Buying Existing Loans


Last week, I shared information about hard-money loans, which are loans that often work when conventional loans won’t. This week, I’ll talk about buying and selling notes secured by real estate, a close cousin to real estate-backed, hard-money loans.

If you sold a property and carried the financing, you are now the proud owner of a note secured by a deed of trust. The note outlines the terms of the obligation, including length, monthly payments, interest rate, and when any associated balloon payment(s) will come due, among other things. (A balloon payment is a payment that amounts to more than double the value of a regular payment, and is usually planned as the final payoff at the end of the loan.)

The main job of the deed of trust is to tie the specific loan to the real estate that secures it. In a seller carry-back situation, the real estate is normally the property you sold. When you sold the property and carried the financing, there may have been good reasons to do so: a higher sales price, a faster sale, a better return on investment than was available from other investment sources; or maybe the sale could not have happened at all without seller financing. Now, however, things have changed. Your princess may be about to graduate from high school and hoping to go to college, or perhaps you want to remodel your home or take advantage of an exciting investment opportunity.

Whatever the reason, you’re currently in a position of needing cash. Happily for you, that note secured by a deed of trust is a negotiable instrument. That means you can sell it.

Depending on a number of factors, you will usually get something less than the outstanding balance owed. If the financing you provided was at a low rate or had an especially long term, the note’s sales price will almost certainly be less than the outstanding balance. If the loan-to-value (LTV) ratio is high—calculated by dividing the total loan amount by the value of the property—you can also expect to sell the note for less than the outstanding balance. Still, cash in your hands may be worth more than the value of the note.

If you choose to sell the note, these transactions are typically handled by a licensed broker who charges a commission for arranging the sale. Like a real estate transaction, it should be handled in a professional manner, making sure all escrow instructions are carefully drafted and followed, and title insurance is secured.

As a buyer of this note, you should have your broker verify that the value of the property supports the loan, and that fire insurance and property taxes are accounted for. And most importantly, confirm that the seller does, in fact, own the note—and that there are no liens that might encumber the note. Your broker can also provide a financial analysis to let you know what the rate of return will yield if all the payments are made in a timely manner (including any balloon payments).

When the dust settles, the sale of an existing loan can be a reasonable source of cash for the seller and an attractive investment option for the note’s buyer.

If you have questions about real estate investment, sales or property management, please contact me at or visit If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. 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.



All Properties are Sold “As-Is” Unless You’re Paying Attention

When you buy a property in California, you’re buying it “as-is” unless you negotiate a different agreement pertaining to a specific item with the seller. Without that special agreement, you’re accepting the property in its current condition.

This is not to suggest that sellers can announce they are selling their property as-is, and then skip required disclosures. Regardless of whether they intend to address problems with the property, sellers are legally obligated to share known material facts and defects with buyers.

However, to protect yourself as a buyer, it is imperative to get as many inspections as you can. First and foremost, you’ll want to inspect the structure. The first inspection is often the pest and fungus inspection, which discloses any problems related to dry rot, termites, powder post beetles, earth-to-wood contact, or other issues related to pests and fungus. It is an inspection of all that’s visible, so any problems that exist inside the walls or under the tile in the subfloor will not be identified.

The next inspection is often the home inspection, which reveals structural issues resulting from substandard workmanship or deferred maintenance, as well as any safety hazards, including faulty electrical connections caused by an inexperienced electrician or old technology/building standards. A roof inspection is sometimes included as part of the home inspection, but not usually—and it’s really important, as is the heating and air conditioning inspection. The inspection that evaluates the condition of heating and air conditioning equipment can save your life. If a heater has a cracked heat exchanger, for example, it can pump deadly carbon monoxide into your house.

The last thing to consider with respect to the structure is whether it is standing on solid ground. When a house is located near a cliff, most people can see it’s worth an inspection to make sure the land won’t slide out from under the house. However, when a structure is sitting on a flat lot, problems can still arise.

In years past, building requirements for testing soil were quite different. Depending on the type of soil (and what’s buried in it), the weight of a house can cause the earth to compress, leading to cracks in a house’s foundation. If you’re considering a property on a hillside, hire an engineer to inspect the integrity of the land. If you’re interested in buying a house on a flat lot, you probably don’t need to hire an engineer unless you see red flags like damage to a foundation, floors, or walls—specifically, cracks that seem to indicate the house is settling more than it should. As with all inspections, it’s better to be safe than sorry. Sure, inspections can be expensive, but not nearly as expensive as purchasing a property that slides down a hill or becomes an unstable mess.

In addition to structural inspections, you’ll want to evaluate specific functions like a pool, well, or septic system. Some problems are obvious; others are not. A pool inspection will not only note the crack in the bottom of the pool, but also the condition of the pumps, filters, heater, and piping. Well and septic system inspections are important because they can identify problems that the current use may not have triggered. A well or septic system may work beautifully for a retired couple, but when you and your spouse and your four kids and your in-laws move in, the well and/or septic system may not be equipped to handle the volume. Be sure to test the well for both quantity and quality of water.

Next week, I’ll review inspections done for natural hazard disclosures and title insurance, so you’re sure you are, in fact, buying the property you intend to buy—and no one else can lay claim to that property.

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.


How to Make an Entrance

Once you’ve purchased a new home, it’s time to make it yours. Creating a welcoming entrance is a lovely way to start: it will be something you and all your visitors can enjoy for years to come. Chances are, having just closed escrow, you’re not in the mood to spend a whole bunch of money. Happily, several small, inexpensive changes can add up to a big impression.

First, be sure people can identify your home by adding house numbers to your mailbox and your house. This is convenient for visitors and essential for emergency responders. I like reflective numbers on mailboxes and beautiful, but prominent numbers on the house itself. It’s best if the house numbers are visible at night, so place them under a sconce or get numbers that illuminate.

Next, consider the walkway to your front door. A walkway should be at least three feet wide, and preferably four feet, to allow two people to walk shoulder-to-shoulder as they approach. Trim shrubbery away from the path and fix any tripping hazards (cracked concrete or bricks that have moved out of place).

Once the path is clear, it’s time to light it for guests (and family members) who come and go after dark. Solar landscape lighting not only improves safety, but adds beauty. Mendo Mill and Friedman’s offer lights that cost only a few dollars apiece and are easy to install—simply stick them in the ground along the path. The sun charges them during the day and they add a nice glow at night. While we’re on the subject of light, consider motion lights outside your front door. This will prevent you from fumbling for your keys in the dark, and it dissuades those who prefer to lurk in the dark.

As you arrive at your front door, planter boxes or flower pots on your front porch can add a bit of cheer. Whether you choose a subtle terra cotta or colorful pots that coordinate with your decor, planting flowers says, “I care about my home.”

Many people like to make a statement with the color of their front door. While it’s often a good idea to fit in with the neighborhood and keep your exterior house colors neutral, a bright front door color can make you smile each time you come home. Use a high gloss paint and consider popular colors like crimson, royal blue or forest green.

Color isn’t the only way to make your front door stand out. You may consider a fun knocker. You can choose a big, brass knocker, if you’re on the traditional side, or a silly, fun knocker that reflects your personality, if you prefer. The great thing about knockers as opposed to door bells is that knockers never run out of batteries.

If you have clear windows as part of your front door or immediately adjacent to your front door, consider improving privacy and safety with after-market decorative film. The film can create a faux stained glass look or simply a frosted window look. Either way, people won’t be able to look into your home before you invite them in.

Before people accept your invitation to enter your home, they should be able to wipe their feet on a door mat. Here’s another opportunity to share your style. Coir mats (the ones with the firm bristles) are wonderful for removing dirt from shoes of all descriptions. You can choose the classic “Welcome” message or create a custom option; you’re only limited by your imagination. Finally, although your mailbox isn’t necessarily part of your entryway, it is one of the first things people see as they approach your home. You can have a big mailbox or a small one. It can lock or not. And it can be almost any shape or color.

Making your house a home is great fun. Enjoy!

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.


Selling in Winter

Many people believe spring is the best time to sell a house, so they take their property off the market during winter. It is precisely this behavior that could make your property a hot commodity during the coldest months.

As I compare housing statistics from April 2015 to statistics in October 2015, I see some interesting trends. January through April, the average time on the market for residential properties in inland Mendocino County was 113 days. Through October, the average time on the market was 91 days. Homes are selling faster now than they were in spring. During the first four months of the year, 75 homes sold. Through October, 217 homes sold; that’s an average of 19 homes per month for the first four months compared to 24 homes per month through October, or put another way: a 26 percent increase in the number of homes selling per month. This market is heating up and, therefore, this suggests it is not a good time to take your property off the market.

I knew a real estate agent years ago who consistently sold more houses in the month of December than during any other month. Why? Because, he explained, everyone else stops working. As the holidays approach, sellers do not want to be bothered with the hassles of having their property on the market, and Realtors—who also have families and personal lives—tend to slow down, too. When fewer homes are on the market, the laws of supply and demand are in your favor: fewer available homes means less competition for your property. If you’re motivated to sell, do not let the holidays scare you away.

This is not only a good time to sell compared to last spring. It is encouraging to look at housing statistics from a year ago. Last October, the median home price in inland Mendocino County (excluding Hopland) was $308,000. This October, the median price was $345,000. That’s a 12 percent increase. If you’re a buyer, I’d say, get into the market while the getting’s good—before prices rise even more, not to mention interest rates.

Bear in mind, “median” is not the same as “average.” Median means there are as many properties with a higher price as there are with a lower price. If you have ten houses evenly spread between $300,000 and $400,000, your median is $350,000. If eleven more houses are put on the market and they are all priced at $290,000, the median price is $290,000.

Average means you add the total of all the prices and divide by the number of properties. Averages can be more dramatically influenced by outlier properties (super expensive or super cheap).

Market forces can certainly influence the median housing price. If there’s a run on higher priced or lower priced homes, the median price can change, but the individual price for many houses will remain consistent. Let’s say COSTCO is finally allowed to open its doors in Ukiah, and they pay salaries between $30,000 and $40,000/year, so a dual-income family makes $70,000. This means the family can afford a $400,000 home at today’s interest rates, so the increased demand for homes in that price range may drive up prices for houses between $350,000 and $450,000. If you are selling a mobile home or a million dollar ranch property, dozens of new COSTCO employees looking to buy a home will not affect the value of your property much.

Regardless of price, the financial factor that always affects the housing market is interest rates. According to Ginny Richards at Sterns Lending, rates are down about three-eighths of a percent compared to last year. I think rates will remain stable until the presidential election is over next year, but my crystal ball doesn’t always work, so don’t count on it.

If you have questions about real estate or property management, please contact me at or visit If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. 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.







Career Opportunities in Real Estate in 2015

Finding a way to support yourself financially in Ukiah can be tough, especially without a college degree, but if you have the right personality and work ethic, a career in real estate might be just what you’re looking for. Jobs range from sales agent to property manager to loan officer, and more. They all require a real estate license, but little additional schooling.

To be a successful Realtor, you must be interested in meeting and working with people. It also helps to be a self-starter, because being a Realtor isn’t like having a regular office job where people notice (or care) if you show up during regular business hours. You must be disciplined enough to prioritize and schedule all your own activities.

As a Realtor, you’ll work on behalf of your clients to find homes, invest money, sell homes, borrow money, and lots of details in between. Since a Realtor works on commission, your financial success depends on your ability to solve problems and help clients meet their goals, so it’s best if your work is accurate, thorough, and timely.

Realtors can specialize in several areas: residential, commercial, industrial, ranches/land, agricultural properties, or new development. Each area has laws and practices associated with them, from zoning to water rights. As a practical matter, you may want to consider whether you’re the outdoor type. If you’re selling ranches, for example, some properties may not be easy to access. Plan on owning a four-wheel drive vehicle and a pair of hiking boots. If you want to sell agricultural property in Mendocino County, understanding soil and terrain, and how they affect different types of grape varietals, comes in handy. If you want to work with a developer to subdivide land and build spec houses to sell, you better be good at details and willing to work with bureaucracy at all levels, completing forms, coordinating inspections and reports, and more.

In real estate sales, you can work very little and make $5,000 a year or you can work a whole bunch and make $250,000 a year. Depending on the market, your income is largely up to you. Remember, as an agent you are self-employed, and therefore 100 percent responsible for your financial success.

If working on commission or being available during non-traditional business hours doesn’t fit your lifestyle, property management might work for you. Many of the same traits as a sales agent are important (e.g., working with people, solving problems), but property management has more security and regular hours. You may not earn as much, but for some, the security you gain is a worthwhile trade.

A property manager takes care of real estate for a property owner, including all the details of renting the home or space to qualified tenants and coordinating care of the properties if something breaks or needs maintenance. A property management position comes with a salary and often includes benefits like health insurance, paid time off and a retirement plan. Be aware, property managers are expected to be in the office, so there’s less flexibility than for a Realtor.

If you are detail oriented and like solving problems, but prefer to work with numbers and a computer, being a loan officer could work for you. Some loan officers work for banks or loan brokerages to lend money; others are self-employed. Either way, some of your salary may be based on a commission. If you are a go-getter, then you’re likely to earn a higher income.

Realty World is currently hiring secretarial help, and other real estate companies may be as well. Starting as a receptionist can provide you with an insider’s view of the industry to see if you may want to pursue a career in real estate.

If you have questions about real estate or property management, please contact me at or visit If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. 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 35 years.







Let’s Do It Again: Safe Mendocino Contest Builds on Success of Safe Ukiah Contest

In June, I was talking with Ukiah Police Chief, Chris Dewey. We were reminiscing over the success of the Safe Ukiah contest, and we started talking about whether a Safe Mendocino County contest could produce even more good ideas on ways to keep our local communities safe.

The next thing you know, we’re having lunch with Sheriff Tom Allman and Ukiah Daily Journal Editor KC Meadows, and we’re brainstorming about all the reasons a county-wide contest would be a great idea. This is our home. We care about quality of life issues, and we want to work together to improve things.

While I’ll admit that as crime goes down, housing prices typically go up and that’s good for business, but that’s not my primary reason for sponsoring these contests. I grew up in Ukiah. I’ve raised five children in Ukiah, and I would like them to consider returning to Ukiah to raise their children someday. Unfortunately, the way things are going, that’s not likely.

People who live in Mendocino County have a history of taking care of each other. The more remote your community, the more you depend on yourself and your neighbors to make things happen. I understand times have changed, and I’m not looking to return to the 1950’s, but I believe we can band together and draw a line in the sand and say, “No more,” especially when people who aren’t from here—and have no intention of ever contributing to our community—start asking for money when I’m at the ATM or shopping downtown.

Chief Dewey’s response to the Safe Ukiah contest was to implement Business Watch; it’s like a Neighborhood Watch program for businesses. It uses technology to help business owners connect, and it helps keep UPD informed of possible problems in real time so they can be more effective. I would love to hear what people have to say about keeping other communities safe.

To that end, Realty World Selzer Realty invites Mendocino County residents to submit ideas on how to make their communities safer. Whether you’re on the north coast or south coast, up in Laytonville, Covelo, or Leggett, or in Willits or Ukiah, you can win $500 if your idea is the best one in your area. We’re dividing the county into its supervisorial districts, so Realty World is offering five prizes—$500 each for the best submission in each district.

Even though I’ve been focusing on law enforcement solutions, there are lots of ways to make Mendocino County safer. Get creative. Safety can mean better roads, helping students stay busy and productive after school instead of getting into trouble, organizing volunteers to provide transportation for those who should no longer drive but need a way to get around. How are people unsafe now? How can we fix it? Sometimes simple solutions are the best. Other times technology can bridge gaps that used to seem unrealistic.

If you are serious about this, you’ll have to consider budget and resource issues. Last year, I was really impressed with the time and research people put into their submissions. It was great because it made the solutions viable. We have to consider not only what to do, but how to make it happen here in Mendocino County.

If you’re a teacher and you want to make this a class project, I think that would be great. You grade the grammar, and the judges will review the ideas.

If you’d like to help but don’t feel like entering the contest, consider joining or donating to the Mendocino Public Safety Foundation, a group that supports public safety and helps fund local projects. If this interests you, give me a call.

You can pick up an application and the rules of the contest at the Realty World office in Ukiah or request them via email at

If you have questions about real estate or property management, please contact me at or visit 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 35 years.


Land Zoning and Water Use

The Williamson Act is a California law that allows the County to comply with an owner’s request to re-zone property as agricultural land, provided the owner is willing to commit to a ten-year term. This limits the property taxes the owner has to pay to be based on agricultural revenues, and prevents the land from being developed during a rolling 9-year term. If you own agricultural land and it isn’t zoned properly, you may be paying more than you need to in property taxes.

Along those same lines, Timberland Preserve Zoning (TPZ) allows property owners to be taxed on the value of timberland minus the value of the timber (trees). The Mendocino County ordinance defines timberland as follows:

“Privately owned land, or land acquired for state forest purposes, which is devoted to and used for growing and harvesting timber, and compatible uses, and which is capable of growing an average annual volume of wood fiber of at least 15 cubic feet per acre.” This is directly from Mendocino County Ordinance # 3335. (So this is not my grammar.)

The TPZ designation is also a ten-year commitment, similar to agricultural land under the Williamson Act. Although timberland is subject to property tax, the timber standing on the land is exempt from tax until harvested. If timberland isn’t zoned TPZ, however, trees standing on the land may be assessed on the basis of their esthetic or amenity value.

Big tracks of land (both agricultural and timber) are looking pretty dry with our current drought conditions, even after the few inches of rain we got recently. While property owners with a lot of land may feel the drought most acutely, property owners of all sizes can conserve water.

The biggest crop in our region isn’t a legal one, so it’s hard to regulate water usage, but I admire local ranchers (above and below the law enforcement radar) who use innovative methods to use rainwater effectively, capture runoff, recycle as much water as possible, and implement low-water practices.

Because Mendocino County is a big agricultural area, water is vitally important locally. All of us, residential users and agricultural users (legal and otherwise), need to do whatever is within our capacity to conserve our scarce water resources.

Speaking of illicit activity, be aware that if you have commercial property in Willits (especially property that is often vacant), you may be at risk for water theft. Thieves have been driving their trucks up to vacant properties, connecting a hose to the spigot, and filling their mobile water tanks. If you go to your local hardware store, you can purchase a spigot lock. The friendly folks at Mendo Mill have them available for about $10. The lock screws into the faucet, then you add a padlock, and your water is protected.

Lots of people have opinions about how best to save water. According to a 2012 Pacific Institute report, a small percent of California’s water footprint is associated with direct household consumption and industrial uses, while the majority of water goes toward agricultural uses. If you read the report, available at, it suggests that we, as consumers, may have more power to affect the drought than we think. It advocates that we change our purchasing habits to reflect water consumption. It’s an interesting read. The report has a very specific agenda that has nothing to do with water, but the statistics are very informative.

Even when we have normal rainfall, when we’re not in a drought, we still have a water storage shortage. We should explore new storage resources, whether that means dredging Lake Mendocino, raising the dam, or developing off stream storage facilities. This drought will surely come to an end; but just as surely, we will have water shortages in the future. Postponing dealing with the problem will not solve it.

Next time I’ll write about COSTCO, friend or foe. If there’s something you would like me to write about or if you have questions about real estate or property management, feel free to contact me at or visit our website at 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 35 years.

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Preparing Your Home for Sale

If you’ve been thinking about selling your house, now’s the time! It is a seller’s market. Rates are low, prices are climbing, and there’s not much for sale. And, since we have more buyers than sellers, the marketing time (time it takes to sell a home) is short. If you’re curious about what your home might sell for, you can get a free market evaluation from your Realtor.

Part of why we have so many buyers is because they know buying now will save them from higher interest rates, higher home prices, and increased property taxes.

So, what’s the best way to sell your house? First, take care of all those little cosmetic things that may have driven you crazy once, but now you hardly notice. Those minor repairs you kept meaning to get to, like leaky faucets, loose doorknobs, torn vinyl, and new paint.

Now that the easy stuff is done, it’s time to imagine your home through the eyes of prospective buyers. Time to de-clutter and clean out your garage. If you’ve lived in your home more than five years, unless you live a Spartan life, you’ve collected a lot of STUFF. Serious de-cluttering means removing about half your furniture, and throwing away all those unfinished projects in the garage.

If you’re really serious about selling your house, get a home inspection and a pest and fungus inspection. Then, you’ll be armed with the information you need to get your house in top shape, and you’ll be able to show prospective buyers that they won’t be hit with any nasty surprises once they enter escrow.

Having done all this great work, if you still want to sell your house, it’s time to prepare for a showing. First, you have to get people in the front door, so don’t forget about curb appeal. How does your house look from the street? Is the yard mowed? Did you trim the bushes? Are the garbage cans stowed? Did you rake the leaves?

Of course, you’ll want to clean your house, but this shouldn’t be your weekly “dust and vacuum” clean. This should be your mother-in-law is coming to visit “have the carpets and drapes professionally cleaned” clean. Because we all know the old adage, “Your dirt is dirtier than my dirt.”

Try to appeal to all the senses. Visually, be sure to pick up the toys, make the beds, do the dishes, empty the trash, and for heaven’s sake put the lid down on the commode. If you have views, be sure to open the window treatments so you can see those views! If your house is dark, turn on some lights. To make the house smell good, put a drop of vanilla on a light bulb, or use a commercial air freshener. If you like to bake, throw a batch of cookies in that morning and your house will smell wonderful. To appeal to people’s sense of sound, have soft music playing when they arrive.

If you move out of your home before you sell it, consider having a staging company furnish it for you. Most people find a furnished home more inviting than a vacant one. Staging companies are expensive, but can make a dramatic difference.

One of the things that also makes a huge difference to the marketability of your home is the community that it’s in. People often ask, “What is there to do in Mendocino County?” And so, I’m sharing information about the Skunk Train. It’s a wonderful local organization, and it needs our help. As a result of a tunnel slide, it must raise $300,000 fairly quickly. In case you’re interested in helping out, I thought I’d put this information in. Visit them online at or

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