RWSR Sign

Tired of Renting? Now’s a Great Time to Buy!

Many renters are under the mistaken impression that they cannot afford to buy a house. Some believe they need a substantial down payment; others believe they cannot afford the monthly expenses of home ownership. While these assumptions may be true, it’s best to review the facts before crossing home ownership off your list.

We’ll assume you’re a first-time homebuyer interested in buying a $380,000 home in Ukiah’s Oak Manor subdivision. You don’t have money for a down payment, but you do have a job and good credit. You’ve been paying $1800 per month for rent, but you could afford a little more.

Here’s the good news: FHA loans do not require a large down payment (typically 3 percent), and at today’s rates if your household income is at least $85,000, you may be able to qualify for a loan that gets you into that $380,000 house. You’ll need to budget about $2400 for PITI (i.e., mortgage payment, interest, taxes, and insurance). So, instead of buying that new car, find a used one and, voila! You can afford little higher monthly house payment.

You’ll also need to budget for things the landlord used to pay for, like painting your home inside and out, putting a new roof on, replacing the water heater, and similar maintenance. Let’s estimate about 1.5 percent of the purchase price for upkeep each year (about $475/month), since that’s usually about what it costs.

Before you panic, let me share a little more good news: you get to write off some of your mortgage payment. Let’s say your household income puts you in the 25 percent tax bracket. Some of your mortgage payment is tax deductible:

Mortgage payment        $2400
Maintenance/upkeep   $   475
Tax benefits                    $ -265
                                          $2610/month

If you think this is a realistic number, here are some important facts about qualifying for a home loan. First, you need to have good credit (a credit score in the mid-to-high 600s). Next, you need reportable income. For the FHA loan I’ve used as an example, there are minimum income restrictions based on formulas that have to do with the number of people in your household, the number of children you have, and other factors. The final requirement is job stability. You need to have been in your job for at least a year, and it needs to appear that you will remain in that job for the foreseeable future.

Owning your own home has many benefits, the most obvious of which is financial. Your monthly mortgage payments allow you to build equity in an investment that is likely to increase in value over time. I can’t make promises, but I can tell you that with all the ups and downs in the economy during the past 50 years, the overall trend in the value of real estate has been up. I bought my first property in 1973 for $18,000. Today, it is conservatively worth $275,000. That’s an average annual increase of 6.4 percent.

Owning your own home also has benefits that go beyond financial. You get to pound a nail and hang your child’s artwork wherever you want without asking anyone for permission. You get to plant trees, paint a room your favorite color, and rip up that ugly carpet. And all your hard work benefits YOU.

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.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. 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 www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

HeatGoesOut

What To Do When Your Heater Goes Out Midwinter

You may have noticed that heaters, and electricity in general, have a way of going out when Mother Nature brings her coldest winter storm of the season. While we don’t face the same freezing extremes as people in Wisconsin or Minnesota, it’s still a bummer to be cold. If you have a low tolerance for whining and you live with teenagers, a broken heater in winter can be truly unbearable.

So how can you warm up with a broken heater? After you schedule a service call, the first thing to do is to locate any places in your home where outside air can get in. Cracked windows are common culprits, as are poorly caulked or weather-stripped doors. Ideally, you’ll want to replace broken or cracked windows, but since that can get expensive and takes time, re-caulking and/or putting packing tape over cracks and holes will help keep warm air in and cold air (and moisture) out.

Keep curtains and other window coverings closed until sunlight hits the windows directly. During the day, concentrate heat in the main living quarters by closing doors to unused rooms such as bedrooms and bathrooms. To make this even more useful, you can get under-door draft stoppers at CVS. These sleeves fit under the door with Styrofoam cylinders on either side, effectively preventing drafts under the door.

Once you’ve done all you can to prevent warm air from escaping, you can do a few things to increase the indoor temperature. If your heater is broken, but you have electricity, you have more options, of course. You can bring in space heaters and allow the heat from the stove and/or oven to warm things up. Incandescent light bulbs, while not a great source of heat, do produce some. (You’ll know this if you’ve ever burned your fingers trying to change a bulb after it’s been on for a while.)

If your electricity is out, options are more limited. If you have a fireplace or wood-burning stove, you’re in great shape. If not, candles help a little, as do kerosene or propane lamps from your old camping days. Be careful with these, especially if you have small children in the home. Never leave them unattended. If you use a kerosene lamp or heater, be sure to crack a window to re-oxygenate the room. If you have ceiling fans, you can reverse their direction (or install the blades upside down) to push warm air down toward you. You’ll also feel warmer if you put rugs over hardwood or tile floors.

Although healthy adults can throw on warm pants and a ski jacket and do just fine without a functioning heater, be aware that infants and old folks have a harder time regulating their temperature. Be sure to keep them extra bundled.

While Murphy’s Law gets all of us eventually, you can sometimes prevent your heater from going out at the most inopportune time with some preventive maintenance. Call the furnace inspector in fall when you’re the only one calling, rather than in December when everyone in Ukiah wants an inspection. As a side note: be sure to ask for a carbon monoxide inspection at the same time. We recently had a property management client call to let us know their carbon monoxide alarm went off. When we called to have the heater inspected, the company did not check for carbon monoxide, only to be sure the heater appeared to be heating. I was livid.

Preparing for contingencies is rarely the most pressing thing on anyone’s mind, but you’ll thank yourself later if you find yourself in a pinch. For tips on winterizing your home, visit richardselzer.com/2017/10/23/winterizing-your-home. For more on emergency preparedness, visit richardselzer.com/2017/10/30/emergency-preparedness-mendocino-county.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. 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 www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

inclusionaryzoning

Inclusionary Zoning Discourages Development

If we thought we had a housing shortage before the fires, we really have one now. While the developers of the Vineyard Crossing housing development on Lover’s Lane in Ukiah are determined to work with the county to make the development a success, they and developers like them face significant hurdles as they try to remedy our local housing shortage. Between inclusionary zoning, proposed school impact and fire impact fees, and new building codes, it is more challenging than ever to develop new housing in our valley.

Inclusionary zoning is particularly frustrating. It requires real estate developers to give the county a certain percentage of the lots they develop or to pay a fee in lieu of the “gift”. In the city of Fort Bragg, I believe the required gift is 20 percent of the newly developed lots in subdivisions of 5 or more lots. In the county, developers can either include low-income units as part of their development or build low-income housing in a different location as a condition of approval for their main development.

Obviously, when developers must pay a fee, give a percentage of their lots to the local government, or make similar concessions, the cost of the housing they’re building will go up to cover their costs. If we want to solve our housing shortage, maybe we could start by rewriting state regulations which tie the hands of both the local governments as well as developers with unnecessary requirements.

I know local government decision makers often have little choice when it comes to state mandates. If the state requires a certain percentage of housing to be “low-income” or insists that new buildings include fire sprinklers, we must comply. Be aware, that sprinklers would have made absolutely zero difference as to which house survived the Redwood Valley fire. In fact, sprinklers would have hindered fire-fighting efforts by draining the water supply, but I digress.

Can you imagine any business that would survive if they had to give 20 percent of gross sales to the government (not profits, but sales before the cost of goods is considered)? If you add inclusionary zoning fees (potentially worth hundreds of thousands of dollars) to all the other building expenses ($12,000 sewer hookup fee, $3,000-$5,000 water hookup fee, $3.48 per square foot proposed school impact fee, fire impact fee and building permits)—all before a shovel hits the ground—you can see why only the brave or crazy get into this business.

I have attended some public meetings where people implied it is the greed of developers causing our local housing shortage. I’m not suggesting developers are altruistic. Their goal is to maximize profits from real estate projects of all kinds. However, their greed isn’t causing our housing shortage. If profit margins are thin in Ukiah and thick elsewhere, developers will go elsewhere.

While I’m tempted to place full responsibility for the housing shortage at the government’s doorstep, that’s not fair, either. Market conditions definitely contribute to the problem: home prices and the cost of rent still remain somewhat low here compared to construction costs. So, the solution to the housing shortage will come from one of two places. Either real estate development and construction costs will have to go down or housing and rent prices will have to rise. Until this happens, our shortage will continue.

One way construction costs could go down is by reducing the red tape. Many building codes start with safety in mind, but somewhere along the way, common sense gets thrown out the window. If we want to find a remedy to our housing shortage, maybe we should take a look at the codes on the books and see if we can bring a little common sense back into the process.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. 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 www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

career_opportunities

Looking for a Great Career? Try Real Estate.

Every year at this time, people contemplate new beginnings. When it comes to our happiness, jobs can have a big impact, so if you’re in a job that makes you unhappy for whatever reason, this might be a great time to consider a change to real estate.

The housing market in Mendocino County and throughout California continues to roll along at an impressive pace. Home values have been rising for the better part of a decade, and interest rates remain low. Add to that the fact that many people who are currently in the industry will be retiring in the next several years, and you’re looking at a golden opportunity.

According to the National Association of Realtors, since 2008 most people remain in the same home for an average of almost nine years. With a median age of real estate agents in the U.S. being 53, it’s clear that many of the agents who helped clients buy or sell real estate last year will not be working when those clients are ready to buy or sell again.

Even if someone’s agent is still in the business nine years later, a recent study showed that people often don’t remember who helped them buy or sell their last house. This should be a reminder to current Realtors to stay in touch with former clients, and an encouraging fact for those who want to get into real estate–there’s plenty of business to be had.

Years ago, my colleague Warren Liberty (father of Factory Pipes owner Ross Liberty) said, “A job in sales can be the easiest low paying job or the hardest high paying job.” I’ve been doing this for more than 40 years and I cannot imagine doing anything else. Although it absolutely requires hard work and long hours, it also affords me the flexibility to schedule vacations when I like, attend my children’s sporting events, and be in control of my own financial future.

Most licensed agents can find a job within a day or two in almost any city in the nation. Then it’s up to them to stay in business. Although Realtors affiliate with a brokerage, they are still their own boss.

If this career path is of interest to you, talk to some people. Talk to Nash Gonzales, the real estate instructor at Mendocino College. Talk to a real estate broker or two here in Ukiah. Each one will give you a slightly different perspective on the business, but I guarantee all of them will say they can’t think of a more satisfying career.

As I mentioned, this is a great time to get into real estate. During the next five years or so, you can learn from people who’ve been selling real estate for years (some of them decades). Once they retire, not only will you benefit from their years of institutional knowledge, they can provide you with a book of business in return for referral fees. In most cases, this will be well worth the investment.

As you get further into the business, you may choose to specialize in a certain area: residential, commercial, industrial, ranches/land, agricultural properties, or new development. Each area has laws and practices associated with it, from zoning to water rights. If you’re selling ranches, plan on owning a four-wheel drive vehicle and a pair of sturdy boots. If you want to sell agricultural property in Mendocino County, educate yourself on how soil and terrain affect different types of grapes. 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. Whatever you choose, I welcome you to the wonderful world of real estate.

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

 

Decor

Things Realtors Wish Sellers Knew – Part II

Last week, I mentioned several things Realtors would like their clients who are selling property to know, including the benefits of choosing simple décor, not keeping secrets, only doing improvements that will provide a return on their investment, and opting to fix big-ticket items rather than reducing the property’s sale price.

Here are a few other items Realtors would love sellers to know.

  1. A Quick Sale Doesn’t Mean the Property Was Underpriced
    Sometimes, a property will sell within 24 hours of going on the market. Sellers feel elated and deflated at the same time. They are thrilled to sell their property so quickly, but disappointed that they may have underpriced it. The fact is, there are a limited number of active buyers at any given time. Each buyer has a unique set of needs, wants, and resources, and it may just be that your property—at market value—was exactly what that buyer needed.
  2. Be Patient
    If a house doesn’t sell in a week, that’s normal! The average time on the market in Ukiah right now is about 90 days. If your house is larger than average or comes with extra land, it may take a bit longer because there are fewer who can afford it. The point is, if your house is on the market, try to be patient.
  3. Help Me Help You
    Selling property is not a spectator sport. For a Realtor to be successful, sellers must keep the property clean and tidy, and they must make the property available to show. If the seller has a dog, Fido should be at the dog sitter’s during open houses and showings. When the Realtor has questions, sellers need to respond with answers in a timely manner. Selling a property is inconvenient, especially for those who must live in the property while it is for sale. It’s no fun to have strangers looking through your closets and opening your pantry, but for those who want to sell their house, there’s just no way around it.
  4. Your Realtor’s Job is Not to Sell the House—It is to See That the House Sells
    Sellers sometimes think their Realtor hasn’t met expectations when some other Realtor finds the buyer. This always seems odd to me, until I realize that many sellers do not understand all the promotional work Realtors do behind the scenes. The reason other Realtors know about the property is because the sellers’ Realtor advertised the property in newspapers, on the radio, in MLS, online, in social media, and with a big shout out during the local MLS meeting. This is just part of what Realtors do for their clients, of course. They also assist with pricing, negotiation, legal questions, disclosures, inspections, contracts, and other issues. If you list your house with a Realtor and it sells within a few months, chances are your Realtor did their job, even if it wasn’t their buyers who signed on the dotted line.
  5. Don’t Shoot the Messenger
    When a Realtor brings a low-ball offer, sellers can get angry with their Realtor. Be aware that Realtors are required by law to present all offers. Sellers can also get testy when Realtors suggest it’s time for a price reduction. Remember, Realtors do not control the market—they respond to it. It is their job to interpret the available data and advise sellers on pricing. It is not to magically enable sellers to sell for more than the property is worth.

Because most people do not spend their professional lives buying and selling houses, they do not always know what to expect from their Realtor, nor do they understand how their actions can have an enormous impact on the success or failure of a real estate transaction.

If you have questions about real estate or property management, contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. 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 www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business in Ukiah for more than 40 years.

 

Post Fire

Real Estate Issues After the 2017 Fires

In the wake of recent wildfires, I thought it would be helpful to answer some questions that may crop up about real estate. But first, I must remind you that I’m a real estate expert, not a lawyer. If you find yourself in any of the situations below, talk to your lawyer. I write this column to shine a light on interesting topics related to real estate, not to give legal advice.

With that disclaimer firmly in place, let’s proceed.

  1. Who bears the risk of loss in a real estate transaction after a natural disaster?

Imagine you just signed a purchase agreement to buy your dream home, and while the property is in escrow, a wildfire burns that home to the ground. Who bears the risk of loss, you or the seller? Assuming you had nothing to do with starting the fire, the seller bears responsibility for the property until title is transferred to you or until you, as the buyer, take possession (unless the purchase agreement specifies otherwise).

Most of the time, this is a fairly straightforward issue, but what if there’s a rent-to-own situation? If you move in before escrow closes, is that considered taking possession? Without a well-written rental agreement that outlines who has liability before the transfer of title, this can become a murky legal conundrum. This, my friends, is why we have a justice system.

  1. May a buyer get out of a purchase contract if the fire caused major damage?

If the property sustains major damage from the wildfire (or other natural disaster), the buyer can cancel the purchase agreement and get back any money paid toward the purchase price. Sadly, the buyer cannot recoup the cost of any inspections completed before the fire. The inspectors did their job and should be paid for it. The fact that the resulting reports are now useless is immaterial.

The gray area in this question has to do with the definition of “major” damage. That can be a question for arbitration or litigation.

  1. May a buyer get out of a purchase contract if the fire only caused minor damage?

Typically, no. The California Uniform Vendor and Purchaser Risk Act suggests that the seller may enforce the purchase agreement if the damage is not material, so long as the seller repairs the damage. In Mendocino County, we use the California Realtor Association contract, and it requires properties to be maintained in the condition they were in when the purchase agreement was signed. As long as the seller can restore the property to that condition, the contract can remain intact.

  1. With regard to minor damage, does the timing of the fire matter?

Yes. When a purchase agreement is signed, it is customary to include contingencies. The buyer often includes contract language that says, in essence, I’ll buy this property as long as the inspections don’t identify any unforeseen problems. If these contingencies are still in place when the fire hits, the buyer can back out of an escrow, citing the minor damage as an unforeseen problem.

Remember, any material change that could affect the buyer’s willingness to purchase the property must be disclosed. Any new disclosure can trigger a buyer’s right to void the contract (unless the seller is willing to repair the material change).

  1. Does a seller have to disclose major fire damage that has not been repaired?

Yes. The Standard Transfer Disclosure Statement specifically asks whether the property or any of the structures have sustained major damage from fire, earthquake, floods or landslides. In addition, the Natural Hazard Disclosure Statement asks whether the property is in a high-risk fire zone. So even if the property has not sustained major damage, if it is likely to in the event of a wildfire, that information must be disclosed.

  1. Does a seller have to disclose that a fire occurred close to the property if the property itself wasn’t damaged?

Yes. A wildfire in the vicinity of the property in question can affect the property’s value because the property may not be considered as desirable if it is now in the middle of a fire-ravaged community. The question is how close is close? Again that’s why we have a judicial system.

  1. Does a seller have to disclose major fire damage if it has already been repaired?

Yes. Any major repairs or renovations must be disclosed. Whenever a Realtor in my office asks me whether they should disclose something, the answer is always yes. Real estate law, honesty and ethics require the disclosure of any issue that is not obvious during a casual inspection. Keep in mind, during the escrow process the buyer is as in love with this property as they will ever be. Now is the time to share any imperfections. Don’t wait for buyers to discover problems after escrow closes (when they’re having buyer’s remorse), or two years later when property values have declined and a job transfer causes the buyer to look for someone else to bear the cost of their problem.

If sellers don’t disclose what they know, it can come back to bite them years later.

  1. What are the tax implications of the destruction of property?

Things are going to get a bit technical here, so bear with me. Federal law allows businesses to deduct the full cost of “casualty losses,” while individual taxpayers with residential properties can deduct losses to the extent that they exceed 10 percent of their adjusted gross income for the year of the loss. This is only true if the taxpayer itemizes deductions, and each loss is subjected to a $100 floor. The amount of the casualty loss is equal to the difference in the value of the property immediately before versus immediately after the loss. If you’d like more information, take a look at the following tax codes: 26 USC 165(a), 26 USC 165(c)3 and (h), and 26 USC 165(i).

Of course, I’m quoting the tax code as it stood before the recent tax overhaul. You may want to give your accountant a month or two to catch up and then ask them whether this is still the case.

  1. Can a landlord or tenant terminate a lease or rental agreement if a fire destroys all or parts of the premises?

Yes. In fact, under California Civil Code, the agreement is terminated automatically if the entire property is destroyed. If only part of the property is damaged, the tenant can cancel the lease if the damaged part was the reason the tenant signed the lease in the first place. For example, if a tenant rents a property because it has a mother-in-law unit for his aging mother, and that unit burns while the main house remains intact, the tenant can cancel the lease (provided the tenant made it clear to the landlord that the mother-in-law unit was an essential part of the agreement).

While the landlord cannot collect rent for any time after the lease agreement is terminated, they can still collect unpaid rent from before the fire.

While I have focused on wildfires and natural disasters, most of what’s written here applies to single-structure fires, too. As long as the buyer or seller is not complicit in starting the fire, the information above applies. As a side note, “complicit” doesn’t necessarily mean intentional involvement. If a buyer or seller’s stupidity or poor judgment leads to the property being damaged, they are just as responsible.

One of these days, I’ll write a column on all the crazy things tenants have done, intentionally and accidentally, to damage properties.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. 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 www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

 

 

 

Cresting Market

Is the Market Turning?

At the time I’m writing this, it appears the market is cresting. We have had a pretty considerable increase in property values for the past five years. The growth hasn’t been overheated or exorbitant, but is has been steady, representing about a 50 percent increase from the lowest 2008 Recession values.

What does that mean for you? If you want to sell, now is still a good time. Keep in mind that if you sell at a slightly diminished price, you’ll also buy at a slightly diminished price, so it all comes out in the wash. The factor that makes this a great market (for buyers and sellers) is the continued low interest rates. I know I sound like a broken record when I talk about how incredible these interest rates are, but if you compare today’s rates against historical averages, you’ll see today’s rates are a bargain and I don’t think they’re going to last.

I know I’ve been saying rates are going to rise for several years now, but according to my crystal ball, I’m right this time. I can tell you, as a lender, I try to keep my loans to a maturity of five years or less. While I expect an increase in rates, the entire increase will not occur in the span of a few months. So, if you have an opportunity to buy real estate with the intention of holding it for a more than a few years, and you purchase it with long-term, fixed-rate financing, I believe you’ll be happy.

I am not recommending you throw reason out the window and buy whatever is available. I am suggesting that if you find a property you like for a price you can afford and feel good about, the benefits of home ownership and/or real estate investment are worthwhile.

So, as the market shifts from a seller’s market (average time a residential property remains on the market is less than 90 days) to a buyer’s market (average time on the market is more than 90 days), remember buyers and sellers are still interested in making transactions happen. If you’re a seller, it can be tempting to list your house for what it was worth a few months ago, but don’t. Overpricing your house will actually result in a lower sales price most of the time.

If you overprice your house, several things happen. First, buyers who could afford your house if it were priced properly won’t even schedule a walk-through. Buyers who are working with a good Realtor will also avoid your property, because most Realtors can spot an overpriced house a mile away.

Second, as your house sits on the market, people see the listing week after week and may assume there’s something wrong with it. Before buyers make an offer, they often ask, “How long has the house been on the market?” If it’s a new listing, they may assume they have to make a great offer or it will be snatched up by somebody else. If it’s been on the market a long time, they may believe you’re desperate to sell—putting them in the driver’s seat.

Finally, even if you find a buyer willing to pay too much, they may not be able to get financing. If your house appraises for less than the sales price, the bank probably won’t loan the buyer the money they need to complete the transaction.

To combat all these factors, sellers who overprice their houses at the outset end up reducing the price to below market value, reducing their revenue from the sale. So, the moral of the story is, don’t be greedy or you’ll lose out.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. 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 www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

 

Business Trends

Ukiah Business Trends

You may have noticed that we finally have some new businesses in town. The old Masonite property north of town, developed by Ross Liberty, has attracted a landscaping supply company, Rhys Vineyards, and a potential hotel, restaurant, and gas station. The landscape business is especially noteworthy because the owner is from Ukiah. Years ago, he got so fed up with local regulations that he moved his business to Cloverdale; now he is coming back. On the other side of town, Costco has broken ground and plans to open its retail store and gas station in the spring. In addition, a new hotel is proposed near the Costco site.

What does all this mean? It means the county’s economic development efforts are starting to pay off. We’re headed in the right direction. Businesses outside Mendocino County are beginning to see us as more receptive to new business.

While the county hasn’t relaxed regulations, there’s been a tremendous change in attitude. County supervisors, CEO Carmel Angelo, Assistant CEO Steve Dunnicliff, Interim Director of Planning and Development Nash Gonzalez and others have bent over backward to make sure no unnecessary impediments or restrictions are placed on new businesses—even in the face of new state regulations.

As consumers, we can expect more choices about where to spend our money, and more choice is almost always a good thing. It generally means broader selection and lower prices. Even if you never shop at Costco, when it opens, you can expect gas prices all over town to drop.

As taxpayers, this uptick in new businesses will provide a broader and more dependable source of funding for city and county governments to pay for much-needed services like roads, a new mental health facility, and the ever-increasing demands for all sorts of other services.

This new source of revenue will be needed in the wake of marijuana legalization, as the property tax base for marijuana-growing property decreases. The economic impact of diminished marijuana dollars will affect local businesses—everything from car dealerships to restaurants.

If my prediction is right, a few years from now, we’ll see less of the underground economy that currently props up our valley, and more of a conventional economy, where restaurants will see less cash and more credit card sales, and car dealers will see more sales paid for with bank loans or checks, as opposed to buyers peeling off $100 bills that smell funny. Our labor market will shift from cash-under-the-table to payroll checks, with all the attendant costs and benefits, whether it be taxes or paid health care.

With this uptick in business activity, there will be more of an opportunity for those of us in the financial and service industries as well. People coming to town to work at Costco or the other businesses I mentioned will need local services, will shop in local stores, and will need to buy or rent housing.

It’s an old expression, but very true: a rising tide raises all ships. Certainly, for those of us in the real estate business, there is opportunity on the horizon. The purchase and sale of commercial buildings and residential properties, as well as an increase in property management, is almost a certainty.

I look forward to the economic growth I see coming our way.

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

 

Downsizing

The Pros and Cons of Downsizing

Once the kids go off to college and then (hopefully) into the work world, empty nesters typically have more house than they need. The question becomes whether to sell or stay put.

Let’s imagine you have a 3500-square-foot house. Now that your five adult children have families of their own, they visit from time to time but have no plans to come back and live with you.

A 3500-square-foot house is a lot to take care of and if it’s located a few miles from town, it’s not as convenient as a nice little place on the Westside of Ukiah, for example. If you sold your big house, you could move into town—into a neighborhood with tree-lined streets that are perfect for evening walks. You could be closer to shopping and other amenities, like Sundays in the Park concerts, the weekly Farmers Market, and your doctor’s office. And you could choose a property that would require substantially less yard work than your current one.

And convenience is only one of the possible benefits. Selling your house and buying a smaller one could be a smart financial move. Cash from the sale of your 3500-square-foot house could be used to pay for the new, smaller house, and you’d have money left over to supplement your retirement income. For the holidays, instead of staying at home (since things would be a little crowded), you could meet kids and grandkids at Disneyland or Yosemite or take a cruise to Mexico. As you can see, the benefits of downsizing are many.

However, as the father of five grown children, the thing that stops me from downsizing is the thought of losing our gathering place. I want all my kids to come home for holidays and birthdays and weekend barbecues. I want them to be able to show their children the room they grew up in, the tree they loved to climb, the fence they painted, and the back door they snuck out of when they thought no one was looking.

If I move, I lose all that. I love thinking about my children having children of their own and bringing them to my house where there’s plenty of room to run around. If it means I need to do a little extra landscaping, so be it.

The decision to downsize is a personal one, and it’s influenced by your financial resources as well as your emotional connection to your house. Sometimes, when people have experienced difficult, emotional family situations like a divorce or a death in the family, it can be easier to start over with a new house.

If you downsize, you will not only lower your mortgage payment, but you’ll also reduce the cost of maintaining your home. You may recall from previous articles, most people spend about 3 percent of the home value per year on taxes, insurance, repairs, and maintenance. If you were to downsize from a $700,000 house to a $400,000 house, you’d save on mortgage interest, plus several hundred dollars per month on house-related expenses.

If you decide to downsize, and you stay within the county, you can bring your tax base with you if that’s financially beneficial for you. If you bought your home twenty or thirty years ago, your original tax base is likely to be below the $400,000 value of the smaller house you’d move into. The lower your tax base, the lower your taxes.

Talk to your accountant about the financial benefits of downsizing, and if it’s the right move, call your Realtor to help you put your home on the market. Then, pour yourself a cup of coffee and start thinking about whether you’d rather go to Disneyland or Mexico for Christmas.

If you have questions about real estate or property management, contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. 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 www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business in Ukiah for more than 40 years.

Divorce and Real Estate

Divorce and Real Estate

When a marriage ends, one of the most contentious issues can be dividing up the assets—figuring out who gets what. If the spouses own real estate together, this is likely to be among the most valuable assets.

Although it can be hard to make rational decisions in an emotionally charged situation, it’s worth the effort. Making decisions out of anger or spite can be really expensive.

When divvying up ownership of the house, there are a few options. Couples can do nothing, maintaining joint ownership and putting off the disposition of the property indefinitely. Sometimes this happens when the couple plans to leave the property to their kids someday.

They can sell the property and divide the proceeds. Depending on the situation, this can be an expensive option. In a buyers’ market, when one spouse refuses to allow the other spouse to buy him or her out, a forced sale can lead to a financial loss. Even if the house has increased in value since it was purchased, there are still fees associated with the sale. If the couple has young children, a more important cost may be the emotional price the kids pay when they’re displaced from their home.

A better option for many couples is an inter-spousal transfer deed or a quitclaim deed. These allow one spouse to transfer title to the other without triggering a due-on-sale clause or a reassessment of property taxes.

While this is a good option for many, it’s important that both spouses consider the economic viability of only one person retaining ownership (and the expenses associated with home ownership) before going this route. Keep in mind, the spouse who gives up ownership remains on the loan documents. When the bank underwrote the loan, they assessed the risk based on both spouses: potentially, two incomes and the better of the two credit scores. So although the divorcing spouses may agree about who is taking on the mortgage payments in return for ownership of the property, if the spouse who receives the property defaults on the loan, the lender can come after the other spouse for compensation.

In case you’re wondering, an inter-spousal transfer deed occurs when one spouse transfers ownership to the other. A quitclaim deed is a legal document that says, in essence, “I transfer any interest I may have in this property.” Quitclaim deeds are often used to resolve disputes between neighbors. For example, if neighbors disagree about an easement involving their two properties, one neighbor can provide a quitclaim deed clarifying that he gives up any ownership of the disputed area. Interestingly, you can give someone a quitclaim deed on a property you don’t even own because there is no “title covenant” (requirement to prove you own an interest in the property).

These same transfer-of-title issues apply whether the property in question is the primary residence or income property. If the couple owns investment properties, they should consider whether both spouses have the economic capacity and business acumen to manage property. Typically, one spouse has been the investor and had tailored the properties that match his or her comfort level.

To divvy up investment properties, a portion could be sold to cash out one spouse, or other assets could be traded for equity in the property; or perhaps the non-acquiring spouse could receive a note secured by the property. When calculating who gets what, remember that the one who keeps the rental properties may have to pay legacy capital gains taxes.

As always, I highly recommend that before making any decisions like these, consult your accountant and/or attorney first.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. 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 www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.