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 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.


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 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.



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 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 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 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.


The Benefits of Real Estate Investing

A few years back, I wrote some columns on real estate investing. Since then, I’ve been asked about the tax benefits and other upsides of owning income properties, so here’s a bit more information.

If you are a business owner interested in owning your own office building, a property manager who wants to own your own apartment building, or simply an investor interested in commercial property, one of the ways to maximize tax benefits in real estate during the first few years you own the property is to have a cost segregation study done.

Without a cost segregation study, improvements to your property depreciate over a fixed amount of time. (“Improvements” include things like buildings and other structures that add value to the raw land.) Each year a little bit of the value is considered an expense or a “write-off” for tax purposes. At the end of 27.5 years, residential property is considered fully depreciated. At the end of 39 years, commercial property is considered fully depreciated.

If you have a segregation study done, however, you’ll get an itemized list of how long various parts of your investment will last, and therefore, how quickly you can depreciate them. The segregation study will consider the value and longevity of things like HVAC systems, interior and exterior paint, carpet and other flooring, asphalt and paving, roofing, and more.

I’ve yet to find an air conditioning unit that lasts 39 years, and still meets quality and safety standards. And unless you require employees to take off their shoes when they enter the building, carpet probably won’t last that long, either.

The segregation study allows you to front-load depreciation, increasing the tax benefits of your real estate investment in the early years. The studies can cost several thousand dollars, but if you can pay for them in the first year with tax savings, they’re worth it. Generally, this is only the case for four-plexes and apartment buildings on the residential side. The savings on single-family homes and duplexes are generally too small to justify the cost of the study.

However, if you’re just getting started with real estate investing and you want to start with a single-family home, there are still plenty of tax benefits and financial upsides.

Lower priced properties typically have a better rent-to-price ratio. A $200,000 home will probably rent for $1,200 per month, while a $750,000 home will likely rent for $3000 per month. In addition to a better rent (income)-to-price ratio, you’ll probably have shorter vacancies with a less expensive property. More people are in the market for a $1200 per month property than for a $3,000 per month property.

A $200,000 rental property in good condition shouldn’t be too burdensome to manage or maintain, and with $150-200 per month in depreciation, has about a break-even cash flow. You invested $45,000 (a 20 percent down payment plus $5,000 in closing costs), and your benefit is the potential appreciation in the value of this property. If values rise at three percent a year, that equates to $6,000 per year on a $200,000 house—that means you made $6,000 on a $45,000 investment or a 15 percent return. This is called leverage. Compared to other investment options, real estate looks pretty darn good!

In addition to the increased property value, over time rents will also increase. And while expenses go up with inflation, mortgage payment (your biggest expense) won’t go up over time. The bottom line is, if you can afford to buy a $200,000 rental today, by the time junior heads to college in 10-15 years, you should have an asset capable of paying for much of his education.

If you have questions about real estate or property management, 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.



Mendocino County Building

Call in the Reinforcements for the County Building Department

In the recent fires, our community lost more than 300 homes plus various other structures in Redwood Valley and Potter Valley. In addition to the financial and emotional toll this will take on displaced families, it will also put a huge strain on a system that was already stretched beyond measure.

The Mendocino County Building Department must now add a few hundred homes to the huge pipeline already waiting for their attention. Before the fire, the County told us it would take 4-8 weeks to review plans and issue a permit, and that’s assuming the plans were picture perfect to begin with.

In some cases, it takes several months to get a permit. This is in addition to the time required to complete all the steps necessary to apply for the permit, including settling with the insurance company, making the decision about whether to rebuild or relocate, selecting an architect, having the architect draft plans, approving those plans, and choosing a contractor. Only after all of that do you submit plans for approval to the County.

To make matters worse, anyone who has tried to hire a local contractor in recent years is painfully aware that even before our fire—and the ones in Sonoma County, Lake County, Napa County, Santa Cruz County, and down in Orange County—we had a shortage of available contractors. Because of the fires in Lake County in the last two years and the hurricanes in the southern part of the U.S., most of the contractors who were willing to relocate for work have already done so. Given these facts, I’m sorry to say that I think the rebuilding process for many locals will be 2-3 years or longer.

I anticipate Mendocino College will respond by expanding construction-related classes, and that the County will respond by increasing staff in the Planning and Building Departments. Although, candidly, I don’t know where they’ll find the people. Most employers in Ukiah were already facing the challenge of finding new, competent employees.

If you’re a dependable worker willing to pay attention and learn a building trade, you’ll be in high demand in the coming months and years. Many entry-level people hired in the construction trades don’t last because employers cannot afford to keep people they cannot rely on.

The winter term at Mendocino College begins January 22, and their Sustainable Construction program offers classes in construction fundamentals, residential remodel and repair, introduction to residential electrical systems, and introduction to plumbing, among others. Whether you hire someone to rebuild your home or you rebuild it yourself, it’s nice to have some basic familiarity with construction practices.

I know this column has focused on the negative side of things, but even with all the pain and inconvenience, there may be some silver linings.

The average age of the housing stock will be newer, safer, and more energy efficient. And if you calculate replacement construction costs for 250 homes at 2,000 square feet apiece; at $250 per square foot, we’re looking at $125 million of new construction with money mostly coming from outside the local economy. Add that to another $35-40 million to be spent replacing personal property from socks and underwear to refrigerators and new cars, and we’ll definitely see an uptick in the local economy.

While there’s probably nothing that could have been done to prevent these fires, hopefully next time (and there’s always a next time) we will be slightly more prepared and will suffer less personal loss.

If you have questions about real estate or property management, 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 in Ukiah for more than 40 years.


Emergency Preparedness Hits Home

I’d like to start by saying how sorry I am for all those who lost their homes and worse in the recent fires. I know we have a long recovery ahead, but I’m confident our community will pull together and rebuild.

Given our recent disaster, I’ve been thinking about how important it is to plan for emergencies. The truth is, because the Redwood Valley fire was so fast and so ferocious, people often had no time to do anything but run. In other emergencies, however, people who have prepared ahead of time often fare better than those who don’t.

Of course, any preparation you can do to prevent a disaster from occurring is best. Those of us lucky enough to have homes still standing should make sure our properties are fire safe. Clear flammable brush at least 100 feet from your home and trim trees at least six feet off the ground. Make sure tree limbs do not hang over your roof and clear debris from your roof. If you have aboveground utilities in your neighborhood, keep an eye on electrical lines that go through trees—make sure there’s plenty of clearance. Locate woodpiles and other fuel sources at least 30 feet from all structures and maintain a 10-foot clearance area around them.

Most fires start small. If you are ready, you may be able to stop a fire from spreading. Be sure you know where the closest fire hydrant is, as well as your garden hoses and outdoor faucets. If you have a well providing at least two gallons per minute, consider filling a 2000-gallon storage tank so it’s ready if you need it.

Sadly, even with all this responsible preparation, your home can still go up in flames. Just ask the families who returned to find ash where their houses used to be.

For insurance purposes, you should create a photo or video log of all your possessions. While tedious, it’ll be time well spent if you need to ask an insurance company to pay a claim.

While disasters come in all shapes and sizes, preparations are similar. You’ll need food, water, and medications for you and your pets. You’ll need some clothes and, depending on the situation, you may need your own shelter for a while. You may also need fuel for your vehicle.

In my house we have backpacks ready to go, because they are easy to carry. In them we have flashlights (with batteries stored in plastic bags, not inside the flashlights where they will corrode). We have matches, a couple water bottles per person, non-perishable snacks, a change of clothes, a toothbrush and toothpaste, a utility knife and/or multi-tool, and a pair of boots or sturdy shoes. We also have our camping gear stored in one place so it would be easy to grab and throw in the car.

If you have time to pack more than just the essentials, consider the irreplaceables: photo albums, family heirlooms and keepsakes, important documents, and if you can, your computer. For more information about disaster preparedness, go to and There, you’ll find a wildfire safety toolkit, as well as many other resources.

One of the most important ways to reduce stress during a disaster is to be sure your loved ones are safe. Agree upon an out-of-town family member or friend who everyone can call to report in. Also, in case you cannot get in touch with one another, agree upon a location away from your home where you could all meet.

For locals impacted by the Redwood Valley fire, be sure to visit the Local Assistance Center at Mendocino College. It’s a multi-agency support center where you can register for assistance of all types. Also, I encourage everyone to attend the community fundraiser Saturday, November 4 at the Redwood Empire Fairgrounds. For details, visit

If you have questions about real estate or property management, 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 in Ukiah for more than 40 years.




Ukiah Valley

Winterizing Your Home


What a difference two weeks can make. When I wrote this column, our valley hadn’t burned, so let me begin by sending my condolences to all those who’ve lost so much.

For those of us in the fortunate position of still having a house that is standing, now is the time to prepare it for winter. These tips will keep the structure in good condition and its inhabitants safe and comfortable.

Smoke Detectors and Carbon Monoxide Alarms – Be sure to test your alarms each fall, and change the batteries before they wake you in the middle of the night, or worse, don’t wake you at all. Newer models have 10-year batteries that do not require changing, so you may opt to replace your alarms rather than just switching out the batteries this year.

Fire Extinguishers – If you have a fire extinguisher (and you should), make sure it is still pressurized (check that the little indicator points to green), and put it next to an exterior door (not in the garage behind several boxes).

Lint Trap – In your clothes dryer, you should remove the lint from the trap after every single load. Lint loves to catch fire. While you’re at it make sure the vent from the dryer to the outside is clear of lint as well.

Extension Cords – If you are foolish enough to have extension cords in traffic areas (like I do), consider moving them or make sure they are well secured. If the cords look damaged, replace them.

Railings, Walkways, and Steps – Secure railings and loose boards and fix tripping hazards.

Roof – A 30-year roof doesn’t mean you should ignore it for 30 years. Repair loose shingles and check flashing, eaves, and soffits. If your flashing needs new mastic (sealant), apply it.

Chimney – Before you fire up your fireplace, have a chimney sweep repair cracks and clean the flue.

Gutters, Downspouts and Drainage – Clear debris and be sure the splash block at the bottom of the gutter directs water away from your house. While you’re at it, confirm that the soil around your home directs water away from your house, too.

Outside Faucets – It only takes one freezing night to burst an uninsulated pipe. Adding insulation is cheap and easy, and it helps avoid a potentially expensive repair. This is also a good time to store hoses for the winter.

Windows and Doors – Add caulking and weather stripping as needed.

Redwood Decks – Re-stain decks and hammer any nails that need attention.

Shrubs and Trees – Cut back any shrubs that grow right next to the house. It’ll save the paint and prevent critters (two-legged and four-legged) from hiding where they shouldn’t. Trim trees up six-feet from the ground.

Leaks – After the first rain, walk around and check for signs of water, including inside closets and attics. While you’re in the attic, make sure you have ample insulation and that it’s in decent condition.

Tile, Tubs and Showers – Repair grout and caulking before problems get worse.

Refrigerator – Vacuum and clean the coils to keep your fridge from working harder than it needs to. Dust works as an insulator on the coils, making it harder to cool the air.

Heating/Air Conditioning – Replace the filter every few months, and if it’s been a few years since you last had the unit serviced, consider an inspection.

Water Heater – Flush your water heater and it will last longer. The particulates in water sink to the bottom of your tank, creating an insulation barrier and causing tanks to rust faster and work less efficiently.

It’s easy to put off routine maintenance, but if you take care of your house on a schedule, it typically saves time and money in the long run.

If you have questions about real estate or property management, 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 in Ukiah for more than 40 years.







Dumb Reasons People Don’t Buy the House They Want

When you decide you’re in the market to buy a house, you can: 1. Do this the smart way, and maximize the likelihood that you’ll end up with a house you like and can afford; or 2. Do this the dumb way, and rush headlong into a complicated process without the support or information you need to be successful.

It always amazes me how many people opt for #2.

Most people don’t buy and sell houses very often, so it’s understandable that they don’t know much about the process, but if you’re going to make one of the biggest purchases of your life, it seems as though a little homework and some help from experts would be a good idea, right?

Mistake #1: Not Selecting a Realtor

The first mistake some people make is to try to save money by opting to go without a Realtor. A good Realtor can save you time and money. They walk you through the process, preparing your for each step so you have as few setbacks and surprises as possible. (Is it self-serving for me to say this? Yes. But is it true, anyway? Yes.)

Mistake #2: Not Getting Qualified for a Loan Up Front

The second mistake people make is to start looking at houses before they know what they can afford. This wastes time and can be very disheartening. It’s far better to schedule an appointment with a loan broker to get “pre-qualified” or “pre-approved” for a loan. Pre-qualified consists of sitting down with your Realtor to figure out roughly how much income you have and how much debt you carry (car payments, insurance payments, tuition payments, etc.), as well as whether you have any savings for a down payment. Being pre-qualified is much better than not being pre-qualified, but it’s not as good as being pre-approved.

To become “pre-approved” is more involved, but it can dramatically increase the chances of getting the property you want. Pre-approval requires a thorough review of all your assets, liabilities, tax returns, W-2s, credit history, and any other relevant financial information to begin the process of applying for a loan. Basically, the only difference between being pre-approved and applying for a loan is that when you’re pre-approved, you haven’t found your property yet.

Getting pre-approved increases the chances of having your offer accepted, and it puts you ahead of your competition, if you have any.

Mistake #3: Choosing the Wrong Loan Broker

Working with an out-of-town or online loan broker can be a risky business. Real estate loans are complicated, so ask your Realtor for a referral so you know you have a loan broker you can trust, one who will walk you through the process—and look out for your interests.

Mistake #4: Putting in a Low-Ball Offer

In a seller’s market, sometimes it’s wise to put in a full-price offer. Sound crazy? It’s not. It’s fine to negotiate in a buyer’s market, but don’t lose your dream house because you thought you were supposed to play hardball.

Mistake #5: Messing Up Your Financing With a Big Purchase

Once you’re in escrow, don’t buy a car with $500-a-month lease payments (or make other, similarly expensive purchases), because big purchases can change whether you still qualify for your loan.

Mistake #6: Running Out of Cash

In addition to a down payment, you’ll need cash for several other expenses when you buy a house. You may have to pay a premium for private mortgage insurance, fund a lender’s escrow account, or pay upcoming property tax and insurance bills. Plan accordingly (your Realtor can help you with this).

Sometimes escrows fall through, but you can reduce the chances of a failed escrow by avoiding these unnecessary mistakes.

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 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.


Photograph showing the headquarters of the U.S. Mortgage company Fannie Mae in Washington, DC, on 14 July 2008. US mortgage giants Freddie Mac and Fannie Mae are set to be put under government control in an attempt to rescue the firms, media reports say on 07 September 2008. Top bosses would be removed under the US Treasury plans which could see the US's largest ever financial bail-out.  EPA/MATTHEW CAVANAUGH

Time to Buy, Thanks to a Loosening of Loan Restrictions

If you’ve been waiting for home prices to fall before you jump into the market, you might have a long wait. It still costs less to buy a house than it does to build one, and with recent changes to rules covering many conventional loan programs, now could be a great time to embark on the adventure that is home ownership.

The two biggest government-sponsored buyers of residential real estate loans are the Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, and the Federal Home Loan Mortgage Corporation (FHLMC), known as Freddie Mac. As of July, they’ve loosened restrictions, making it easier for people to get home loans.

First, they decided to eliminate derogatory credit remarks on some credit reports, which will improve some people’s credit scores and help them qualify for a larger loan amount, or perhaps a lower interest rate. Second, they increased the debt-to-income ratio from 45 to 50 percent. If your combined monthly income is $6,000, the 45 percent debt-to-income ratio would only allow you to put $2,700/month toward monthly debt. Now, with that same income, you can put $3,000/month toward debt. Debt includes things like your mortgage payment, any car payments, revolving credit card debt, and student loans. If your situation allows you to put the additional $300/month toward a mortgage payment, that enables you to spend almost $60,000 more on a house at today’s rates, potentially moving you from a two-bedroom, one-bath house with a single-car carport to a three-bedroom, two-bath house with a two-car garage.

This change is important because Fannie Mae and Freddie Mac own a huge percentage of mortgage loans, and influence even more. Banks underwrite to Fannie Mae and Freddie Mac standards so they can sell to them.

So, if you want to buy a house, you may be able to get a larger loan with the same income. I understand that there are benefits to renting over buying—like having a landlord who is responsible for the structural repair and upkeep of your home, but there are many great perks to owning your own home as well.

First, real estate is one of the best long-term investments you can make. Although home prices may rise and fall in the short term, the trend during the last 40 years is clearly upward. Ask your parents what they spent on their first house and you’ll see what I’m talking about.

Another benefit to owning over renting is that much of your new monthly housing cost is tax deductible. Interest rates remain near historic lows. In fact, in my 40 years in the real estate business, the lowest interest rate for a 30-year, fixed-rate mortgage I recall was 3 percent, and it was only that low for about a day. Today, rates range from about 4 to 4½ percent. Compare that to the peak interest rates in the 1980s, when they were above 14 percent, and you’ll understand why I’m so enthusiastic about today’s rates.

Finally, there are benefits to home ownership that you can’t put a price on. It feels empowering when you don’t need anyone’s permission to change the landscaping, replace the carpet, or paint your dining room lavender.

All in all, these changes from Fannie Mae and Freddie Mac will allow more buyers to qualify and at higher prices than they would have in the past. But remember, just because you can qualify for more, doesn’t mean you should. Review your personal finances and consider the fact that your mortgage payment won’t be your only house-related expense; you’ll need to budget for repairs and upkeep, too.

If your situation supports it, now could be the perfect time to venture into the world of home ownership.

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 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.