Statesman Journal from Salem, Oregon • Page 7

0.34 DOW 24.04 I NASDAQ 4.62 SECTION Business editor: Don Currie, (503) 399-6677, dcurrieStatesmanJournal.com Tuesday, September 27, 2005 Do your research before buying a business Greensoaim sues.warnini Home prices rise as sales sear Exotic mortgages hold risks, the Fed chairman cautions ou have found a business for sale that you want to buy What questions do you need to ask? What answers must you have? Let's look at some. First, what is your experience and background in running a small business and in WASHINGTON U.S. existing-home sales soared in August to the second-highest pace on record, and prices took the biggest annual jump in 26 years, the National Association of Realtors said Monday. The Realtors said sales of existing condos, single-family homes and co-ops rose 2 percent in August from July to a seasonally adjusted annual rate of 7.29 million. That is 7.8 percent higher than August 2004 and second only to June's 7.35 million rate.

The median price for an existing home was $220,000, up 15.8 percent from the $190,000 of a year ago and the fastest annual appreciation since July 1979. i In the Salem area, home sales are up 33 percent from a year ago, according to the Willamette Valley Multiple Listing Service. The average home prices is $193,227, up 11.8 percent from August 2004. this particular industry? If you es at prices they otherwise could not afford. He mentioned as examples interest-only mortgages, 40-year mort' gages and so-called "option ARMS" adjustable-rate mortgages that permit borrowers to decide how much to pay, how long the loan term should be and when they can convert between a fixed rate and a variable rate.

"These products could be cause for some concern both because they expose borrowers to more interest-rate and house-price risk than the standard 30-year, fixed-rate mortgage and because they are seen as vehicles that enable marginally qualified, highly leveraged borrowers to purchase homes at inflated prices," Greenspan said. Dugan, reinforcing Green span's message to the banking industry, expressed concern that "looser underwriting standards and the more widespread penetration of riskier mortgage products have raised questions about how these loans will fare in the event of a rise in interest rates or a softening in house prices." The regulatory agencies urged lenders in May to tighten their standards for home-equity loans. The agencies do not write the standards but issued the suggestion as "guidance," warning that some borrowers may have trouble paying back their loans. Many economists, including those at Freddie Mac, predict that mortgage rates eventually will rise and the housing market will cool as the Fed keeps bumping its rate higher. have never owned a business before, it is By Nell Henderson The Washington Post WASHINGTON Federal, Reserve Board Chairman Alan Greenspan warned that the growing use of riskier new mortgages could result in significant losses for lenders and borrowers if the market cools.

i And some cooling is likely, Greenspan suggested in remarks delivered via satellite to the American Bankers Association convention in Palm Desert, repeating his view that "home prices seem to have risen to unsustainable helpful to look for one in your particular field of expertise. And, generally, a bank would never consider loaning you. levels" in some markets. Greenspan's concerns were echoed by another bank regulator, U.S. Comptroller of the Currency John Dugan, who also addressed the bankers' convention.

One driver of price appreciation, Greenspan said, is the popularity of new types of mortgage products that enable many borrowers to buy hous money for a business in which you have no experience. Next, look at the business itself. Why is it for sale? More people may be If it is as great as the seller claims it to be, why sell? Why not hire a manager, keep it in the family or even I- JlMMIE lease it out? The reasons rarely are simple. Thesale requires more research than just the seller's WlLKINS Small-Business Adviser i 1 -ijdkj I Oregon firm wants coffee outlets from Canada to Mexico The Associated Press EUGENE Dutch the Oregon coffee company founded by Grants Pass siblings Travis and Dane Boersma, is expanding. Dutch pronounced Dutch BROZE, has more than 70 outlets, a combination of jmiiu.

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Lccal outlets 515 SE Jefferson Dallas 3175 Market St. NE, Salem 4915 River Road Keizer company-owned and franchise operations. The Boers-mas, whose family heritage is Dutch, are wrapping up phase two of a five-phase expansion i plan this year, work explanation. There will be personal and professional reasons. Your job is to understand and to make your risk decisions accordingly.

What are you actually buying? How does the price tag spread across the assets of the business? What is the condition of the equipment? What is the true replacement value of the furniture, fixtures and equipment? What would you need to pay for similar assets on the used market? What assets are not staying with the business? Are any of these departing assets critical to success of the business? Make certain that you are not (unintentionally) buying the business debt. At times, the owner will sell accounts receivables along with the accounts payables. How old are these receivables? Are any actual bad debts that you can never collect? How old are the accounts payables? Has the business not paid its suppliers and therefore is on cash on delivery? Check the amounts and ages of the accounts receivables and payables even it you are not "buying" them. Look at the financial statements and summaries for trends in income. Does this business have the ability to keep its current market share and remain competitive? What will keep the customer base coming back? Can they be easily lured away by your competitors? How many existing customers will the business lose with a change in ownership? How much additional money must be invested in the business to make the changes you think are necessary? This business may be running profitably now and yet still not be able to sustain the debt load (bank loan) if you have to borrow money to purchase and run the business.

The last three to five years of financial statements and tax returns (ask to see both) can be an indicator of whether the business has been well run. If you are told that the financial statements don't really reflect the true value of the business that, in fact, much of the profit is "hidden" walk away. Although it may be true, you cannot borrow on hidden assets. This is the beginning of the process, but at least you have some good questions and answers to start. ing to fill in gaps in a franchise network between Seattle and San Francisco.

Phase three is set to begin in 2006, and the goal is to stretch the Dutch empire from Canada KOBBl R. BLAIR I Statesman Journal Craig Rockwell buys coffee from Gabe Wagner on Monday at the drive-through of Dutch Bros, on Market Street NE in Salem. See Dutch 2B Boeing division strike's end may please both sides Deal highlights Machinists will vote Thursday on a new three-year contract Leaders of Machinists District Lodge 751 in Seattle say the deal is "a victory for working families across the country" that addresses the issues most important to its members, who average 49 years of age and make about $59,000 a year. The company says the total cost is similar to its previous offer, and analysts say the plan lets the company quickly regain the momentum it needs to continue its heated battle with rival Airbus SAS. "Call it a draw," said analyst J.B.

Groh with D.A. Davidson. Investors appeared to welcome the tentative agreement, sending Boeing shares up $1.47, or 2.3 per- cent, to $64.67 in trading Monday new three-year contract offer that, if approved, would allow Boeing to swiftly reopen its commercial-airplane-assembly facilities in Gresham, the Puget Sound area and Wichita, Kan. The proposal gives workers a nearly 17 percent boost in pension payouts and guarantees retiree medical benefits for new hires. It also assures that health-care premiums remain the same as in the current contract.

But it also calls for no general wage increase, instead opting for lump-sum bonuses totaling about $11,000 across three years. And it takes away a previously offered provision that would have given workers pay incentives based on corporate financial performance. Highlights of Boeing's proposed three-year contract for about 18,400 members of the Machinists union who assemble commercial airplanes: WAGES: No general wage increase, but workers would i receive a ratification bonus equivalent to 8 percent of wages or about $5,000 on average in the first year, plus $3,000 payouts in the second and third years of the contract PENSION: Workers would receive pension payouts of $70 per month for every year worked, up from $60 now. HEALTH CARE: Health-insurance premiums would be unchanged from the current contract. OTHER CHANGES: Boeing backed away from a proposal to eliminate retiree medical benefits for new hires but dropped a plan to make incentive payments based on corporate financial targets.

Boeing agreed to give workers in Wichita, the same deal as those in Gresham and the Puget Sound area after previously offering Wichita workers less. Bv Allison Linn The Associated Press SEATTLE A likely end to the strike at Boeing's commercial-airplanes division could be one of those rare labor-management deals in which both sides feel like winners. "Not to say, 'Hurray, we all but both sides can claim victory," said analyst Richard Aboulafia with the Teal Group. About 18,400 Machinists are scheduled to vote Thursday on a Jimmie Wilkins is the director of the Chemeke- ta Small Business Development Center. The Small Business Adviser column is produced by the center and appears each Tuesday.

Questions can be faxed to (503) 581-601 7, e-mailed to SBDChichemeketa.edu or phoned into (503)399-5088. See Boeing, 3B I Mgu, f7 FT T73 WALL STREET After a roller-coaster day, stocks clqse higher despite rising oil prices Page 4B THE TICKER Kulongoski signs bills that are meant to boost technology research at universities Page 33 SMALL BUSINESS Rhonda Abrams suggests that business owners keep a notebook of their ideas Page 2B.