How soon will I be priced out of market?

Q: My daughter is buying a house from me with 25 percent down in cash. We can close anytime, and at age 28 she has excellent credit (above 700). Should she get a mortgage now or should we hold off a few months for a better interest rate as rates are now climbing again?

A: I don't think anyone knows where interest rates are going at the moment -- they could go up or down or stay even between now and the end of the year.

But it's true that mortgage interest rates have been on the rise lately, despite the Federal Reserve lowering the short-term federal funds rate. That, in conjunction with falling home values, is making some buyers nervous.

I hope mortgage interest rates don't climb much beyond where they are at the moment. If they go too much higher, first-time buyers like your daughter may have trouble qualifying for the home.

In your case, it sounds as though you have the luxury of time on your side. If I were you, I'd help your daughter find a quality lender and get preapproved for her mortgage. That way, when you're ready to close, the lender will be ready as well.

If your daughter decides to obtain financing now and rates go down to a level that would justify her refinancing the loan, she can do that at a later date. The interest rate your daughter gets on her loan today is still at a historically low level.

Rates may rise over the next couple of months and if she waits, she'll have lost the opportunity to get today's rates. But if she takes today's rates and over the next year or two rates decrease, she should have the ability to refinance the loan to that new lower rate. And, if rates decrease after she applies for the loan, many lenders will give her the ability to re-lock her loan rate once or twice before the deal closes.

Q: How has the residential market been in Albany, N.Y., over the last year or two? I have a three-unit investment property there and I'm trying to get an idea of how badly I will get hit if I try to sell, or if I will escape the worst of the housing slump. Do you know of any reports or studies that would be helpful as well?

A: It's difficult to know how any particular real estate market is doing. You can look at the Freddie Mac home-price index, which indicates that housing in New York fell just over 4 percent in value in the past year. Or, you can look at the S&P/Case-Shiller home-price indices, which are based on 20 top housing markets (not including Albany), and which indicate that home prices are down roughly 15 to 16 percent from their high.

None of these tell you what's going on in your neighborhood, however. And, when it comes to real estate, the old mantra of "local, local, local" remains valid. It's all about what's going on down the block and in your backyard.

If you're thinking about selling your investment property, you should invite three top neighborhood agents in to do a comparative marketing analysis of the property. A CMA (as they are often called) is an agent's calling card. He or she will walk through your property, go back to the office and pull up the comparable sales of similar properties in the neighborhood. Then, the agent will come back with a marketing plan and a suggested list price. You'll be able to see the research: what has sold in your neighborhood, when it sold, and for how much.

After reviewing the data, you can make a decision to sell or keep your rental property.

Q: My father and I are joint tenants with rights of survivorship on a two-family house. My father is 88 years old, and is not a well man. We went to a real estate lawyer and had the house put in my name.

If Dad goes into a nursing home, what is the lookback period for Medicaid? Would Medicaid be entitled to half of the equity in the property? Would I have to sell the house?

A: Under new federal rules, the Medicaid lookback period is five years from the date of transfer. In other words, if Medicaid has to pay for your father's stay in a nursing home because your dad is broke, the government could reverse any transfer of wealth from your father to anyone for the previous five years, if they suspect him of trying to hide assets or he transferred assets that could have been used to pay for Medicaid costs.

Would you have to sell the property? Maybe. It's also possible the government would put a lien against the property that would have to be satisfied when the property is sold or refinanced down the line.

For more details, talk to your real estate attorney or an estate attorney.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

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