Young adult woman preparing fence to be painted or stained outdoors in natural area.

Be a Good Neighbor While Your Renovate

Having a good relationship with your neighbors can make life far more peaceful and enjoyable, so whenever you contemplate outdoor home projects—whether you’re installing a new deck or hiring someone to install a sprinkler system—it’s wise to consider how those projects will affect the people around you, not only while the project is underway, but after it’s complete.

First and foremost, communicate! Let your neighbors know about your plans, so they are not surprised by additional traffic from construction workers or disruptions caused by unexpected noises or smells. It would be a real shame if your neighbor planned an outdoor wedding in their backyard on the same day you planned to bring in hot, stinky tar to redo your roof. If you’re hiring workers to help you, tell them where they can park that will cause the least inconvenience to your neighbors.

Sometimes, it makes sense for neighbors to share the cost of a project (improving a private road or repairing a shared fence), so talking with neighbors ahead of time can benefit you and them. Other times, you may be able to get a discount if you can bring additional business to the trades people you hire. There are economies of scale for people who have to move big equipment to get work done. If a tree-trimmer brings his equipment all the way to your house, he’d probably appreciate some additional business from your neighbor. If you and your neighbor both need new driveways, you may consider approaching a contractor together, and asking if he would consider a discount for two jobs, instead of getting just one new account.

Whether you’re working on a joint project or simply doing a little home improvement on your own, it’s important to consider the safety of people and pets. If you have a construction site, be sure to clean up at the end of each day (or ask your workers to). Do not leave tools and/or equipment out where children or pets could stumble across them and hurt themselves. If you’re using nails, keep a close eye on them to prevent discovery later, with a bare foot or tire. If you share a property line with a neighbor and your work opens a hole between the two properties, be sure your pets and their pets cannot escape.

It’s also important to clean up for other reasons. No one wants to see a big mess day after day, whether it’s dirt and leaves from your landscaping project or scraps from your construction project.

Here in Ukiah in August and September, many people like to start work early, before the full heat of the day starts broiling everything. However, not everyone appreciates waking to the sound of a skill saw or Weedeater. If you plan to start before 9:00 am, it’s thoughtful to give notice to neighbors so they can plan accordingly. The same consideration should be given if you plan to work late into the evening, and the noise and/or light from the project could disrupt your neighbors. Keeping regular hours is especially important on the weekends, when people like to sleep in.

Most people can put up with a little inconvenience for a limited time. We all need to get things done around the house and that can involve noise, mess and increased traffic. However, before you start a new project, make sure you have the time and money to finish it so the project doesn’t languish for months or years to come. No matter how patient your neighbors may be at the beginning of a project, if it continues beyond a reasonable time, they’re bound to get frustrated eventually.

If you have questions about real estate or property management, please contact me at or call (707) 462-4000. If you’d like to read previous articles, visit my blog at Dick Selzer is a real estate broker who has been in the business for more than 40 years.

First-time Homebuyer

Becoming a First-Time Homebuyer

Home ownership isn’t right for everyone, but it can be a great investment and provide a huge sense of satisfaction. Before you cross home ownership off your list because you don’t think you can afford it, let me tell you what it takes.

The median house price in the Ukiah Valley is about $425,000. Since you probably don’t have that kind of cash lying around, you’ll need a home loan . The good news is that many first-time-homebuyer loan programs require little or no money for a down payment, making this whole adventure a lot more doable.

In recent weeks, the annual percentage rate for a 30-year, fixed-rate mortgage with little or no money down has been in the neighborhood of 6 percent. That means, you’ll need about $3,000 a month to pay the principal, interest, taxes, homeowner’s insurance, and mortgage insurance. You’ll also need an additional $500 a month for home repairs and upkeep.

That additional $500 a month should go into a savings account each month and only be used for the inevitable expenses that come with home ownership. At some point, you’ll need to paint your home inside and out, patch the roof, replace the water heater, and buy new appliances. You’ll need to replace carpeting, fix windows, and if you have children, you’ll have reupholster your favorite easy chair to get rid of the Silly Putty. If you’re lucky, these repairs won’t all be necessary at once, but I can guarantee they’re coming eventually.

So how much income do you need to earn to be able to buy a median-priced house? Your total household income needs to be about $100,000 a year. If both contributors make the same amount, they each need to be employed full time making about $25 per hour.

And as you might imagine, reportable income is not the only requirement to get a loan. You need good credit (a credit score in the mid 600s) and job stability. Lenders want to do everything possible to assure that you can make your monthly payments, now and in the future.

To rent this same house, rather than spending $2800-3500 per month, you would pay closer to $1500-1700 per month. Of course, once that $1500 is spent, it’s gone. You are not building any equity. So although renting is a bargain, keep in mind there are more issues to consider than just the monthly cost. During the last 50 years, home ownership has created more wealth in the U.S. than any other investment.

And owning your own home has benefits that go beyond financial. Pounding a nail wherever you want doesn’t require anyone else’s permission. You can replace the lawn with a vegetable garden or rip out ugly bushes for an unobstructed view of your kids playing in the yard. You can allow your teen to paint her bedroom purple, knowing you can paint over it when she heads off to college. And your elbow grease benefits YOU.

When you rent, your home can be sold out from under you at any time, forcing you to find a new place to live in a market with very few homes available. For many, the tradeoffs make home ownership worth the expense. If you think you might be able to purchase a home, and you’d like to learn more, call your local Realtor and they can help you figure it out.

Before I go, I wanted to mention an issue facing local homeowners and renters alike. The water in our region depends in large part on the Potter Valley Water Project. PG&E has owned the hydroelectric project for years, but it looks like they’re selling. If the future owners are not good stewards, the water that irrigates our crops and provides our drinking water could be at risk from Potter Valley to Healdsburg. Visit to learn more.

If you have questions about real estate or property management, please contact me at or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.comDick Selzer is a real estate broker who has been in the business for more than 40 years.

Ross Liberty

Way to Go, Ukiah!

Ukiah is my hometown and I love living here. I know it’s not perfect, but no place is. One of the many things I enjoy about Ukiah is our unique sense of community. Last fall and again this summer, when fires threatened local homes, Ukiahans came together in truly remarkable ways.

According to the logistics guy who manages the firefighters’ staging area, uniformed firefighters can’t pay for anything in this town. They go into a restaurant for a meal, and it’s covered. They go to Ukiah Valley Athletic Club (the old Redwood Health Club) and they’re given a free membership for as long as they’re in town. They walk into Starbucks, and the coffee has been prepaid by other patrons.

I was eating in Star’s Restaurant and saw a group of firefighters having dinner. I asked the waitress if I could pay for their bill, but she told me another patron had beaten me to it—the meal was already paid for. I even heard about a lemonade stand where kids were raising money for firefighters. I confess that I never pass up a chance to support kids selling lemonade, but this time I made a point to get in my car and drive around looking for the lemonade stand so I could support them.

As I drive around town, I see signs thanking firefighters for their service all over the place, and I just learned that a group of citizens with thank-you signs have been greeting firefighters at 7:00 am each morning, standing across the street from where the firefighters rolled out, so the first thing the firefighters saw was signs of appreciation.

In small ways and big ways, Ukiah has rallied around the firefighters who have come from as far as Australia and New Zealand to safeguard our families and our homes. My best friend, Ross Liberty, owner of Factory Pipe, has gone way above the call of duty. Ross owns the old Masonite property and when he learned the firefighters needed a place to set up, he offered the use of his land for free. Just so you know, the going rate for providing that kind of space is about $5,000/day. When people ask why he doesn’t charge, he says, “They’re doing us a favor by being here. This is the least I can do.” But of course, that’s not true. It’s not the least he could do; he could have charged them. Instead, he’s just a great, community-minded guy, like a lot of people in this valley.

Local businesses aren’t only rallying around the firefighters; they’re also helping local people recover from the fire. The Lake and Mendocino County Rotary Clubs, North Coast Opportunities and the Community Foundation of Mendocino County have funds set up where people can donate to assist fire victims, and the Savings Bank of Mendocino County is giving a discount to people seeking construction loans if their property burned in the fire—whether it was last fall or this summer. Details are available by calling either Cesar Lopez or Jose Cardenas-Ortiz at (707) 462-6613.

As we go about our daily activities, most of us don’t put our lives at risk very often. Most of us don’t leave our families for extended periods of time. Firefighters do both, and sometimes they pay the ultimate price. My condolences to the family of Utah firefighter Matthew Burchett and my thanks to all the firefighters who came to fight the Mendocino Complex fire.

If you have questions about real estate or property management, please contact me at or call (707) 462-4000. If you’d like to read previous articles, visit my blog at Dick Selzer is a real estate broker who has been in the business for more than 40 years.

Mortgage To Do List

Mortgage Do’s and Don’ts

Buying real estate is one of the biggest investments you’re likely to make. As such, mortgage lenders have to make sure you can afford what you’re buying. Here are some things you can do to improve your chances of qualifying for a loan.


DO provide your lender with your homeowner insurance agent’s contact information as soon as possible. If you don’t have homeowner insurance, now is the time to talk to an insurance agent. Insurance can be difficult to get and more expensive than you realize, so providing your agent with enough lead time to find the best policy is a good idea.

DO keep copies of all new pay stubs, tax returns, bank statements and any other asset documentation. You’ll want at least two years’ worth for the lender, and you should keep tax returns for seven years. Be aware, any asset on your current tax return needs to be documented to its original acquisition date, the date when your tax basis starts and all the deductions since.

DO keep proof that your earnest money and option deposits have cleared your account by keeping a copy of the cancelled check(s) – front and back – and the bank statement showing funds cleared.

DO notify your lender immediately if any of the following change: income, assets, credit history, or address. If the change decreases your assets or income, be sure to discuss the changes at the earliest possible moment, and certainly before you spend a couple thousand dollars on property inspections.

DO submit a completed gift letter if your loan allows gift funds and you plan to accept them. The letter must be signed by all gift donors and borrowers.


DO NOT change your employment. Your lender will use your current job and income—and your anticipated future income from that job—to secure a loan for you. Changing this information complicates things. If you change jobs but maintain (or increase) your income—and remain in the same field—it’s not as big a deal. If you change industries, lenders can get a little nervous. They like stability. If you do make a job change of any sort, share it with your lender immediately.

DO NOT change your marital status. I recognize this is a bit more difficult than the job situation. If you and your spouse need to separate, then so be it. If you can stick it out, this is a good time to do so. Certainly, you shouldn’t stay married if the loan is the only reason, but staying together to help your spouse purchase a home that will provide a safe and comfortable place for your children to live can be a reasonable thing to do. If you must divorce, remember you and your former spouse will need to divide the equity in any jointly held property. Again, keep your lender in the loop.

DO NOT change your debt-to-income ratio or your asset-to-liability ratio. Said another way, do not take on new loans while you’re trying to get approved for a mortgage. Do not apply for a new car loan. Do not run up your credit card debt. Do not finance that boat you’ve always dreamed of. Just wait until you’ve closed escrow. If you can afford to pay your mortgage and buy a new car or boat, more power to you. Just be aware that before a new mortgage is finalized, they run a final credit report where any new financing will show up, and this can derail your loan.

In today’s world of greater regulation and loan scrutiny, little changes can lead to big problems. If you’re in the process of qualifying for a loan, stay in touch with your loan officer. Explain any changes as soon as you become aware of them.

If you have questions about getting into real estate, please contact me at or call (707) 462-4000. If you’d like to read previous articles, visit my blog at Dick Selzer is a real estate broker who has been in the business for more than 40 years.


Play to Your Strengths

 For the past couple columns, you may have noticed that I’ve written about financial equations and analysis. This is my happy place. My favorite part of the real estate industry, and any other business venture, tends to revolve around concrete, numbers-driven data. I like working with things that are pragmatic and provable rather than abstract and subjective, which means in any discussion regarding real estate or investments, I immediately begin projecting revenues and expenses and calculating rates of return, so I can come to a wise investment decision.

When I first ventured in to real estate a few years (decades) ago, I tried my hand at selling homes. In 43 years, I would say I’ve been very successful: I’ve sold two homes (my mother’s and one to a cute, single young woman). It didn’t take long for me to come to the conclusion that residential sales was not for me, especially when I lost transactions because I did not care enough to respond encouragingly when people complained about décor.

If someone said, “Hmm, I just don’t see my couch in this room,” I’d stare at them blankly while thinking to myself, “I’ll buy you a couch. Do you like this house or not?” If I’d hear one spouse say to another, “It’s awfully dark in here,” I had no interest in discussing all the ways they could make a room seem lighter–paint the walls white, get some lamps, add a window. To this day, when I make improvements to my own home, I hire a decorator to advise me. In fact, I recently hired someone to pick out curtains—but it turns out they aren’t curtains or even drapes; they’re “window treatments.” Who knew?

By the same token, when I need to replace windows or have some other renovations done, I hire a contractor who can get the job finished in a few days. Yes, he will charge an exorbitant hourly rate, but if I do the job myself, based on the number of hours it will take me, I’m only saving about a buck and a half an hour, plus I’ll probably need to have my work fixed later anyway.

The point is, I hire experts to do what they do best, which leaves me time to do what I do best. I’m good at financial analysis, commercial real estate investing, and providing Realtors with the tools they need to be successful, whether they’re selling residential, commercial, land or industrial properties. Those who help clients buy and sell residential real estate not only understand the nuts and bolts of real estate law and finance, they also enjoy interactions with clients about how to turn a house into a home. I was good at the first part, but not the second. I really enjoy being a broker—it’s a win/win. I respect and admire their hard work and skill, and I can use my expertise to make sure we’re all successful.

So, I guess what I’m trying to say is I think things work best when we all do what we do best. Very few of us are good at everything. I didn’t hire an eye surgeon to replace my heart valve, and I certainly didn’t try to do it myself. I found a cardiac surgeon and here I am to tell the tale. What do you do best? Are you doing it and enjoying it? If not, why not?

If you have questions about real estate or property management, please contact me at or call (707) 462-4000. If you’d like to read previous articles, visit my blog at Dick Selzer is a real estate broker who has been in the business for more than 40 years.



Basic Finance: Internal Rate of Return

This is the second in a series about finance. Because saving for a down payment can have such an enormously positive impact on which property you can buy, I thought I’d explain a few things about how to invest your savings as wisely as possible.

The idea of investing can feel quite intimidating, but once you know how to compare various investment opportunities, you’ll be able to figure out which ones will earn you the most money. Last week, I reviewed the concept of compound interest (earning interest on your interest). Now, let’s talk about how to measure your return—what you earn.

When you consider the best way to invest, you need to know how much you will earn over what period of time. Be cautious if any investment advisor who gives you gross return (overall earnings) numbers without including a specific time frame or someone who simply uses payback time to measure your return. These are methods used to conceal some aspect of the investment—to dupe unsuspecting investors.

With gross return, if an investment advisor says you’ll earn $1,000,000 over the life of the investment, but fails to mention what the term is, you may have to live to be 125 years old to enjoy those earnings. If an investment advisor tells you the payback time on an investment is three years, that sounds great—you’ve recouped your investment in three years. But what it doesn’t tell you is how much you could have earned on a different investment with a slightly longer payback time.

Because the idea of payback time is simple, I often hear people use this measurement when deciding whether to make a particular investment. Let’s say we invest in $10,000 worth of widgets. We get back $3,333 per year for three years the total investment is “paid back.” On the other hand, if you invested that $10,000 in something that paid you $3,000 per year for five years, your internal rate of return would go from zero to about 15 percent, a far higher return. This is why I avoid payback time as a measure of return. Using the payback method, you would choose the first investment instead of the one with higher return.

I mentioned “called internal rate of return” just now. This is the very best way to measure investments because it allows you to compare investments with different interest rates and payment schedules over time.

The internal rate of return is the rate at which net present value (today’s value) of a set of cash flows equals zero. The cash flows include two things: the initial investment (as a negative number) and the returns (as positive numbers). Confused? Let’s use an example to clear things up.

Let’s say you have $10,000 in your bank account and you want to buy a house ten years from now. You don’t know whether you should invest your money at 1 percent for ten years or 2 percent for five years. If you only cared about gross return, these two investments would be indistinguishable: they both earn $1,051. However, the internal rate of return looks at the time it takes to earn the money. If you can earn $1,051 in half the time and then reinvest your earnings, clearly the second investment (the one with the higher rate) is a better choice.

If you want to play with numbers (one of my favorite pastimes), there’s a great website that allows you to calculate all manner of things: You can calculate payments and returns related to mortgages, taxes, all manner of loans, investments, and more.

If you have questions about real estate or property management, please contact me at or call (707) 462-4000. If you’d like to read previous articles, visit my blog at Dick Selzer is a real estate broker who has been in the business for more than 40 years.



Basic Finance 101: Compounding Interest

When it comes to buying real estate, many people tend to get a little overwhelmed by the financial side of things as they try to understand the short-term and long-term effects of the down payment, interest rate, points, and other financial factors. So, I thought I’d write a little series to explain some important financial concepts.

When you try to qualify for a home loan, lenders want to know your debt-to-income ratio. They calculate this by adding up all your monthly debt payments (car loans, student loans, revolving credit card debt, etc.) and dividing them by your gross monthly income (the money you earn before taxes and other deductions). Lenders’ primary goal is to make sure you can repay the loan. So, while it’s okay to have some debt, it’s best to have as little as possible.

To pay down your debt, the best approach is to consistently pay at least the minimum required to stay in good standing on all your loans. Hopefully, you have money left over, and if you do apply it to the debt with the highest interest rate. Also, try not to be tempted by credit card teaser rates, because when those zero percent offers jump to 24.5 percent a few months later, your bill will skyrocket.

Once you’ve paid off your debt, it’s time to start saving and this is where the power of compound interest puts you on an accelerated path to purchasing your own home. Albert Einstein called compound interest “the eighth wonder of the world.” He said compound interest is the most powerful force in the universe and the greatest mathematical discovery of all time. That’s pretty strong language for a guy who took his numbers seriously.

So what is this amazing force? Compound interest is the addition of interest to the principal sum of a loan or deposit. Said another way, it allows you to earn interest on your interest. Compound interest is the result of reinvesting interest rather than paying it out, so that interest in the next period is earned on the principal plus previously accumulated interest. The longer you allow the investment to grow by reinvesting the interest, the greater the magnification of this effect as compared to simple (non-compounding) interest.

Here’s an example. If a 25-year-old invested $1,000 on January 1, 2018 at 5 percent per year, then on December 31, 2018, the new balance on the investment would be $1050. A year later, the new balance would be $1102.50 (the 5 percent interest was earned on $1050), and so on. After 40 years, the original $1,000 would have grown to $7,040. Without compound interest, the original $1,000 would have only grown to $3,000 ($1000 original investment + $50 per year x 40 years).

Here’s a fun fact. In 1626, Europeans bought Manhattan Island from the local Indians for about $29 worth of beads and other goods. If those Indians had the opportunity to invest their $29 at an annual compounding rate of 5 percent, they would now have $5,262,336,110. Some investments have monthly compounding. If that were the case for the Indians, they’d now have $8,118,216,133. Whether it’s $5 billion or $8 billion, it’s a lot of dough.

Now, I recognize that most of us can’t wait 392 years for an investment to grow; however, even over a shorter period, money can grow at an impressive rate, especially if it compounds monthly, daily, or even continuously, and there are investments that do this.

Recognize that compound interest can also work against you. If you are in debt, especially revolving credit card debt, your debt will grow just as quickly as your investment would, which brings to mind another Einstein quote about compound interest, “He who understands it earns it. He who doesn’t pays it.”

If you have questions about real estate or property management, please contact me at or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.comDick Selzer is a real estate broker who has been in the business for more than 40 years.

Homeowners Insurance

Homeowners Insurance and Wildfire Coverage

If your home burned in last fall’s wildfires, you may be interested in the following bills going through the state legislature right now.

AB 1797Replacement cost coverage

With a few minor exemptions, this bill would require an insurer that provides replacement cost coverage to provide an estimate of the cost to rebuild or replace the insured structure that complies with specified existing regulations. This estimate would need to be updated every other year or when it’s time to renew the policy.

It’s still up to policyholders to select the coverage limits for their homeowners insurance. This change would go into effect July 1, 2019.

AB 1875Online insurance finder

This bill would require the California Department of Insurance (CDI) to establish an online tool called the California Home Insurance Finder to help homeowners find and compare residential insurance options. To do this, the CDI would gather information via an annual survey of insurance brokers. It would then promote the online tool and make it available in various languages starting no later than July 1, 2020.

In addition, if an insurance agent does not offer extended replacement cost coverage that meets certain criteria, that agent has to let the homeowner know that other providers may offer this type of coverage.

AB 1923: Wildfire debris removal

When the governor declares a state of emergency after wildfires like those we faced last year, authorities can activate consolidated debris removal programs for large-scale clean up. This new bill would allow local governments to pay for the clean up by collecting money from the insurance companies of covered homes in the area, as long as the homeowner grants access to their property through a right of entry form.

AB 2611Appealing wildfire insurance decisions

Right now, insurance companies cannot cancel policies or fail to renew them just because a property sustained fire damage. Assembly Bill 2611 would create an appeal process for disagreements between homeowners and insurers about whether a policy is issued and/or the premium for that policy based on a wildfire risk model.

The insurer has 30 calendar days to respond to the homeowner’s appeal, during which the insurer can’t cancel, increase the premium, fail to renew or make any other adverse underwriting decisions toward the homeowner.

If the insurer denies the appeal, the insurer must provide factual evidence for the decision and let the homeowners know they can appeal again, this time to the Department of Insurance.

AB 3166: FAIR Insurance plans

The Fair Access to Insurance Requirements (FAIR) Plan Association assures that basic home insurance plans are available for homeowners who don’t qualify or can’t afford more comprehensive homeowners insurance. Although mainstream insurers have these basic plans, they don’t always publicize them. This bill would require insurers to inform homeowners about these FAIR Plan Association policies so homeowners know their full range of insurance options.

AB 1772: Extending insurance collection times

Insurance companies limit the time homeowners can apply for benefits after fire-related loss or damage. This bill would extend the minimum time limit during which a homeowner may collect the full replacement cost of a loss relating to a state of emergency from the current 24 months to 36 months—that is, from two years to three years—with additional extensions of 6 months for good cause.

If you’re interested in local fire recovery efforts, visit

If you have questions about real estate or property management, please contact me at or call (707) 462-4000. If you’d like to read previous articles, visit my blog at Dick Selzer is a real estate broker who has been in the business for more than 40 years.



Water Rights

Water Rights for Homeowners

Many of us don’t think much about the water we use. If we turn on the tap and water comes out, we’re satisfied. When we hear ominous warnings about droughts, we stop watering our lawns (or limit watering to early mornings), but deep down, we’re not too concerned. The tap has never stopped working, so we expect that to remain the case.

However, if you are considering buying a property, whether it’s residential, commercial, land or industrial, one of the most important considerations is the water supply—is there enough water to do what you want to do year-round? Since droughts really are taking a toll on California ground water and other water sources, water rights will continue to have an enormous impact on real estate. Here’s how.

First, some places will have moratoriums on new water hook-ups, so if you plan to build a home in a place where all the other houses have water, you still may not be able to get it. Several years ago, this happened in Brooktrails north of Willits, Redwood Valley, and in the Ukiah Valley for properties in the Millview County Water District. Those moratoriums have since been lifted, but they and others could go into effect again if the shortage isn’t addressed.

Second, rationing could go from voluntary to mandatory. When we all do our part to cut back, there’s enough water to go around, but at some point, there may not be. This is when you’ll get nasty looks from neighbors if you leave a hose running while washing your car or you’ll stop getting invited to neighborhood parties because of your lush, green lawn. Rationing could come in the form of tiered water pricing: the more you use, the more you’ll be charged per gallon. That’ll make everyone (except teenagers) think twice about those 20-minute showers.

Even without a moratorium or rationing, access to water can be difficult and expensive to acquire. Right now, water hook-ups in the Ukiah Valley cost about $6,000 each, which is cheaper than the cost of drilling a well or developing a natural spring. If your property is off the beaten path, the hook-up to the water main is only the first cost. You then have to pay the construction costs of getting the water from the water main to your property.

In some areas, the cost of getting and/or using water may have an impact on your ability to develop the land. One of the problems local farmers face is the cost of electrical service to run the pumps that protect crops against frost. Even when farmers have almost limitless water rights, they find themselves in a financial bind because they have to pay PG&E a stand-by power charge—the fee for the privilege of using the pumps a couple hours every now and then. To be fair, it’s not unreasonable for PG&E to charge a fee since PG&E has to maintain the infrastructure to deliver the power to all the farmers’ pumps (at the same time) the moment a frost hits.

The next challenge occurs when there’s a misunderstanding about property boundaries and water rights. Even though your boundary line may go to the middle of the Russian River, you may not have enough water rights to get a watering can’s worth of water to soak your tomato plants. Property boundaries do not convey water rights. And that well you drill three feet from the river may be legally determined to be river water, and thus, illegal.

In this world, there are four types of laws: criminal, civil, railroad and water. The bookcases full of laws pertaining to water make sense when you think about it. Water is the life-giving, industry-sustaining substance we all depend on. To that end, California just passed a groundwater management plan that’s destined to have a significant impact on water rights, so before you buy property, make sure you know your water rights.

If you have questions about real estate or property management, please contact me at or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.comDick Selzer is a real estate broker who has been in the business for more than 40 years.



Adjustable Rate Mortgages

When you get a loan to buy a house, you can choose a fixed-rate or an adjustable-rate mortgage. A fixed rate means the interest rate stays the same for the life of the loan. An adjustable-rate mortgage (ARM) has a variable rate.

Most ARMs provide lower interest rates at the beginning of the loan, and then the rate varies depending on the index it is tied to. If you’re buying a house that you’re sure you will only be in for a few years, you can usually save a significant amount of money with an adjustable-rate mortgage.

Some ARMs have fixed rates for the first year (or even the first several years), but eventually the rate changes. The amount of the change depends on the index and the margin of the loan. Lenders often use the U.S. Prime Rate as their base lending rate, then add a margin based primarily on the amount of risk associated with a loan. Other common indices include the 10-year Treasury bill, the cost of funds index (COFI), and the London Interbank Offered Rate (LIBOR). Margin is a specified rate above the index, usually 1 to 3 percent. This margin gives the bank the incentive to lend money to you or me and not just buy treasury bills at the index rate.

Before you sign on the dotted line, be sure you understand which index your adjustable interest rate is tied to and what the margin is. Some indices are more volatile than others.

Try to avoid the temptation of low interest rates associated with an ARM if you don’t plan to move in the next few years. While telling themselves, “I’ll probably move,” people sign up for the ARM and then get stuck with higher interest rates than they would have if they had started with the fixed-rate loan.

This is especially true when the ARM begins with an introductory rate that’s a teaser rate—a rate that isn’t fully indexed. Let’s say your loan is tied to the LIBOR at 2 percent with a margin of 2 percent. That would make the fully indexed rate 4 percent. An introductory rate less than 4 percent is a teaser rate, and people fall for teaser rates all the time.

If you qualify for the ARM based on a teaser rate, but you will not be able to afford the mortgage when the rate becomes fully indexed, this is not a good plan. However, if the initial interest rate allows you to qualify for the loan and you know your financial circumstances are about to improve (your spouse is returning to work once Junior goes to kindergarten next year, for example), then it’s fine.

The best way to figure out which type of loan is right for you is to work with your Realtor and a local lender. Be up front about your financial resources and your plans as they relate to your income. Lenders have many loan programs to choose from, so the more information you provide, the better they can help you find a loan that best meets your needs.

If you have questions about real estate or property management, please contact me at or call (707) 462-4000. If you’d like to read previous articles, visit my blog at Dick Selzer is a real estate broker who has been in the business for more than 40 years.