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Open House

First-Time Home Buyers; Best Places to Live; House Swapping Alternative Way to Vacation

Aired July 21, 2007 - 09:31   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

GERRI WILLIS, HOST: Hello. I'm Gerri Willis, and this is OPEN HOUSE, the show that saves you money.
Coming up, why house swapping -- yes, house swapping -- could make you feel right at home on your next vacation.

And is your purse making you sick? Dirty secrets you might be carrying around.

But first, it might be a home buyers' market out there, but, look, if you're a first-time home buyer, you may still feel that the cards are stacked against you.

Jessica Anderson from "Kiplinger's Personal Finance Magazine" is here to talk about some of the hurdles new buyers face and what you need to know before jumping into that homeowner pool.

All right. You've got to feel for these first-time home buyers. Prices are still relatively high, and, you know, the pressures are enormous to get a loan.

What do you say to these people?

JESSICA ANDERSON, "KIPLINGER'S PERSONAL FINANCE MAGAZINE": Well, I think it's important to remember that affordability is going to be key for first-time buyers, and even though long-term interest rates are still at historically low levels, the mortgage products that these buyers have typically used to get their foot in the door are becoming harder to qualify for.

WILLIS: Now, you say first-time buyers make some critical errors, some big mistakes. What are they?

ANDERSON: I think the biggest mistake is buying more than you can afford or simply buying when you can't afford it. Getting your foot on that property ladder is a great thing to do...

WILLIS: Yes.

ANDERSON: ... but it's not worth it if it's going to leave you broke in a few years or see the home that you've waited for so long go up in foreclosure.

WILLIS: You know, and a lot of those calculators out there, they have you spending way too much dough, as would some of those bankers, too, I think. Let's talk about some of those rules of thumb when it comes to deciding how much to spend.

What should these first-time buyers, what should they budget for housing?

ANDERSON: Well, lenders typically go for the 28-36 rule, which states that no more than 28 percent of your gross monthly income can go towards housing costs. That's your mortgage payment, interest, home insurance, and property taxes. And the 36 percent is your total debt payments. So taking out the housing cost, you then have only 8 percent left for your credit cards, car payments, and student loans.

WILLIS: You know, Jessica, I think those numbers would come as surprises to a lot of homeowners who are already out there and already spending more dough than that. It's tough in this market to find housing and to fit into those parameters.

ANDERSON: Absolutely. And, you know, this is really just a benchmark. It can be stretched, in especially more expensive metropolitan areas. But if you stay within that, you're much less likely to become house poor.

WILLIS: All right.

You've got a great Web site you want to mention here. Tell us a little bit about where people should go on the Web for help comparing loans.

ANDERSON: OK. The site is called freeratesearch.com. And it really can help you evaluate your loan choices and expand your search beyond the lender that may have pre-approved you.

It can give you par rates for your area, which is kind of equivalent to the dealer's invoice pricing on a car. You know, just the best rate, no commissions, period. And the site will also forward your contact information to the lender in your area with the best rates so they can contact you.

WILLIS: All right, Jessica. Thank you so much for your help today.

ANDERSON: Thank you.

WILLIS: All right. Now, whether it's your first home or your fifth, people move to suit their needs, whatever they may be. Well, think you know the best place to live? Think again. "Money" magazine has some great ideas.

They've compiled their annual list of "Best Places to Live," and special projects editor Jennifer Merritt is with us.

Jennifer, welcome.

JENNIFER MERRITT, "MONEY" MAGAZINE: Good morning.

WILLIS: You know, I think you need to explain your methodology first. How does this work? MERRITT: Sure. Well, first of all, we're looking for communities that have great schools, low crime, plenty of job opportunities, easy cost of living, good access to health care, and a real community feel. Access to leisure and arts, a sense that you belong to something.

WILLIS: Well, that's what I'm looking for, too.

Number one on your list, though, was a surprise to me -- Middleton, Wisconsin. You say it's a big family town. What else does it have going tore it?

MERRITT: You know, it's just a few miles from Madison, so you think it might get sucked into that college town atmosphere. But actually, it's really its own place.

It's a fairly big place, so it has lots to offer for everyone, including some of the new urbanist-type of developments. The houses are close to the streets.

WILLIS: The design is awesome.

MERRITT: Right.

WILLIS: I can see from the picture. Really attractive, easy to live in. You also say the economy is really good.

MERRITT: Absolutely. There are a number of companies in Middleton, right there. And then people also commute into Madison, but jobs are plentiful. People have moved there without jobs and told us they found jobs in days.

WILLIS: Wow.

OK. I have to get to another town here. Hanover, New Hampshire, boy, we are in the snowbelt, right?

MERRITT: Well, it's been a little less snowy with global warming. But Hanover is also another college town, Dartmouth College is there. But there's something for everyone there. You can get a townhouse or condo, 2,000 square feet, four bedroom, you know, for $200,000 to $300,000. But you can also get 15 acres and a house up in the mountains. So it's a really beautiful place to live.

WILLIS: So pretty. OK.

Let's go south. Lake Mary, Florida. Now, this is your hometown, isn't it? Didn't you live there?

MERRITT: I grew up there, sort of. I lived there four or five years when I was a kid. And it was nothing like what it is today. They've done a great job, unlike some parts of Florida, of keeping the sprawl and the mixed use, the big development toward the edge of town so that the center of town is really -- has that old Florida feel.

WILLIS: Oh. Well, that's a surprise, because that can be an issue in Florida, I know.

MERRITT: Absolutely.

WILLIS: Another surprise on here, Northbrook, Ohio. You say it's very affordable.

MERRITT: Now, it wasn't one of the places that made our top 100. However, you can get a house, a three or four bedroom house, for under $100,000.

WILLIS: Well under $100,000.

MERRITT: Right.

WILLIS: Like $83,000.

MERRITT: Eighty-three thousand dollars. It's a short commute to Cincinnati. It's a very small community, about 11,000 people.

WILLIS: OK.

Well, you know, real estate there may be not so pricey because the economy is doing so poorly.

MERRITT: Exactly. Exactly.

WILLIS: But you've got to talk to me a little bit about Chappaqua. This is up the street from me. And Bill and Hillary live there, right?

MERRITT: I know. Well, if you can come up with $1 million or $2 million, you can buy a house in Chappaqua.

You're going to get the best schools, but you're also going to get some of the most expensive real estate in the country. A house goes for well over $1 million. And yet, you get a lot for that, I suppose. Your children will most likely end up in the top-notch colleges, and you also get a real sense of community.

WILLIS: Jennifer, thank you so much for that. We appreciate it.

Coming up on OPEN HOUSE, the great American house swap. Find out how this could mean a vacation for less.

Then, life, well, you know it's all about negotiating. But I want you to learn from the best. Negotiating Trump style ahead.

And a big part of your life is filled with germs. We'll tell you what to do and how to clean it up.

But first, your "Tip of the Day".

(BEGIN VIDEOTAPE)

WILLIS (voice over): Renting a car on vacation this summer? Here's what you need to know about rental insurance. Check with your insurance company on coverage of your own car. Ask your agent if your policy covers rental cars. Also, call your credit card company. They may provide coverage, too.

But if you need to buy insurance at the rental counter, be prepared to spend. A collision damage waiver covers any damage to the car you're driving for about $10 to $25 a day. Liability insurance, that can cost about $9 to $14 a day.

But before you sign on the dotted line, research if there are any excluded areas. Many plans don't cover luxury vehicles or certain types of accidents or damages.

And that's your "Tip of the Day".

(END VIDEOTAPE)

(COMMERCIAL BREAK)

WILLIS: Bingo, for over 100,000 satisfied swappers every year. Forget expensive hotels. Forget cheap hotels. House swapping is an alternative way to vacation these days.

To talk more about this trend, George Balen is here from homeexchange.com.

George, welcome. Good to see you.

GEORGE BALEN, VP, HOMEEXCHANGE.COM: Thanks so much for having me.

WILLIS: First of all -- I'm sorry about that. First of all, explain the trend to us, if you would.

BALEN: Well, home exchange is a real simple concept. You stay in someone's house, and they stay in your house. You can trade cars, boats, RVs.

WILLIS: Wow.

BALEN: Even pets in some cases.

WILLIS: But let's talk about those houses? You can exchange houses for vacation and obviously cut your fees a ton.

Now, is there a fee to do this in the first place?

BALEN: Well, there's a membership fee to join. It's about $100 in most cases. And that gets you a year's membership. You can then list your property, upload photos, and that gives you e-mail access to all the other members on the site.

WILLIS: All right. Well, let's look at some of the costs involved vis-a-vis renting a hotel room.

For example, if you were going to San Diego, you rent a three- star hotel room, it's going to cost you $162 a night or over $2,000 a week.

BALEN: Right.

WILLIS: Obviously, if you swap houses, it's not going to cost you anything at all.

Now, meals, again, you're saving big dough because you're probably eating in a couple of times a day.

BALEN: Right.

WILLIS: And the car. People are trading, swapping cars as well, so you can really cut your fees. You know, we figure that if you rented a car for a week, it would be a lot of dough. So the savings are big here, right, George?

BALEN: The savings are big. And, you know, a typical hotel room in a major city, you know, it's going to run $200, $300, $400 a night. You have the expense of room service or eating out.

You know, we find a family of four can just save thousands of dollars in a week's vacation even just on hotels, food, even entertainment.

WILLIS: Good deal.

BALEN: You can stay in, watch a DVD, read a book instead of being stuck in a hotel room.

WILLIS: All right. Does this apply to everybody, though? I mean, the devil's in the details. If it I live in Dubuque or if I live in Indianapolis, would I still be able to trade houses?

BALEN: You know, we have a lot of people who are in outlying areas, maybe looking for just some, you know, peace of mind, a little out of the way place to relax. And even areas where you might not think you'd get a lot of activity, there's so many members -- we have over 17,000 listings -- that odds are someone's going to want to go to your area.

WILLIS: Wow. I want to stay in that house we're showing. That's amazing.

OK. But I did this once many years ago. I swapped with somebody when I was traveling internationally to Paris. Fifth story walk-up, and the whole place was covered in cat hair.

Tell me, you know, how do you avoid problems?

BALEN: Well, you know, there's a couple things you can do. And we allow you to search on the site for people who have done previous exchanges. So if you feel more comfortable dealing with someone who has experience, you can ask for references. That always seems to give that extra layer of comfort to people, doing it that way.

WILLIS: Good idea. BALEN: And you can also in cases have a local point of reference, local contact -- you know, a neighbor or a relative -- who can stop by for your exchange partner, give them a little peace of mind and it gives you a little peace of mind as well.

WILLIS: Well, George, thank you so much for being with us today.

His Web site is called homeexchange.com.

Thanks a bunch.

BALEN: Thank you.

WILLIS: Still ahead on OPEN HOUSE, learn how to negotiate Trump style. You won't want to miss this.

And clean out that purse of yours. After seeing this segment, hey, you won't want to wait long to do just that.

But first, your mortgage numbers.

(COMMERCIAL BREAK)

WILLIS: George Ross has negotiated countless deals for the Trump organization. I spoke to him about his boardroom secrets and how they can get you and I a bargain.

Ross is the author of "Trump Style Negotiation: Powerful Strategies and Tactics for Mastering Every Detail".

(BEGIN VIDEOTAPE)

WILLIS: So, you are a negotiation expert, and I think this is something that everybody feels inadequate at. I know I do. I'm a terrible negotiator.

Why are people so bad?

GEORGE ROSS, EVP & SR. COUNSEL, TRUMP ORGANIZATION: They're just bad because they don't know the first thing about it. They don't bother to look into it, and they don't realize they're negotiating. But they're always negotiating from the time they're born.

WILLIS: What's the bottom line? You say, at the very least, you've got to question the price. You've got to make sure you're always asking for more.

ROSS: Well, not are you asking for more, you've got to do your homework. Now with the Internet and the availability of information, you can get almost all the information you want.

Get information to people you're dealing with, and when you have all that information, then you go in and you start negotiating because now you're armed. And you can be a good negotiator because you have information. And once you display that information to the other side, they treat you entirely different. WILLIS: Information is key. But you also said, which I thought was really interesting, people have to know you, feel like they know you. You have to have something in common before you can actually have a good negotiation, something that's going to be successful.

What do you mean by that?

ROSS: Well, personality is the most important trait of any negotiator. If people are comfortable with you as a person, then they have a tendency to deal with you. And if they're not, then they shut off.

WILLIS: Do you bluff when you're negotiating?

ROSS: Of course. Of course.

WILLIS: And how do you -- how do you -- I just -- everything is on my face. So how do you -- how do you do a successful bluff?

ROSS: Well, you can always do it. You can always draw back.

You can always agree. If somebody gives you a price and you think it's a fair price, you can always say, I'll take it. But the idea is not to say I'll take it.

Say that's outrageous. That's twice what I wanted to pay. And then see if it goes down. But you can always go back and say, well, you know, the truth of it, to make you happy, I'll pay what you want me to pay. That's all.

But you can always back up. You don't kill the deal just by negotiating.

WILLIS: What are the biggest mistakes people make, though, when they sit down to negotiate for anything at all, whether it's a house or a car or whatever? The biggest mistake is they don't -- they go in unprepared.

They don't know what questions they're going to ask. They don't have any information. And they just go in and say, all right, I'm planning on buying a car. You don't know what kind of car, what the price is.

WILLIS: And so the information, obviously, some of the kinds of pieces of information you'd want to have in a negotiation like that, might be, why are these people selling? Are they in a hurry? Because you're looking for ways to find an advantage, right?

ROSS: Absolutely. There is always a story behind every negotiation on the other side.

There's a dealer who has to sell cars. Or at this point somebody sells a house because they've had -- they've got to move, they've been relocated, or it's just time. Sometimes there's a death in the family, whatever it is. But find out the reasons.

WILLIS: So, George, when do you know that you should stop negotiating, that you've gone far enough?

ROSS: It's hard to know that as a fact, but in your own mind, you have to set goals and say, I'm satisfied with the deal that I have, and therefore it's time to close.

WILLIS: George, great advice. Thank you for joining me.

ROSS: My pleasure. Thanks for having me.

(END VIDEOTAPE)

WILLIS: All right. Didn't have time to write all those great tips down? Well, don't worry. It's all here for you in "The List".

Be armed when you're going into negotiations. There's so much information out there, you'd be silly not to research any info you can on the price of a car, a home, or the people you're meeting with.

Personality is key. Get to know the person you're meeting with and keep your cool. Figure out what buttons you can and cannot push.

And finally, know when to stop. Set goals for yourself. If you're satisfied with the deal, then close it. Otherwise, too much pushing can leave you at a loss.

As always, if you have an idea for a "Weekend Project," send us an e-mail to openhouse@cnn.com. And if you want to check out this "Weekend Project " again, check out our Web site, cnn.com/openhouse.

Chances are you or someone you know carries around a purse every day. I know I do. Why reaching into one can get you more than just your wallet. The dirty details are next.

But first, how to be free in Boston in this week's "Local Lowdown".

(BEGIN VIDEOTAPE)

WILLIS (voice over): Check out what you can do for free in Boston.

The Freedom Trail is one of the best known tourist activities and won't cost you a penny. Take this two-and-a-half-mile walk to visit 16 historic sites.

Tryout sailing at the Boston Sailing Center. Once a month, you can take a 30-minute ride around Boston Harbor for absolutely no cost.

And if you're looking for something you'll never forget, visit the Museum of Dirt. That's right, dirt. It contains more than 300 vials of dirt from celebrity homes and other exotic locations.

That's this week's "Local Lowdown".

(END VIDEOTAPE)

(COMMERCIAL BREAK)

WILLIS: OK. Most of us women carry our purses everywhere we go, and while you may know what's inside your purse, you'll be surprised to find out what's on the outside could make you sick.

Gary Tuchman reports.

(BEGIN VIDEOTAPE)

GARY TUCHMAN, CNN NATIONAL CORRESPONDENT (voice over): Women are generally very careful with their purses. They don't want to forget them, misplace them, or have someone steal them. And they take great pride in the way they look and how they carry them. But what the purses actually carry on them might surprise you.

CHARLES GERBA, PROFESSOR, UNIVERSITY OF ARIZONA: We found E. coli on the bottom of the purses, other types of bacteria that you might usually find in your toilet we found in the bottom of purses. So people are obviously laying them down in places they shouldn't.

TUCHMAN: The University of Arizona's Dr. Charles Gerba is one of the top germ experts in the country. We took him out on the streets of Manhattan to introduce ourselves to women and their handbags.

(on camera): I want to ask you a question.

UNIDENTIFIED FEMALE: OK.

TUCHMAN: Can I take your purse from you?

UNIDENTIFIED FEMALE: No, that's OK.

TUCHMAN: Well, not to keep, but to test for germs.

UNIDENTIFIED FEMALE: OK.

TUCHMAN: We have a doctor of germology here, a professor at the University of Arizona, who will tell you what's on your purse. How about that?

UNIDENTIFIED FEMALE: OK.

TUCHMAN (voice over): Dr. Gerba has a special germ meter which indicates approximately how much bacteria is on the bottom of Melissa's bag.

GERBA: Wow. Yes, you're -- basically, 200 and above is not very good. That's pretty unsanitary.

You wouldn't want to make a meal on the top or the bottom of your purse, I guess.

TUCHMAN (on camera): What's the number we have?

GERBA: We're over 276, so that mean... TUCHMAN (voice over): What does 276 mean? It means there are thousands of bacteria on her bag, about 55 germs per square inch, which compares to 49 germs per square inch for the average workplace toilet.

And then there's Michelle's bag.

GERBA: Oh, wow.

UNIDENTIFIED FEMALE: 493! Oh, no!

GERBA: That's in the millions. My god, that's the highest I've ever seen. Let's see what kind of life forms are on that.

TUCHMAN: These life forms on the bottom of purses are often transferred onto the places where women put their purses -- on desks, counters, and tables, where they also may eat.

GERBA: Well, they could get into foods. They could get on to your hands, cause -- in places where they could cause skin infections. But there's also an indicator they could be picking up viruses. Viruses that could cause flu or diarrhea.

TUCHMAN: All bags have some bacteria, but when you have tens of thousands, hundreds of thousands, or millions, chances increase that you will have more dangerous germs such as salmonella, feces, and E. coli.

Out of the 13 purses we tested, five failed the germ meter test. And another four failed back at the lab where traces of E. coli were found.

So, what can you do to make sure your purse doesn't fail the germ test? Dr. Gerba recommends you don't put purses on places like bathroom floors and kitchen counters. And make sure you occasionally clean them with some kind of disinfectant wipe.

(on camera): You're one of the experts of this in the world, and I'm wondering, if someone says to me, boy, we're being a little melodramatic about this, is it possible we are?

GERBA: Oh, I think it's more -- I don't think we can be over- melodramatic. You think it's just recognition that, you know, it might pay just to reduce your risk a little.

TUCHMAN: One more thing to tell you, and this is directed towards the men. What goes for purses also goes for briefcases.

(voice over): So no matter what kind of bag you carry, try to limit the number of germs you carry.

Gary Tuchman, CNN, New York.

(END VIDEOTAPE)

WILLIS: Yuck. Well, as always, we thank you for spending part of your Saturday with us.

OPEN HOUSE will be back next week right here on CNN. And you can catch us on "Headline News" every Saturday and Sunday at 3:30 p.m. Eastern Time.

Don't go anywhere. Your tops stories are next in the "CNN NEWSROOM".

Have a great weekend.

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