A Weekend Project, Installing A Home Theater.  A look at Mortgage Rates as Low as Zero Percent
TONY HARRIS, CNN ANCHOR: We're about 90 minutes away from learning if a person in custody in Wichita, Kansas, is a suspected serial killer known publicly only as BTK. The case has vexed local authorities for 30 years. The news conference is set to begin at 11:00 a.m. Eastern. CNN will carry it live. In Florida today, divers will look in ponds and waterways while searchers scour the countryside for any sign of Jessica Lunsford. The 9-year-old was reported missing early Thursday morning. Stay with CNN throughout the day for the latest developments in this case. I'm Tony Harris. "OPEN HOUSE" starts now.</s>ANNOUNCER: Today on OPEN HOUSE, mortgage rates as low as zero percent. Sound too good to be true? Those deals are out there, but there is a downside. We'll take a look. Then, cutting commissions. Forget 6 percent. We'll show you how to negotiate a lower rate with your real estate agent. And a weekend project, surround sound. Install your own home theater, just in time for your Academy Awards bash. Next, on</s>OPEN HOUSE. GERRI WILLIS, HOST: Hello, and welcome to CNN OPEN HOUSE. I'm Gerri Willis. From buying and selling to renovation and design, we show you how to get the most value out of your biggest investment, your home. We've all seen the car commercials advertising zero percent financing. Now it looks as though mortgage lenders are getting in on the action, offering incredibly low introductory rates. With these rock-bottom rates, why not jump at these offers? Joining us from West Palm Beach, Florida, with the pros and cons, Greg McBride, senior financial analyst with BankRate.com. Greg, welcome.</s>GREG MCBRIDE, SENIOR FINANCIAL ANALYST, BANKRATE.COM: Thank you, Gerri.</s>WILLIS: All right, how low do they go?</s>MCBRIDE: You can find rates actually below 1 percent, at least to start. The rates don't actually go all the way to zero because of the way that mortgages work. They actually have to have a number greater than zero. So you might see rates of 0.5 percent, 0.9 percent.</s>WILLIS: But these are only teaser rates, right? They only last a short period of time.</s>MCBRIDE: Exactly right, they are teaser rates. They may last from one months to three months, in most cases, sometimes as long as six months, but they are only introductory in nature.</s>WILLIS: Now, Greg, there's a reason they call these payment option loans. There are actually lots of ways to pay your loan month to month. Help us understand these. Let us start with the minimum payment. What does that mean?</s>MCBRIDE: Sure, these loans give you a choice in terms of how you want to make your payment every month. And think of it like walking into a convenience store to get something to drink. You have your choice of which size beverage you want. And the minimum payment is, like, small. What this is, is, it's figured on that introductory teaser rate, and that's the rock-bottom rate, or the rock-bottom monthly payment that you have as one of your four options every month.</s>WILLIS: OK, there's an interest-only feature as well.</s>MCBRIDE: Yes, interest only. And that's something that, again, it's -- this is an adjustable rate mortgage. Rates can rise. So that payment will fluctuate as interest rates continue to climb.</s>WILLIS: And then there's a standard option as well for the</s>MCBRIDE: Exactly. You usually have both. So you have the option of paying down some principal over either a 30-year repayment schedule, or an even larger payment over a 15-year repayment schedule. And the luxury here is that the borrower gets to decide each month which route they want to go.</s>WILLIS: You know, it sounds like a great thing. But I got to tell you, I'd be tempted to pick that minimum payment each month. Is there a downside to that?</s>MCBRIDE: Well, the downside is that if you make that minimum payment month after month after month, that may not be sufficient to pay the accrued interest. And what happens is, your balance may actually rise instead of fall over time. The other thing is that this is an adjustable rate mortgage. So your payments are subject to fluctuate, even regardless of which payment plan you choose. So if you're a schoolteacher in Palo Alto, California, buying your first home, this may not be the right loan for you.</s>WILLIS: So wait a minute. You're telling me that I could actually end up owing more on this loan than when I started if I picked the minimum payment option?</s>MCBRIDE: Yes, because that minimum payment is based on that initial low teaser interest rate. And what happens is, the rate on the loan jumps to something a good bit higher than that, maybe 4.5 or 5 percent, shortly thereafter. And if you're just making that minimum payment, that payment is not enough to cover the interest that's due for that month. That unpaid interest gets tacked onto the balance.</s>WILLIS: Wow. So are there other points, fees, I have to pay for this loan?</s>MCBRIDE: You may have to pay a point up front. A point is 1 percentage point of a loan. With these type of programs, you may often encounter 2 or 2.5 points. And you can pay that one of two ways. You either pay it out of pocket up front, or you roll it into the loan balance. And these days, most borrowers are rolling that into the loan balance and then obviously borrowing a higher amount.</s>WILLIS: All right. So let's recap here. I may owe more on the loan at the end of the first year than I owed when I started. I'm going to have to pay extra points. It sounds, Greg, like this isn't for anybody at all. Who would pick this option?</s>MCBRIDE: This is a great option for people that are looking for some flexibility to tailor their monthly mortgage payment to their income. For example, if you are a real estate agent in Chicago, and your best months are June, July, August, you have the option in those months, when your income is at its highest, to make your higher monthly mortgage payments. January and February, when your income is probably lower, you can, you have the option of dialing back those payments, making smaller payments in the months when your income is a little bit lower.</s>WILLIS: Well, Greg McBride, thanks for being with us today.</s>MCBRIDE: Thank you, Gerri.</s>WILLIS: Homeowners are always looking for ways to save money when buying or selling a house. One possibility, cutting the commission you pay your real estate agent. Many sellers assume they must accept whatever rate their agent suggests. But as David Haffenreffer shows us, sometimes all you have to do is ask.</s>DAVID HAFFENREFFER, CNN CORRESPONDENT (voice-over): When Viveca Woods decided to sell her home in Greenwich, Connecticut, she quickly realized that a sizable chunk of the sale would be going to her real estate agent. She wanted to cut the agent's commission, so she started looking into the numbers.</s>VIVECA WOODS, HOMEOWNER: The national average we found was between 5 and 6 percent. But here, I did my research locally, and I found it was 5 percent here, and that requesting a lower commission of 4 percent was fairly reasonable.</s>HAFFENREFFER: Woods' house is listed for $739,000. A 5 percent commission would mean a payment of nearly $37,000 to the agent. By cutting the commission to 4 percent, the agent's share will drop to about $29,500, a savings of more than $7,000. (on camera): But while Viveca Woods will keep more of the money when she sells her home, there are some downsides to cutting commissions. Some real estate agents may not show the house to buyers working with other agents just to avoid sharing the smaller commission. (voice-over): Suburban New York broker Scott Stiefvater says less exposure means the house may not sell at the higher price possible.</s>SCOTT STIEFVATER, STIEFVATER REAL ESTATE: Maybe the agent would be willing to do more if she or he was getting paid more. There are certain circumstances where a broker can come in and take less, but they're still not working for their client.</s>HAFFENREFFER: Many homeowners even say they're afraid or too uncomfortable to bargain with their agents. They may also mistakenly believe 6 percent is the standard broker fee. Still, Valerie Patterson of RealEstateJournal.com says sellers can motivate their agents to accept the lower commission.</s>VALERIE PATTERSON, REALESTATEJOURNAL.COM: If your house will be easy to sell, perhaps, or if you are willing to help with some of the marketing efforts, or maybe if you are willing to be more flexible about the type of financing you will accept from a buyer.</s>HAFFENREFFER: And for Viveca Woods, the benefits of paying a lower commission outweigh any fears over the downside.</s>WOODS: Had the broker said no to our proposal, obviously, and it's apparent to him that we could have taken our business elsewhere.</s>HAFFENREFFER: An option ultimately available to every seller. For OPEN HOUSE, David Haffenreffer, CNN, Greenwich, Connecticut.</s>WILLIS: Coming up on OPEN HOUSE, from negotiating a commission to pricing your home, we have tips on managing your real estate agent. Plus, home staging. Learn how to best showcase your house when you put it on the market. And later, our weekend project, install your own home theater. We're going to show you how to do it right. But first, your tip of the day.</s>UNIDENTIFIED MALE: Keep your property taxes down by reviewing your property assessment. You may just find that your home is overassessed. First, figure out if your assessment is accurate, fair, and on par with similar homes in your neighborhood. You can do that by simply talking to your neighbors, or visiting your town or city's assessment office. If you think your home is overassessed, you can appeal it in court, and your chances of winning are good. Act quickly, be aware of deadlines, and find out how much time have you to file an appeal. And for more information on how to fight an assessment, go to the National Taxpayers Union at www.ntu.org. And that's your tip of the day.</s>WILLIS: Looking to speed up the sale of your home? Your own unique style may be working against you. That's where home staging comes in. It's a way to create instant appeal for any buyer.</s>WILLIS (voice-over): New furniture, fresh flowers, better pictures on the wall.</s>BARBARA BROCK, HOME STAGER: Think that's too big?</s>WILLIS: That's where you put your efforts when moving into a new home. Or is it? More and more home sellers are sprucing up for sale, turning to home staging.</s>BROCK: Everyone who is a seller needs to put an effort, a little monetary effort, or put a little time effort into making your house nice.</s>WILLIS: For a $2,000 fee, a professional like Barbara Brock comes in to eliminate clutter, change our arrange furniture, and maybe even enhance curb appeal.</s>BROCK: Is that not perfect?</s>WILLIS: Her latest challenge, Hank Camillo's (ph) three-bedroom, one-bathroom home in Syosset, Long Island. Although it's in the top 25 percent of housing markets, he's already dropped its price $13,000 to $537,000, and it still hasn't budged. His house was vacant, so Brock added the eye candy, furniture and accessories to the kitchen, bathroom, living room, dining room, and master bedroom.</s>UNIDENTIFIED MALE: Well, we'd been having trouble selling it with it vacant. The biggest problem has been that people have no visual effect of what it would be.</s>WILLIS: Brock says the rules of staging are simple. No more than five pieces of furniture per room. Always have the furniture facing people as they enter. Light the corners to emphasize hidden space. And add tones of reds and yellows to establish a sense of warmth and intimacy throughout the home.</s>BROCK: How you live in a home and how you market a home are two different things.</s>WILLIS: Brock says staged homes sell faster, and usually for more money, than those that aren't fixed up.</s>BROCK: A buyer will make a decision within 19 seconds of walking in a house. And you want...</s>WILLIS (on camera): You mean, yes or no? They decide that quickly?</s>BROCK: Absolutely, they decide that quickly.</s>WILLIS: So you have you to catch their attention right away.</s>BROCK: You really want to get their attention.</s>WILLIS (voice-over): Now Hank Camillo hopes that's just what she will do at his home.</s>WILLIS: Showcasing your home is just one way a good real estate agent can help you. It's a lot of work to sell a house, and it's important to know what your agent is responsible for and whether they're getting the job done. Brad Inman, publisher of "Inman News," has tips on getting the most from your agent. He's joining us from San Francisco. Brad, welcome.</s>BRAD INMAN, PUBLISHER, "INMAN NEWS": Good morning, Gerri.</s>WILLIS: Well, let's just get right to it. If you are selling your home this spring, what can you do to manage your agent?</s>INMAN: Well, one, you should insist that that agent stay in touch with you on a really regular basis. They are on call. They are like your employee, you're the customer. So it's very important that you have a really good line of communication and that agent stay very, very diligent about staying on top of things related to your sale.</s>WILLIS: So, Brad, should I be requiring daily reports, monthly reports?</s>INMAN: You know, I really look at it this way. This is your number one asset. This is a critical period in you realizing the full value of your house. How they market it, how they position it, how they negotiate is so critical that once you put it on the market, in that first few days, you are probably going to have a broker open house and then a consumer open house. They should be talking to you, I think, several time a day about the status of the market, you know, what's going on with putting it on the MLS, what's going on with the broker open house, what's the initial feedback, what consumers said at the open house, all this should be in a database. It should be sent to you regularly. And they should be talking to you on a routine basis.</s>WILLIS: Well, one of the most important things that the agent is going to do is set the price for your house. How do I make sure they've set the right price?</s>INMAN: Well, this really starts before you select the agent, Gerri. You should have three or four agents come into your house and give you a comparable market analysis. This is a free service agents provide to get your business. And that's the first step you should take to determine what the house is worth. Next, go online and get a home valuation. They are free on the Internet. Many Web sites provide them, where they take comparable home sales from the past and come up with some estimate of value. And then finally, lean across the fence and talk to your neighbors. Find out what they are saying about the sales in their neighborhood. And then finally, the MLS. Look at the MLS data to see what's priced in the market. Take all that information and then come up with the price of your house. Ultimately, the price is what a buyer will pay. But you should price it right to begin with.</s>WILLIS: You know, spring is a very busy time for agents. And sometimes it's hard to keep the agent focused on your deal. How can do you that?</s>INMAN: Well, keep in mind you are paying them a very, very healthy piece of the sales price in that commission. So they have, one, a fiduciary obligation, a contractual obligation, to you. And you should insist that they stay on top of the sale. And there's early signs if they are not. If they are not communicating to you regularly, if they cancel an open house, if they don't personally show up for the open house and delegate that responsibility, that means they are not taping -- staying on top of the home sale, which means they may be violating the listing agreement with you, and, therefore, you should, you know, insist that they follow the guidelines of that agreement.</s>WILLIS: Well, you bring up the listing agreement. A lot of people don't pay any attention at all to what they are signing with the listing agreement. Is there anything I should demand in that?</s>INMAN: Well, first of all, it's, you know, the price you are going to pay, the commission. So that's negotiable. But the important thing in that listing agreement is the term of the agreement. You know, are you listing it for three months, six months, or a year? You don't want to have an endless open-end part of the agreement. The next is their obligation. What is it they are going to do during the process of the home sale to make sure that it's marketed properly, negotiated properly, and represented properly? And all that is in that agreement. And you should look at this as a very serious contract between you and, in effect, your vendor, your real estate agent.</s>WILLIS: Right.</s>INMAN: And they have to follow those rules.</s>WILLIS: Should I ask them, should I make sure that I can sell the house on my own? Because after all, look, somebody in my family can come up and say they want to buy the house. Should I make sure that I can do that without paying their commission if someone comes to me?</s>INMAN: It's a tough question. Most agents would not put that an agreement. What you may, however, try to insert into the agreement is that if you bring the buyer, that they'll discount the commission even further than the current listing agreement. Agents are going to push back on that. But again, they want your listing. Keep in mind this is a hot market. There's more buyers than there are sellers. They want your listing. So you're really in the driver's seat to negotiate the terms that you deserve.</s>WILLIS: Brad, thanks so much for being with us today.</s>INMAN: Thank you, Gerri.</s>WILLIS: Coming up on OPEN HOUSE, our weekend project, installing a home theater and surround sound just ahead of the Oscars. Make it your weekend project, next.</s>WILLIS: Welcome back to OPEN HOUSE. The Oscars are only a day way. That's just enough time to tackle a home theater for your weekend project.</s>WILLIS (voice-over): Johnny Depp, Hilary Swank, and Morgan Freeman will get front-row seats. But for the rest of us, it's sofa city. So why not feel a little closer to all the action at the Academy Awards and install surround sound? Start by getting the right equipment. (on camera): I understand the first thing we're going to do is go shopping.</s>ANDREW SINGER, SOUND BY SINGER: Right. And that's the most fun of the whole project. There are certain building blocks that are essential to a surround sound system. They are a DVD player, a surround sound processor, and a multichannel amplifier, which can either be five channels or seven channels. Sometimes the surround sound processor and the amplifier are combined into a surround sound receiver, to save you a little bit of money.</s>WILLIS (voice-over): So you'll need either five or seven speakers. Just make sure they are timbre-matched. That way, all the speakers will be from the same manufacturer, and the sound will be seamless. For most people with a medium-sized living room, 12- to 15-inch speakers make sense. They won't overwhelm the room, and they are available in every price range. But where should you put them?</s>SINGER: You have to put three speakers across the front, a left front and a right front, as well as the center. The center channel speaker is critical for dialogue and other things that go on in the center to fill it all out.</s>WILLIS: In a rectangular room, the speakers should be placed on side walls parallel to the main couch. In a square room with a couch on the rear wall, try placing the speakers next to the couch. When deciding to put the subwoofer, which gives the system the bass sound, try a corner location to help amplify low frequencies and produce a booming, reverberating sound. Now, you are ready to install. Remember, if your system is complicated, you may need a professional to help.</s>SINGER: The first thing you would have to do is to figure out how to hook it all up. Now, typically, a manufacturer will provide you with a simple diagram that shows you what goes into where. Alternatively, the dealer can draw you up a very specific one, which will give a better idea of how things ought to be put together.</s>WILLIS: For a lot of us, loose, messy wires are a concern. Running them under the carpet could be a good way to hide them.</s>STEVE MARTINEZ, PROFESSIONAL INSTALLER: When you are running the wires under the carpet, and you're passing the tack strip, you should always nail down the tack strip so you don't penetrate the wire, which can cause a short into your system.</s>WILLIS: Actual installation takes less than a day, no matter what system you buy. It's the cost that can vary dramatically, from as little as a few hundred bucks up to several thousand dollars. The best way to decide what you want, demo store speakers with your own DVDs or CDs so you can hear the difference in sound in something you're already familiar with. (on camera): Well, the speakers are in place, the wiring is all done, I've even got my popcorn. Now we're going to test that surround system.</s>WILLIS: Don't make the mistake that a lot of people do, buying a TV that's too big for the room. The rule of thumb here, multiply the length of your TV screen by 3. That's the distance you'll want to sit from the TV for best viewing. Coming up, a look at next week's show. But first, the latest mortgage numbers.</s>WILLIS: Coming up next week on OPEN HOUSE, can you afford a second home? We'll show you how to get the money for investment properties. Then, think you can handle selling your home on your own? We have tips on how to do it right. And our weekend project, the closet makeover. If you're sick of squished clothes or digging for your shoes, we'll transform your closet. Plus, we want to hear from you. Send us your comments, your questions, to openhouse@cnn.com. Thanks for watching OPEN HOUSE. We'll see you here next Saturday. Coming up, "DOLANS UNSCRIPTED." But first, a look at the day's headlines. Have a great weekend.</s>HARRIS: And good morning, everyone. I'm Tony Harris at the CNN Center in Atlanta. "DOLANS UNSCRIPTED" is straight ahead. But first, these headlines. About one hour from now, officials in Wichita, Kansas, are... 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