole point of these laws, as it prevents banks from engaging in RE speculation. Which is why truly banks never want to foreclose.

Elizabeth Razzi: Thanks, anonymous. So, share with the chat. Are you a regulator, former regulator, real estate investor or what?

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Alexandria VA: An acquaintance of mine wants to walk away from his mortgage and let the bank take it. He claims the house is now worth $170,000 less than what he paid for it (don't know how he came up with that figure) and will never recover, so he wants to wash his hands of it and just turn over the keys. Not so coincidentally, he is going through a divorce, wife is still in the house while he has moved to an apartment.

He has not lost his job or anything, still has the income to make his mortgage payments, just doesn't want to.

In such a situation, won't his credit take a tremendous hit? He's planning to buy something else in a while; I suggested that might be more difficult than he thinks, but he says in a year's time, his credit will be fine and he'll be able to find a mortgage again.

What say you? How long does someone's credit suffer from walking away from a debt like that?

Elizabeth Razzi: It will hurt him for more than a year. About 3-5 years are the hardest hit. But forever, when he fills out a credit application, he will have to say yes when asked if he ever defaulted on a loan. Divorce wars come into play here. Who knows what kind of arguments the couple--and their lawyers--are having over who pays for what.

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Fixer Uppers: Not a realtor, but we short-sold our former dream house last summer to a couple with cash. They had looked at the house while we were still hoping to get out cleanly, then when we dropped the price, they pounced.

Having cash was the key, because we were able to go to the bank with a firm cash offer, and the buyers got the place for $200K less than our original non-short-sale asking price.

So maybe they should start checking out houses for sale in their preferred areas, whether shorts or not, and be ready to jump as our buyers did when we dropped the price for a quick sale.

Elizabeth Razzi: Good advice! Thanks for a report from the field.

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Gaithersburg, Md.: I'm currently ready to sell my house in Gaithersburg (zipcode 20878) mainly because I would like to get the tax benefits that expire on April 30. My headache is I can't find good homes in those areas that I've set my heart on for very long. Even if some prospective buyer decides to buy my house when I can't find the right home for me, that will certainly get me into trouble. Do you think I should wait until I can find some good listings or just take chances? My agent wants me to sell my house and look for one at the same time. Thanks for your kind advice.

Elizabeth Razzi: This is always a headache for the move-up buyer. It's scary to sell the good-enough home when you'e not sure there will be a better replacement that you can afford. I would try to take the heat off myself and imagine that homebuyer tax credit (up to $6,500) doesn't exist. The odds ae just too high that you won't meet the deadlines anyway. You have to get under contract by April 30. You'll have the best chance of finding the home you really want (and not feel pressured to overpay for it because of an arbitrary deadline) by selling, and renting temporarily (either a rent-back of your old home, or a temporary apartment) until you find the right place.

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Elizabeth Razzi: Well, everyone, thanks for good company on a snowy afternoon. Please stay safe this weekend. And, either on paper or on Washingtonpost.com, please find our Real Estate section. Renae Merle reports on the property tax assessment notices hitting area mailboxes soon. Take care.

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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.


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