Peter Pays Paul

Michael Stoler of the New York Sun has written an article about our industry. (HT: The Dirt Lawyer)

Mr. Stoler accurately states that for new or inexperienced developers the sources of capital are few and far between. He writes:

“The answer for a growing number of these borrowers is alternative, or specialty, lenders that provide financing at higher rates and with stricter conditions.”

Still Lending

While the credit crunch has decreased the supply of funds, specialty lenders are still willing to lend on the right deal. Specialty lenders can be hard money lenders or hedge funds.

In order to obtain a loan from these specialty lenders, borrowers should have lots of cash and a solid project grounded in reality, not the past boom market. Mezzanine lenders and joint venture funds help borrowers with limited cash acquire the necessary equity to gain financing.

Borrowers should expect a rate in the double digits and higher fees to pay for the speed that specialty lenders provide.

If you need specialty financing, please feel free to call me at (925) 280-5388.

The Contra Costa Times reports today that as many as 20,000 homeowners are eligible for property tax relief. This is due to a decrease in property values from the peak of the real estate market in 2005. Most of the homeowners eligible for the discount are located in the cities of Concord, Antioch, San Ramon, and Brentwood.

The article reports that those eligible for the tax reduction should expect a card in the mail by this weekend notifying them of the smaller tax bill.

According to Contra Costa Association of REALTORS® there are currently 1,241 active REALTORS® in Walnut Creek, CA. According to the City of Walnut Creek’s website the current population of Walnut Creek, CA is estimated at 66,111 people. That means that there is one REALTOR® for every 55 people in Walnut Creek. This number does not take into account the number of DRE licensed individuals that are not part of the Contra Costa Association of REALTORS®.

With so many options to choose from, how do you decide who is best? It is easy to be overwhelmed with this daunting decision or to be influenced by the slick-talking salesman who just wants your money.

Connie De Groot an agent in Southern California released a press report of the “Top Ten Things to Look for in a REALTOR®”. Inspired by her list, here are the things to focus on when choosing a real estate agent to represent you.

• Look for a full time real estate agent. A full time agent is more likely to know markets because they focus on real estate and not something else. Most people would not go to a podiatrist for brain surgery. They would go to a neurosurgeon. Why would you go to a baker/mechanic/pilot/etc. for real estate?

  For most people their home is their biggest asset. Entrusting this transaction to a part time agent can be a risk.

• Look for a full service real estate agent. Using a discount broker is fine, if you want to save money. But you must understand that you get what you pay for. A full service agent should handle the transaction so that you can get on with your life. A full service agent will schedule and attend any inspections, arrange for repair work, and coordinate the transaction freeing you from these time consuming activities.
• Find a trustworthy agent. A great agent is going to look after your bottom line first and their own second. This is why they earn their commission. They protect your interests and represent you.
  Many agents will tell you what you want to hear to get the listing or the deal, and then the truth will come out later. Find an agent that is bold enough to tell you the truth, even if you don’t like the truth. An agent that is misleading to another person, may be misleading or deceptive to you. Listen to their speech to others for clues to their honesty.
• Find an agent that is a specialist. Jeff Brown talks about the downfalls of a one-stop shop in real estate investment. The same dangers are lurking in other areas of real estate. A jack-of-all-trades is often not “excellent” at any of them.
• Look for an agent that is technologically inclined. It is important that your home be placed online and properly advertised to attract buyers. Almost 61% of home buyers walked through a home they viewed on the internet according to the National Association of REALTORS®. Many agents will buy a “website” for their listing. This does not mean that the website will be found by anyone on the internet.
• Look for an agent with a team. Finding a reputable handyman, plumber, or other contractor can be daunting. Many agents have worked with these professions before and are able to refer you to quality workers. BEWARE: ask how the agent knows the contractor and if they have used them before. The referral may be a relative or friend.

These are the important things to look for in an agent. Other characteristics like enthusiasm and drive are important, but can be misleading.

Choose someone you like and can work with. If you can’t stand an agent, find one that you can work with. You should feel comfortable talking with your agent. During your transaction you will be communicating with your real estate agent consistently and speaking with them should not be dreaded.

This current market is a great market to buy investment property or a first-time home.

Why? In many markets, including the East Bay Area of California, the market has returned to a more normal status. The insanity of the seller’s market during 2004 and 2005 has shifted to a buyer’s market. In some areas of the country there has been a price correction for homes.

The buyer’s market is a simple product of supply and demand. Currently, there are more homes on the market than buyers. This creates a surplus of homes. In Concord, California there was roughly a 12 month supply of single-family homes available, according to my calculations.

Two things can resolve the current surplus of homes. 1) More home buyers enter the real estate market. This is the more unlikely solution. Mortgage lenders have tightened their qualifications for loans. Eligible home buyers must have better credit scores and a stable financial situation to qualify for loans. Also, interest rates have increased in the past few weeks, decreasing the amount home buyers qualify to purchase. The combination of these two factors make this solution less likely than the other.

2) Home owners decrease their home prices. Sellers will need to make their home more attractive to the available home buyers in the market. One of the ways will be a reduction in listing price. This can be evidenced through buyer incentives (credits toward closing costs) or by lowering the asking price. Home sellers are forced to compete on price to entice buyers into the home.

Home sellers cannot immediately increase the number of home buyers as a result of their actions. However, a home owner can lower the price of their home to increase the home’s attractiveness to the available buyers. If you can buy more house for less money, why wouldn’t you?

This makes it a great market to buy a home for investment or personal use. I say that with a caveat: The holding period should be greater than two (2) years. I make this caveat because I think that we are near the bottom of the current real estate market correction. I am not sure that we have reached the absolute bottom yet. A two year holding period allows for the real estate market to reach bottom and begin to rise again.

My advice to buyers and investors: Call your agent today and get in the market! This in my opinion is a great time to buy for the long haul.

My advice to sellers: Do not expect to set the terms of the deal. You are no longer in the driver’s seat of the real estate market and need to make concessions to home buyers.

The Shell Ridge Open Space is the largest open space within the bounds of Walnut Creek. Shell Ridge is a great place to ride your bike, go for a hike, or take your dog for a walk.

Just being in nature is one of the best parts of the Shell Ridge Open Space. Walking along the trails it is not uncommon to see squirrels, reptiles, and other wild creatures. In the midst of the Open Space is an extreme sense of calm from experiencing the beauty around you.

Here is a map of the Shell Ridge Open Space.

Below are some pictures taken from the Shell Ridge Open Space.

Here is the current market data for the Meadow Creek, Indian Valley, and Walnut Heights areas of Walnut Creek as of today June 6, 2007. I have included only single family homes in this search.

Only one home sold in the last 30 days in this area. There are 6 homes currently in escrow in Walnut Heights, Meadow Creek, and Indian Valley.

The second CERT training class was on Wednesday. This time my lovely wife attended with me. The classes are held at the Contra Costa County Fire Protection District Training Center on Treat Boulevard in Concord, CA.

This week we studied the fire safety. We had the opportunity to extinguish a small fire in a fire pan with the oversight of trained professionals. For some students it was the first time they had discharged a fire extinguisher. For all of us students it was good practice.

Some interesting fire extinguisher facts:

• A 5 pound fire extinguisher will only last about 20 seconds.
• Only try to extinguish a fire that is smaller than you are.
• Extinguishers do lose their effectiveness over time. The powder within the chamber settles and does not disperse when needed. This can be avoided by gently inverting the extinguisher every 6 months.
• It is wise to have two (2) extinguishers in your home in case of emergency.

We watched two demonstration videos displaying the speed that a fire can start and consume a room. The first video showed the speed that a dry Christmas tree could ignite an entire room. In less than 5 seconds the entire tree is engulfed in flames. In just 40 seconds the entire room is filled with smoke and flames. The bottom line is to keep live trees watered on a regular basis.

The second video shows the speed that a sofa in a living room can ignite the whole living room. After only 4 minutes the entire living room is filled with smoke and flames. It is amazing how fast a fire can spread.

These videos should instill in all of us the need for smoke detectors. The Santa Clara County Fire Department recommends, at minimum, placing one smoke detector in each bedroom, outside each sleeping area, and on every level of your home. For best protection a smoke detector should be placed in each living area, save the kitchen or bathroom.

You should also change the batteries in your smoke detector every six months. An easy system to remember to change the batteries is to change them at the same time the clock for Daylight Saving Time is changed.

Proper safety equipment can be an added selling point for your home. A $10 investment can help sell your home and can save your life or the life of someone you love.

Reading the Contra Costa Times does have its rewards. Last week I read about a six week training program sponsored by the City of Walnut Creek and the Contra Costa County Fire Protection District called C.E.R.T. or Community Emergency Response Team.

C.E.R.T. is a program that has been put in place all across the country. Hurricane Katrina has raised awareness to the need for community members to be prepared to assist others in a disaster.

According to the Citizen Corps’ website:

The Community Emergency Response Team (CERT) Program educates people about disaster preparedness for hazards that may impact their area and trains them in basic disaster response skills, such as fire safety, light search and rescue, team organization, and disaster medical operations. Using the training learned in the classroom and during exercises, CERT members can assist others in their neighborhood or workplace following an event when professional responders are not immediately available to help. CERT members also are encouraged to support emergency response agencies by taking a more active role in emergency preparedness projects in their community.

This past Wednesday night the class began. It was very interesting and I am glad to be taking part in it. I am one of about 40 people currently enrolled in the program. It was interesting to see people from all walks of life. Senior citizens from Rossmoor were there as well as other young professionals like myself.

Our first class covered the topics of terrorism and a general outline of C.E.R.T. Training. Mike Marciano from the Office of Emergency Services spoke about terrorism. The information he provided was very informative and not alarming. Thankfully we do not yet live in a country where terrorism is a daily threat.

Mike Forster from the Contra Costa County Fire Protection District outlined the general overview of CERT Training. He also provided us with an extensive list of the necessary items for a disaster kit. California doesn’t experience hurricanes and tornadoes are unlikely. The most likely natural disaster to afflict Walnut Creek, Concord, or Pleasant Hill is an earthquake. Having a disaster kit prepared in advance increases the likelihood of surviving such an event. He recommends having a large kit in your home, a smaller kit in your car, and a third kit at your workplace.

This class is highly informative and is a great way to get involved in the community. It is also a great way to prepare your family for a disaster. Next week we will be learning to extinguish small fires.

The City of Walnut Creek is sponsoring two more C.E.R.T. training sessions this year. The first will begin July 24 and the second will begin September 19. For more information visit the City of Walnut Creek’s website. To enroll in the class contact Community Relations Manager Gayle Vassar at (925) 943-5899.

One of the most confusing things for people I know is my description of where I live. I tell most people that we live off of Walnut Boulevard. Most of the replies I receive say, “I know where that is. Doesn’t that connect with Bancroft Avenue?” To which I have to respond, “No.” So you don’t really know where it is. (Map of Area)

When I was growing up, I never even realized that there was a Walnut Avenue. Why? Because living in the Wild Oak area of Walnut Creek limited our exposure to most things east of Homestead on Ygnacio Valley Road. From the house here we could just cruise down the hill to Nordstrom’s and Safeway. We could take a different route and end up on Newell Avenue by Caspar’s Hotdogs. We had little or no need to head east on Ygnacio Valley Road.

The Meadow Creek, Wild Oak, and Walnut Heights areas are very desirable because of their close proximity to almost everything. It takes less than 10 minutes to reach downtown Walnut Creek by car on a bad day. The freeway is less than 10 minutes away. They are near to Las Lomas High School, Walnut Heights Elementary and Walnut Creek Intermediate School. Also within walking distance is Howe Homestead Park and the Shell Ridge Open Space.

Most of the homes were built in the 1950’s and 60’s. The homes have an individual character and some have been tastefully remodeled. Most of the lots are large enough that homes can be expanded. Many homes in the area also have pools. Much of the area consists of gently rolling hills and gullies. Some homes even have a view of Mt. Diablo.

Once off the main roads, many of the cul-de-sacs are quiet and great for kids to play with neighbors. Recently many younger families with children have moved into the area. This is the ideal place for a young family, who wants their kids to attend quality schools and live in a great neighborhood.

Walnut Creek is a great place to live, raise a family, and work. It is also a wonderful place to live if you work in San Francisco, San Jose, or Oakland. And the neighborhoods of Meadow Creek, Walnut Heights, and Wild Oak are ideal locations in Walnut Creek to buy a home.

Now I know that journalists are paid to sell newspapers, but sometimes they make absolutely no sense to me at all.

Case in point: The business section of today’s Contra Costa Times and the business section from yesterday. (more…)