Post Real Estate columnist Elizabeth Razzi discussed the local housing market — from condos and investment properties to contracts and mortgages on Friday, December 4, 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).
A transcript follows.
Elizabeth Razzi: Hi, everyone. I’m glad you found your way to the chat today. We’ll have another one on Friday, Dec. 18, then none until the new year. Let’s get going!
Anonymous: I believe now is a great time to buy a home; the prices are down and interest rates or low. The problem seems to be with the banks however; they do not want to make home loans. It is a great time for speculators who do have the finances to take advantage of low costs. I believe that when the national news media stops saying the housing market has not yet hit bottom people will start buying and we will see recovery start. As it is sellers have dropped prices as low as they can afford and potential buyers are waiting for the bottom. Isn’t it true that our attitudes are developed around what the news media leads us to believe?
Elizabeth Razzi: Well, I don’t get the impression that Anonymous is actually asking for my opinion, so I’ll just throw his or her statement out there to get the conversation going. So..are your attitudes developed around what the news media leads you to believe?
Washington, D.C.: Posting early. I have a rental question for you. A few weeks back I asked if we would see more modest rental housing and fewer luxury apartments and condos. You said yes and left it at that. Can you provide more detail? For example, the area is littered with holes in the ground that were going to be luxury housing such as the Trillium in Bethesda on Wisconsin Ave. and Woodmont. It’s been a hole for almost two years now. Why don’t these developers admit that the market for luxury condos was overbuilt (not likely to come back soon) and use this for rental housing as we still have a huge housing shortage in this area? Seems like they would make more money than doing nothing. I am not seeing this more modest housing being built.
Elizabeth Razzi: I don’t know what’s going on with specific holes in the ground. But not much of anything is getting built now because commercial real estate–of all types–is still in the midst of a credit crunch. It doesn’t really matter what the developers would like to do–or where they might sense an opportunity to make a profit. The loans aren’t happening.
Baltimore, Md.: Hi Elizabeth. Do you, or any chatters, know of any way to legally get rid of a timeshare? I am stuck with one from an inheritance, and cannot sell it, cannot rent it, cannot donate it or give away, due to the yearly maintenance fees of $ 750. I considered just not paying the fees, but did not want to risk ruining my credit score, or having a lien placed on my primary residence. Any suggestions? Thanks.
Elizabeth Razzi: I suggest you have a talk with the lawyer who handled the estate. People cannot force their debts and obligations on you through their estates, but you may already have taken title to that timeshare. And I don’t think the timeshare people could place a lien against your home unless you financed the timeshare with a home-equity loan, and it appears you did not do that. I would seriously consider handing the deed back to the timeshare owners, and stating, in writing, that I reject ownership and refuse to pay the fees. But I’m not a lawyer. Any lawyers out there with advice on this one?
Centreville, Va.: Thank you for taking my question. Is there any LIMIT for the number of home a person can own, assuming the first four homes are financed and currently rented? Thank you.
Elizabeth Razzi: The only limit is what you can afford. Only one of the homes can be your principal residence, eligible for those tax deductions. And only one can qualify as a vacation home, eligible for those deductions. The rest are considered investment property. You are a real estate investor, and lenders will look at the specifics of your equity and cash flow–on all the properties–each time you look for financing.
Houston, Tex.: How do rates for refinacing loans compare to regular mortgage rates?
For example, if the rate for a 30-year fixed loan is 4.80%, what might one expect for a 30-year refinance for the same amount (assuming LTV of 80% or less)? Also, if the loan includes cash-out, does this affect the rate as well?
Elizabeth Razzi: You should get the same rate on a refi as for a new mortgage, downpayment and other things being equal. You need to have a lot of equity to qualify for a cash-out refi these days, but if you have it, I wouldn’t expect that to change the rate much — unless you brought your new LTV above 80 percent.
Kitchen remodel: This might be more appropriate for the Home Front chat, but I’ll ask here. We are remodeling our kitchen, which is small with limited cabinets. There is a dishwasher, but we’re considering replacing it with a cabinet because I’d rather have storage space. We rarely use the dishwasher–our previous house didn’t even have one. Do you think that this will adversely affect our resale value?
(Although, honestly, I would never not buy a house because it didn’t have a dishwasher, so perhaps I’ve answered my question.) Thanks for the chats…
Elizabeth Razzi: Sure, this is appropriate for our chat. Some buyers definitely will hold it against you if you don’t have a dishwasher. They’ll just move along to the next house. Sure they could rip out the cabinet, but they’ll imagine the hassle and expense of adding a water line and drain and conclude they don’t want to be bothered. On the other hand, if you plan to live there 8-10 years or so…in other words, longer than the dishwasher’s typical lifespan…who cares? Do what you want, and retrofit for resale.
Los Angeles: The real estate market in L.A area is very low. I was wondering if the Washington area is better place for investment. What is your prediction for real estate market in Washington and suburbs?
Elizabeth Razzi: Well, for investment purposes, buying low is a good thing, right? And real estate investment (as opposed to speculation) is a long-term deal. We will have an investment piece in the Saturday Real Estate section (also available on washingtonpost.com) early in the new year. But if you’re seriously considering investing in DC vs. LA, you need to spend some time booking airline tickets. Get your boots on the ground and check out the market for yourself.
Washington, D.C. : A question about these “low” interest rates. Do any banks actually, really, truly offer them or is that just for highly qualified people with low loan amounts? We have been looking to refinance our jumbo loan to try to take advantage of these low rates, but when it actually comes down to it no one can really help us.
We have good credit scores, over 20% LTV, and still these rates are like smoke in the wind. The higher FHA limits are still in effect but finding a bank that will actually take the paper is impossible. Any advice as far as resources for jumbo loan refinances?
Elizabeth Razzi: You’re confusing me. Are you trying to get an FHA loan or a Fannie/Freddie conforming loan (both of which are capped at $729,750 for 2009 and 2010)? Or are you looking for a jumbo loan for a greater amount? Jumbos are still tougher to get, and carry higher rates.
Lorton, Va.: How can you find out about the cost of housing for either renting or owning? In particular I would like to know the Virginia Market Rate to learn whether a 4% increase in rent is excessive or realistic. I have heard the figure in the past but don’t know where to find it. Thanks.
Elizabeth Razzi: The Department of Housing and Urban Development publishes a list of Fair Market Rents for communities. They are used to set housing subsidies–not actual rents for specific properties. What really determines a realistic rent is the amount being charged by your competition. Shop the market some, and see what’s available at your current rent vs. your new rent. Raise yours too high, and you’ll at least know where your tenants are likely to go! Here’s their link http://www.huduser.org/portal/datasets/fmr.html
Arlington, Va.: I’m a ICU nurse, can work almost anywhere in the country, and am tired of the DC area. I’d like to move somewhere interesting where I can buy a house. What areas of the countries would you guess have the best bargains?
Elizabeth Razzi: Sorry to see you go…The best bargains will be found where the real estate crash was worst. Las Vegas, Florida, Southern California come to mind. You can also really stretch your homebuying dollars by going where the economy has tanked the worst. Detroit and parts of Ohio come to mind. Be prepared to stay awhile, because their values probably aren’t going to roar back quickly, especially in places like Detroit and Ohio, that have been going through industrial-revolution-magnitude job upheavals.
Florida: A somewhat real estate question – my property taxes are due and are escrowed. I get a 10 percent discount if paid by Dec 1. I sent a copy of the bill to my mortgage company and they confirmed a check was sent to my county in mid-November. However, the county tax office said they never received it. So I lost my discount. The county says it is the mortgage company’s fault and the mortgage company says it is the county’s fault and no one will accept blame or find the missing check. What can I do? And why should I pay the higher tax rate if it wasn’t my fault? And no, they won’t let me pay the taxes myself as it must be escrowed. To make matters worse, this mortgage company is new and bought mine in October but they swear they have the right paperwork (I sent my own copy plus what was sent by the county) but someone dropped the ball and I am stuck paying which is not fair.
Elizabeth Razzi: This is definitely a real estate question. You need to raise some serious hell with that mortgage servicer. Don’t think of it as a 10 percent discount. It’s a 10 percent penalty. Write to them. Demand an accounting of exactly what was paid, and when. Keep taking your complaints up the chain of command–and back it up in writing–with the servicer. You might even send a copy to the state Attorney General’s office. All of your fuss may come to naught–but at least you’ll have the satisfaction of having objected to the abuse of your money.
Washington, D.C.: for what it’s worth, top of the line apt rentals are still above $2000 and maybe that’s a good sign, as there seem to be plenty of them. Happy holidays to you.
Elizabeth Razzi: Thanks for the report. And happy holidays to you, too.
Frederick, Md.: I love this chat! I’m leaving the area to accept a job on the West coast, but since I don’t want to take a huge hit on my home, I’ll have to rent it and take a small ($200) loss each month for a couple of years. I know I need responsiveness, and I like the idea that some will spot check the townhouse while tenants are in place, but what else should I be looking for in a property management company?
Elizabeth Razzi: Aw, thanks! You’ll have to keep tuning in from the west coast. You definitely need to know someone is keeping an eye on the place. Get recent references from other landlords who have used this property manager. And, of course, it’s a reputable, established company, right?
Rockville, Md.: My mother is planning to move out of the house I grew up in and into a senior apartment. If I buy it by making a mortgage payment to her every month (i.e. she’d be functioning just like any other lender) can I still tax-deduct the interest without a bank being involved?
Elizabeth Razzi: You can do it without a bank being involved, but you’d need to get a lawyer involved. To do this right, you would have to actually set up a mortgage on the property, and the lender (i.e. your mother) would have to send a statement to you and the IRS each year, noting the interest paid. And there are tax consequences if the interest is absurdly low. And, of course, you really need to take care that everything is done above-board, so your mother doesn’t, even by mistake, find herself giving away her home for nothing. Talk with a good real estate lawyer.
Anonymous: to Anonymous,
No one who actually is thinking seriously about buying a home is going to base that decision on what the national media says. That’s crazy, a home is a huge investment and commitment, you have to do your own research and thought for it.
Yes, when the national news media decides the bottom has passed, “more buyers” will jump in, but given that things like the C-S index and even NAR are delayed, the news media will reach this conclusion after real buyers with feet on the ground have already taken the plunge and caused the turn around by buying.
Elizabeth Razzi: The anonymous chat….Thanks for chipping in.
rent increase: I don’t know the figure Lorton is looking for, but from personal experience, a 4% rent increase is great. I just found out my rent increase (in Arlington) is about 4%. A lot of my friends in the area are envious because their increases are going to be a lot higher.
Elizabeth Razzi: Thanks for the report from the field.
Virginia: How do I find out which neighborhoods are more neighborly and people interact with each other more? I am planning on moving to a totally different area and do not know anyone. I don’t want to depend just on my real estate agent’s knowledge.
Also, do you think neighborhoods with just- built homes are friendlier because they don’t know anyone else yet? Do you think those with HOA are more active with their neighbors?
Elizabeth Razzi: I wish I could generalize, but I really don’t think there are any generalizations to be made about neighborliness, or old vs. new communities. You need to do some investigation.
I’m a big fan of bicycling or walking through neighborhoods in the early evening or weekends. Do you see signs of life? Are kids toys left outside? Is last week’s trash bin still lingering at the curb? Can you find any passersby to chat with?
Ask your real estate agent to help you get copies–or online access–to neighborhood chat boards or newsletters. Do they have potlucks and rummage sales? Or do they nitpick over HOA violations? Another likely sign of liveliness is the nearby presence of coffee shops, dry cleaners, etc. Will you run into new neighbors when you run errands on a Saturday morning–or does eveyone hop in the car and drive 10 miles for all their tasks? Tot lots, playgrounds, pools and such can help spur neighborly interaction. Are they empty on a weekend–or busy? Anyone else have tips?
Dishwasher Issue: If you remove the DW, just make sure to leave the water lines and drain available (just tuck them under the sink whence they originate) for the next owner to replace the cabinet with another DW.
Of course, you’d better install a cabinet that’s the same width, so the buyer doesn’t have to start all over…
Elizabeth Razzi: Good advice. Thanks.
T. Woods: Can you believe my crib in Florida is only worth $2.6 million? I think that’s the most embarrassing revelation in this whole mess.
Elizabeth Razzi: Hahaha! Yeah, I was kinda surprised by that pricetag, too.
Arlington, Va.: I have been prepping my condo to go on the market in late January, mostly due to the fact that I’m drowning in my mortgage. I just found out that the woman who owns the condo under mine just listed hers as a short sale. What does this mean for me?
If it helps, hers is about 200 sq ft bigger and she’s listed hers at the same price that I’m hoping to get mine for. Mine does have a newly remodeled kitchen and bath while hers are original to the condo.
Elizabeth Razzi: Well, I wouldn’t be too worried about her short-sale listing. Anyone who comes to see her unit will notice that, for the same money, they could get a remodeled kitchen and bath…AND a quick decision from a motivated buyer. Good luck.
Alexandria, Va.: We bought a second home down in the Outer Banks for a vacation home. Got a 5.25% ARM on it, which has now adjusted to 3.25%. Yay! So we are now paying an extra $800 a month to pay the mortgage down as quickly as possible. I’m thinking if we stick with the ARM, at worst, over the next 3 years, we will average 5.25% even if it goes up the maximum 2% each year. I’m reading a lot of articles that say it’s a good time to think about refinancing into a lower rate, but do you think it’s a bad idea to stick with an ARM, especially considering our accelerated pay-off plans?
Elizabeth Razzi: It would be so painful to refinance into a higher fixed rate. But everything depends on how long you plan to hold on to that Outer Banks house. What is the maximum interest rate allowed, overall, under your ARM terms? You could end up paying that–especially if inflation were to come back, as some people argue it will. (I’m not predicting..just reporting.) And you don’t say how quick your payoff will be. Keep in mind we are experiencing historic lows for interest rates–and they are being driven artificially low by government action.
Clarendon, Va.: “Why don’t these developers admit that the market for luxury condos was overbuilt (not likely to come back soon) and use this for rental housing as we still have a huge housing shortage in this area?”
But what kind of people are going to live in this “rental housing”, as opposed to the luxury condos? At least with the luxury condo, I know the owner is going to be somewhat reputable. But now if you start building rental housing, especially 3-BR apartments, then who knows what’s going to wind up living near you?
We have a huge problem with a mixed-income project being built near us right now. Hopefully lawsuits will run out the clock on the tax credits the developer needs. We might wind up with a huge hole in the ground a block from the Clarendon Metro, but I’d much rather that than what’s being built.
Elizabeth Razzi: “…who knows what’s going to wind up living near you.” I think the operative word is “who’s going to wind up living near you.” Seriously, there are reputable people who live in 3-br apartments.
moving to Springfield: I’ve been a renter for 15 years, and never, in that whole time, had a rent increase of more than 3%. EVER. 1-2% is more typical. The incoming tenants will occasionally be charged more than 3% higher than the rent I got the year before, but the existing tenants???? Vacancies are a landlord’s worst enemy.
I find it hard to imagine rent increases of more than $50/month in the current economy. So I guess if your rental is under 1200/month then a 4% increase might fly….
Elizabeth Razzi: Vacancy is definitly the risk when you’re talking about a significant rent increase. Especially considering that overall inflation is close to nil. But…if it was underpriced to begin with, that would be a different story.
Elin Nordegren: It’s not YOUR crib anymore, Tiger.
Elizabeth Razzi: I think he gets to keep the SUV.
Re: RE Taxes in Escrow: Isn’t the mortgage company suppose to belly up and pay the difference of 10 per cent if they didn’t pay on time? I thought that was the law or am I mistaken?
Elizabeth Razzi: I don’t know that that’s a law. But I sure would demand it.
Laurel, Md.: I live in a townhouse with an HOA that has to approve major landscaping changes. The bylaws say they will respond to any request within 30 days. It’s been 60, and they haven’t.
Since the bylaws don’t contain a contingency if the HOA violates its own rules, have they effective abrogated their ability to deny?
Elizabeth Razzi: Sounds like you’re itching for a fight. Do you really want to invest in landscaping and later have to fight over it–and possibly have to pay to remove it? I’d make sure to ask to speak at the next HOA meeting (some have bureaucratic hoops through which you must jump) and ask members to address the question. And if you’re going to get all legal about things, I would at least inform them that I assume their approval through a letter delivered by certified mail. Might as well build your paper trail.
Washington, D.C.: For Virginia’s question about finding out about neighborhoods. I love following my neighborhood blogs to keep abreast of neighborhood social, business, housing, and other issues. I think a web search for blogs for the neighborhood you are interested would turn up some blog resources.
Elizabeth Razzi: Good idea. Thanks!
Silver Spring, Md.: My husband and I are 1st time home buyers. We’ve been looking for a year so far(with a buyer’s agent). A FSBO house in our target neighborhood will soon become available. If all the stars are aligned and we decide to buy the house but they are not willing to pay a buyer’s agent commission, what precautions do we need to take? Are a real estate lawyer and home inspector sufficient to safeguard our interests?
Elizabeth Razzi: Yep. You’re on the right track. Talk with the FSBO owners, determine how serious you are, and then pay a real estate lawyer to draw up your purchase contract. Be sure to make it contingent on an appraisal. That’s always wise, but especially critical if neither of you is being guided by a real estate agent. That’s not to say they always know the value–or that they’re above goosing the price. But you need at least one third-party opinion.
Bethesda, Md.: “At least with the luxury condo, I know the owner is going to be somewhat reputable.” Sounds like we have racist here.
Bernie Madoff owned a luxury condo by the way. Was he reputable?
Most apartment dwellers in this area are reputable as most apartments rent for well over $1000. In fact many high earning professionals rent because they can’t afford to buy. Home ownership is sort of a luxury good in this area, at least in DC and in the close in suburbs (ones that a close to where the jobs are).
Elizabeth Razzi: Well, not necessarily racist. Classist, though.
Clifton, Va.: I wouldn’t buy a home w/o a dishwasher and I figure 80%+ potential buyers feel the same way.
Dishwashers area given. Fireplace, no big deal. Only one bath in 4 bedroom home, big deal. No dishwasher, most folks would just walk away from it. I use dishwasher maybe once a week but its a top of the line Kitchenaid.
Elizabeth Razzi: Smart buyers also are thinking resale value.
Dishwasher, again: Thanks for the advice. My husband is a contractor, so adjustments would be easy for him to do. (I suppose that we could even tell a prospective buyer that he’d put in a dishwasher for them.)
Elizabeth Razzi: Oh, just go ahead and hook up a bright, shiny new one before you hang the for-sale shingle. Meanwhile, enjoy your counterspace!
Washington, D.C.: I had the question earlier about jumbo loans. Sorry for confusing you – we are looking for a “jumbo” loan amount $720,000. That is still under the limit for an FHA loan but finding anyone who does loans- of any type – that size and can still get us a better rate, i.e. under 5.5%, has proven to be so tough as to be impossible. Any advice as to specific banks, etc., to go for help would be appreciated.
Elizabeth Razzi: Sorry, I can’t recommend companies. All you can do is shop, shop, shop. Don’t forget to try credit unions, if you find one you can join.
Virginia: Did you see the Outlook article last month about the myths of real estate, such as it being a great investment and homeowners being better citizens than renters? Why are these myths still being perpetuated even after the housing meltdown? Seems we need some outside the box thinking on this, such as offering fewer and not more subsidies for home ownership.
Elizabeth Razzi: I saw it. But, I admit, I’ve gotten kind of bored with the whole “buyers being better than renters/or not” argument. Seriously. Everyone leaves so much out of the discussion.
First — do you seriously think there are NOT subsidies for rental housing? They go to the landlords, who can deduct their interest and taxes, just like homeowners. Plus they deduct insurance and depreciation. I don’t know how much of those tax deductions ultimately benefit tenants through lower rent, but they have to affect the equation.
As for housing as an investment. I have never met an elderly person who regretted buying their home and paying it off. Once you’ve paid for it (a quaint notion–but worth reviving) you can live in it at very low expense. And you can pass it on to heirs (another quaint notion.)
AND….the pickings available in the rental market often are not comparable to what you can find in the purchase market. I could go on….but time flies.
mixed income house: I live in a mixed income development in Courthouse. I am single and make $75,000 in a government job. Remind me again why you wouldn’t want me to live near you?
Elizabeth Razzi: More for the mix.
Elizabeth Razzi: Thanks for a lively chat, folks! Next one will be Friday, Dec. 18, same bat time; same bat channel. Saturday’s Real Estate section introduces us to some people living–and working–in very small urban spaces, which some say will become a trend. Have a great weekend, and I’ll see you next time.
Source: Washingtonpost.com | Elizabeth Razzi – Washington Post Real Estate blogger and columnist | Friday, December 4, 2009