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Flipping the Script

NEWS1A local planning expert puts the art of house-flipping to work for the public good

In the fallout from the national mortgage crisis, “house flipping” has gained a stronghold in the cultural vernacular, inspiring a number of reality television series. It’s either a testament to American ingenuity or profiting from others’ misfortunes—or both—depending on one’s perspective.

But what if this concept—buying a home at low value, fixing it up and then selling it for a much higher price—could be used for the greater good?

That’s what longtime planning expert Michael Bethke and his co-workers are trying to promote through the creation of a program they’re calling For Sale, For Good.

Bethke wants to incentivize homeowners to leave their properties to nonprofit organizations through living trusts and other methods. He and his friends have already begun helping flip one San Lorenzo Valley house, with the proceeds planned to go to charity.

Some people have properties they’re holding onto or have inherited‚ that might not be code-compliant. He’s encouraging them fix up the property, sell it, and donate proceeds to a local nonprofit they feel passionately about. For Sale, For Good can help with major renovations, as the group is currently doing in the Valley.

“We want it to be all-inclusive for all kinds of public good,” Bethke says.

Sometimes that means getting the renovation process under way or connecting them with estate and planning attorneys.

“What our group does is we come in and we look at what needs to be done,” he explains. “We can get red-tagged properties and then sell them at a discount—with the understanding that a sizeable portion of the next proceeds will go to a charity of your choice.”

Raw Materials

Currently, For Sale, For Good is working on its first test case, and Bethke believes it’s just the start.

Back in October, Bethke was approached about a property in Felton known as Rusty’s Retreat. For years, the Rosebloom Avenue property was not just an eyesore, but also a constant fixture in the county court system. From suits filed by one-time tenants of the property to a barrage of civil actions filed by the county for code compliance issues, the property owned by Rusty Hartman was mired in litigation and red tags.

In the world of code enforcement, red tags are housing code violations placed on someone’s property title, often for unpermitted construction, that can make it difficult to get loan financing. That, of course, also makes it very hard to sell the house until the red tags have been removed and all the issues have been legalized. As part of the renovations, For Sale, For Good is working to fix those problems and get the red tags removed.

“The one true redemption that’s actually going to save his good name is that he wanted the proceeds of his property to go to programs for disadvantaged children,” says Bethke of Hartman.

The net proceeds of the sale will be going toward to a group of charities, including Jacob’s Heart, the Resource Center for Nonviolence and the Boys and Girls Club of San Lorenzo Valley and Scotts Valley, which doesn’t yet have a brick-and-mortar location.

Rusty’s Retreat had been embroiled in litigation for some 23 years, involving numerous judgments and injunctions that continued on even after Hartman’s death in August 2013. The property was chock-full of illegal outbuildings, piles of garbage and abandoned vehicles.

At one point, Hartman was cited for running an illegal auto wrecking yard at the property, and he had developed an ugly reputation for being something of a slumlord. After his death, Hartman’s trust was financially responsible for the resulting expenses pertaining to the lawsuit.

Bethke hopes the proceeds to charity from the sale will be $200,000, and Bethke points out there is the added bonus of it being a tax write-off. Bethke says he’s working for free, and the renovation costs for contractors and construction will come out to about $65,000 out of the sale.

Legalize It

Bethke and friends aren’t the only ones working to remove red tags from people’s property titles.

The county’s Planning Department is working to implement a new construction legalization program—the first in 20 years—called the Legalization Assistance Permit Program, or LAPP. The program would focus not on illegal houses, but issues like renovations and conversions done without property permitting or inspections.

County officials hope the program can encourage and incentivize property owners to make their property improvements legal, and to help them obtain permits and inspections with the goal of ensuring everything is brought up to current code and standards. A major component of the plan is to help applicants find affordable ways of doing this. A public outreach campaign is planned, including public workshops slated to begin later this month, according to planning director Kathy Previsch.

Bethke believes promoting the idea of For Sale, For Good to the public could entice owners of blighted properties to work to improve them, rather than just allowing them to lie fallow—the same goes for foreclosed properties now owned by the bank, and that, he says, could have a positive impact for whole neighborhoods.

Bailey Properties, a real estate company, is helping them prepare the Hartman property for staging for open houses, and Bethke says he and his partners are also speaking with banks and county officials about a number of foreclosed properties in the San Lorenzo Valley to see if they could be used in the same way.

Safety Zones

Red tags are a personal issue for Bethke, and he is particularly affected by the years he spent in East Palo Alto in the 1990s, when he witnessed the danger of extreme violations firsthand.

The case that left the biggest mark on him was when a drug dealer set fire to a home that wasn’t code-compliant. There were people living inside a garage that had been illegally converted when it happened, and a total of nine people—including five children—died in the fire, unable to get out of the home’s single door.

At the time, it was considered “one of America’s single worst multi-fatality residential structure fires,” according to the report by the Menlo Park Fire Protection District. Rescue efforts were hampered by a burning car near the front door, by the protective iron bars on the windows and three seemingly aggressive dogs at the rear of the building.

Bethke, then Palo Alto’s planning director, had to go into the torched home afterward. The harrowing details still haunt him. He recalls seeing scratch marks on the wall of the converted garage that were believed to have been made by the children trying to escape.

“That’s why I feel so strongly,” Bethke says.


PHOTO: For Sale, For Good is working to renovate a house in Felton and send the proceeds to charity. KEANA PARKER

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