Saturday, September 29, 2007

Mixed Use

I wrote a couple of days ago about buying multi unit properties, but I didn't mention mixed use properties. Mixed use buildings are those that have both commercial and residential space. It is generally a storefront on street level with apartments above. This is the ideal scenario for someone who runs a business, wants to own their space and live close by. You really can't get any closer than upstairs! A mixed use building could also be a great investment, as commercial spaces sometimes have higher rent and longer leases. Also, there would be no rent control for the commercial space.

Because there is commercial space involved, your financing will be different. There will only be one loan for the entire building and it will be considered a commercial loan. With this type of loan there is a minimum down payment of 30% required.

A major benefit that comes with a mixed use building is with condo conversion. With a two unit residential building, if both units are owner occupied you must fulfill a one year occupancy period before you can bypass the condo lottery and apply for your condo conversion. With a two unit mixed use building (one commercial and one residential) you do not have to fulfill that one year occupancy requirement. You can apply for a condo conversion right away. Once the building goes through the process there will be a commercial condo and a residential condo.

The same benefit applies to a three unit building. The two residential units, provided they are both owner occupied, can fulfill their one year occupancy requirement (a residential building with three units would otherwise have a three year occupancy requirement) and then bypass the lottery to start the condo conversion process.

There are currently 16 mixed used buildings available all throughout San Francisco, ranging in price from $779,000 to $2,800,000. If you are considering a live/work scenario, looking for investments, or want to take advantage of the early condo conversion for a jump in value, this way be your way to go.

Friday, September 28, 2007

Condo Vs. Single Family Home

Whether to purchase a house or a condo seems to be a pretty hot topic of conversation these days. I am getting a lot of questions about the advantages/disadvantages of each scenario. The most common question is which is a better investment. Of course it all comes down to money. In general I would say that the single family home is a stronger investment. As I have reported in past postings, the median home price in San Francisco has appreciated over the past few months while condo prices have gone down over that same period of time. That is a general note for all of San Francisco. When you are looking at the strength of your investment, I think it is important to look specifically at the property you are considering. Location is probably most important, because the one thing you cannot change about a property is its location. Condition of the property is next, and with a condo that includes taking a look at the association. Is it run efficiently, and are there healthy reserves for building maintenance?

When making the decision about what type of property you would like to buy, you need to answer a couple of questions that may help guide you in the right direction. The first question is, "how much do you want to spend?" Figure out what a comfortable monthly payment is. That amount along with the size of your down payment will determine your purchase price. Let's say you've done that and you've come up with a purchase price of $800,000.

The next question is, "where do I want to live?" If you want to live in Noe Valley or anywhere north of there, you are pretty much condo bound with $800,000. You can buy a house in Bernal Heights, Sunset, Mission Terrace, Exelsior, Ingleside, and other neighborhoods on the southern side of the city for that same amount. In San Francisco, the neighborhood you choose will determine the type of property you can afford.

You also need to ask yourself, "what is most important to me?" Take a look at your lifestyle and think about what you want in a home. If your vision is children and pets playing in a backyard, then a single family home is probably the way to go. On the flip side, if you travel a lot for work or can't be bothered with gardening or maintenance of a building, a condo is definitely for you.

My advice is that instead of looking at the property for answers, take a look at your lifestyle and what you need. Think about why you need what you need as well; there may be a few different solutions. Make a wish list and don't be afraid to ask for everything you just might get it!

Thursday, September 27, 2007

Potrero Hill

It is funny that Potrero Hill is today's subject. I had my hair cut this evening by a great new stylist, new for me that is, and while she was snipping away we were talking about real estate. She asked if there was anything available in Potrero Hill. I told her that there had been next to nothing there lately, but that there were a few nice properties just hitting the market. That tends to be the case in really great neighborhoods; once you get in you never want to leave.

What makes Potrero Hill so great? The first thing that comes to mind is the weather. This is no doubt one of the sunniest spots in the city, and the really great part about it is that because you are on the hill you can look across to Twin Peaks as it gets covered in fog. That brings me to great thing number two...VIEWS! Potrero Hill offers some of the greatest views in the city; views of the Bay, downtown views, views of Twin Peaks, and sometimes you can find them all from one property. Another less talked about perk of living in Potrero Hill is that it is one of the safest spots to be in an earthquake as it sits on bedrock.

18th Street and 20th Street are the main commercial drags on the hill. There you will find restaurants, cafes, shops, a grocery store, and much more. Because of the nice weather many of the restaurants have outdoor seating which creates a wonderful atmosphere on warm evenings. Also, at the bottom of the north side of the hill (which tends to be the most desirable side) there is a new Whole Foods grocery store, the Metronome Ballroom (where I have taught dance for the past seven years or so), and more restaurants and cafes.

So how much does it cost to live in this wonderful place? The median home price over the summer was $830,000. An example of something selling right now at that price is this 3 bedroom, 2 bath split level condominium located on a quiet cul-de-sac block of Kansas Street. It is listed at $849,000 and is 1700 square feet.

One small drawback on the hill is that there is no BART or muni trains. The only public transportation here are buses, but you are only one quick bus ride away to BART or downtown.

As far as schools go, there is a private preschool, two public elementary schools, one private elementary, and one public high school. Starr King Elementary located on Carolina Street (one of the public schools) has San Francisco's first Mandarin immersion program.

Wednesday, September 26, 2007

Weekly Sales Report

Welcome to another Wednesday sales report. There was not quite as much activity this week than there was in weeks prior. New inventory is back down to regular numbers; sales were down a bit as well. There were 12 escrows opened this week as opposed to 18 the week before. There were 14 closed escrows. Of those, exactly half sold over asking. That statistic has remained fairly steady over the past weeks. Six sold under asking and the remaining one sold at asking.

With the surge of new listings that we saw at the beginning of the month and lower sales numbers this week, what does that tell us? There is a large number of listings still sitting on the market. The average days on the market, although it varies from neighborhood to neighborhood, is much longer than the two weeks we were seeing for so long. In general, the average is closer to 30 days. Don't be turned off by a property because it has been on the market for a month. Instead by happy you weren't forced to rush in and overbid.

Another trend I have been noticing lately is that sellers are deciding not to sell if they don't get the price they need. They are opting to hold onto the property; either live there themselves or rent it out. Homeowners who bought in the past year or two have not yet built up enough equity to make a profit on the sale of their home. In the past, San Francisco properties appreciated so rapidly that you could make money in a sale a year or even less after purchase. That has not been the case in the past two years; many homeowners are forced to hold onto their property longer than they intended. A property like this may sit on the market for a month or two while the seller tries to get their price. The buyers will see it sitting on the market and assume they can negotiate a lower price, but the seller will not negotiate. My point is, time on the market doesn't necessarily mean you can get the seller to lower the price.

People are always asking if it is a good time to buy. Nobody can tell you what lies ahead. Nobody knows whether interest rates will rise or fall, or whether home values will rise or fall. What I can tell you is that the longer you hold on to your property, the safer your investment.

Tuesday, September 25, 2007

New Lending Restrictions?

What I have been hearing in the past few months since the fall of the sub prime market is that restrictions on home loans have tightened. I had heard that your credit score must now be above 720 and you must have a minimum of 10% down. I had also heard that the lenders had cut some of their loan programs such as those that did not require you to document your income or your assets; they would simply take your word for it. Not any more, they said. It was proving to be too risky as the default and foreclosure numbers were multiplying before their eyes. It seems, however, that although some of the restrictions had tightened initially, things are already starting to loosen up.

A very nice man walked into my open house this past weekend and mentioned he was looking for a house that had a lot of bedrooms so that he could rent out some of the rooms to help pay his mortgage. It turns out I had helped somebody do this same thing last year so I am familiar with the game plan. My past client bought a house in the Excelsior. He lives in the in-law unit and rents out the main part of the house leaving him responsible with only a small portion of the mortgage. He purchased the home with 100% financing, and although he did have some cash reserves, he did not have to pay a penny out of pocket for the house or closing costs until the first mortgage payment was due. The seller paid the closing costs. This is rare in San Francisco, so don't get any ideas!

The man in my open house seems to be in the same situation. He also has some cash reserves but would need help coming up with the mortgage on a monthly basis. He mentioned that he does not have enough for a 10% down payment but could possibly put 5% down. I told him that he would need to get his financing in order first, and that it might be difficult for him based on the newer, tighter credit restrictions.

Boy was I wrong! He called Countrywide straight away. Countrywide is a national bank known to do sub prime lending; they have really suffered in the credit crunch. I think it is 12,000 employees who lost their jobs? Anyway, the very nice loan consultant he spoke with there mentioned that they not only have loan programs with 5% down payments, but they still do 100% financing. I was very surprised. He mentioned that some programs had been cut initially, such as the stated income/stated asset program, but they recently had started to come back.

It seems some banks are still eager to lend money to just about anyone. Hopefully there has been some lesson in all this, for the banks I mean. The lessons for the borrower are clear. Be conservative. Be sure you understand the terms of your loan. Read the fine print.

Monday, September 24, 2007

Multi Unit Buildings

Whether you are looking for extra income to help you with your mortgage or you are thinking of buying property with friends or family, a multi unit building may be the way to go. The most popular (and sometimes most profitable) way to do this is for two parties to purchase a two unit building together. Generally it is two friends who come together to become business partners; owning property together is a business relationship. The goal in this scenario is to convert the units into condominiums. The order of events is:

1. Purchase a two unit building as Tenancy In Commons where both units will be owner occupied
2. Fulfill the one year owner occupancy requirement to start the condo conversion process
3. File papers with the city to convert
4. Have building, plumbing, and electrical inspections and complete all suggested work
5. Have a survey done of the property
6. Prove occupancy

Once all of the work is done and has been signed off on by the city, you become the proud owner of a condominium. This process can take anywhere from 12 to 24 months. Converting tenancy in commons (TICs) into condominiums is desirable as it will raise the property value 10-15%. Also instead of owning a percent interest in the entire building with the other party, you become the sole owner of your unit.

If the building is three to six units, the occupancy requirement you must fulfill in order to convert is three years and then you must enter the condo conversion lottery. Winning the lottery can take another five or six years, so you may not be able to convert for eight or nine years after purchase. In this scenario, you cannot buy with the intent to convert. If it happens, it is a bonus for you.

There are some restrictions on converting based on the eviction history of the building, and these laws change periodically so be sure to check the eviction history of the building and the current laws.

Friday, September 21, 2007

Credit Myths

Your credit score has always been an important factor when financing a home. With the fall of the sub prime market it is that much more important as there are fewer lending institutions willing to take the risk of loaning money out to those with lower credit scores. Unfortunately, it seems that the majority does not understand how the credit score works. It seems to go against intuition. I thought I would clear a few things up.

Step one is to check your credit in advance. You can get a copy of your credit report once a year from each of the three credit reporting agencies. It would be a good idea to make this a yearly habit; it does not hurt your score to check your credit in this way and it is free. You may find something on there that you forgot about. There may also be something that doesn't belong there or wasn't reported correctly. These mistakes can take time to clear up; don't wait until the last minute. Make sure you check the report from all three agencies; one may have something the other two do not have.

Don't close any of your accounts! You can certainly pay down your debt, but even once they are paid off, do not close the accounts. You can cut the credit card up if you feel tempted to start using it, but closing the account; erases the credit history and reduces the amount of total credit you have available. The credit score looks at the difference between your available credit and what you are using.

If you have an excess of credit and you feel like you need to close something, make sure it is the newest account as you don't want to erase your credit history. Keep the accounts you have had the longest.

Shopping for a mortgage or a car loan will not hurt your credit. When you are going to make a large purchase, it is wise to shop around and get the best loan possible. Doing this will not hurt your credit score. The credit score will see multiple inquiries of the same type within a short period of time as one inquiry, and your score will only get dinged once.

My last piece of advice is to always seek professional advice before you do anything to try to improve your score. Call a mortgage broker; they would be happy to look at your credit report with you and lead you in the right direction.

If you are already pre-approved for a loan and in the process of buying, don't make any big purchases! Even though your lender has already checked your credit in order to approve you, they will check it once more right before closing. If there is a change the bank could pull out of the loan. I heard a story of an excited couple who went out and charged a house full of furniture for their new house before their escrow had closed. Needless to say, they were stuck with a lot of furniture and nowhere to put it!

Thursday, September 20, 2007

Mission Bay

The Mission Bay is one of San Francisco newest neighborhoods. In 1998 the San Francisco Board of Supervisors established that this area between the bay and highway 280 would be a redevelopment area. The area is 303 acres in total, and the redevelopment plan includes everything a San Francisco neighborhoods needs. When all is said and done there will be 6,000 housing units, 25% of which will be affordable to moderate and low income families. A UCSF research campus is being built on 43 acres of land. The plan also allows for commercial and retail space, a public school, a police and fire station, a library, the light rail, and 49 acres of open public space including parks along the bay. Many of you have already been watching this neighborhood develop over the years, and some of you may already be living there.

The San Francisco Multiple Listing Service shows that there are presently 50 properties available in the Mission Bay neighborhood, most of which are at only in these five developments:

The Beacon is a full block bounded by King, Townsend, 3rd, and 4th Streets. It was built in 2004 and includes condominiums of various sizes, a gym, swimming pool, Safeway, Borders Books, and other commercial spaces. There are currently 25 units on the market ranging in price from the low $500,000s to $1.5 Million. These will be resale as opposed to new construction sales.

Arterra is designed be San Francisco's first LEED certified residential high rise building. This building is still under construction but they are accepting reservations and deposits. They are currently reserved at over 50% before even completing a model unit. These condos range in price from $600K to $900K and are located at 300 Berry.

Park Terrace is Mission Bay's newest waterfront community overlooking Mission Creek. These units start in the low $600,000s and go up to just over $1 Million.

235 Berry is a new development by Signature Properties. Construction has been completed and they are about 80% sold. Those that are currently listed range in price from the mid $800,000s to 1.2 Million. They have water and city views.

Radiance is a luxurious complex due for completion in the spring of 2008. It is surrounded by parks and has both water and city views. They are almost 50% sold now; prices range from the mid $600,000s all the way to $2.3 Million! The building includes a landscaped rooftop courtyard with a fire pit, a fitness center, a club lounge with a gourmet kitchen, separate storage rooms, and parking. If you are looking for modern and luxurious, there is definitely something here for you.
Construction for the Mission Bay redevelopment plan is expected to take place over the next 20 to 30 years. It will create an estimated 31,000 permanent jobs in addition to the construction jobs and will cost approximately $4 billion.

Wednesday, September 19, 2007

Weekly Sales Report

The theme of this morning's office meeting was "Giving Back". Coldwell Banker sees the importance of giving back to the community, and what better way for a company that sells homes than to support the wonderful organization that builds and donates homes to families in need. Every year Coldwell Banker raises money and donates time to Habitat for Humanity; in 2006 they raised over $368,000 and donated over 3,500 volunteer hours to 11 home construction projects throughout Northern California. Yes, I got in there and swung a hammer! I highly recommend it. Not only does it give you a new found respect for construction workers, but you learn a lot about building a home. It's amazing to see it all come together. This year's goal is to raise $500,000; our office held our annual raffle this morning. The final numbers aren't in yet but I will let you know if and when we reach our goal!


There were 18 open escrows this week. Of those 18, 7 were single offers, 10 were multiple offers, and 1 was a preemptive offer. A preemptive offer is an offer that was presented to the seller before their published offer date. A preemptive offer typically needs to be well over the asking price for the seller consider it.

The property that received the most offers this week was a "heavy cosmetic fixer" on 19th Avenue in the Richmond District. It is a large Edwardian single family home on a great block. It does require quite a bit of upgrading, but it has many original details intact. It was listed at $799,000 and received 22 offers. We will know the sold price when escrow closes.

There were 19 Closed Escrows this week. 5 sold at asking price, 9 sold over asking, and 5 sold under asking. That keeps things pretty steady from last week with about 50% of all properties selling over asking price and more than half receiving multiple offers. Steady as she goes!

Tuesday, September 18, 2007

The Federal Reserve's Big Announcement

They did it! We were all hoping they would! The Federal Reserve lowered the Fed Funds Rate by a half of a percent. The Fed Funds Rate is a short term rate that banks charge each other. This is important to consumers because it affects the cost of things like credit cards, home equity lines, and auto loans. It is also important because it has a direct effect on the Prime Rate, which is the rate banks charge their best customer (usually corporations). Bank of America lowered their Prime Rate just minutes after the Fed made their announement; a few others including Wells Fargo followed. This half percentage reduction is the first of its kind since 2003, and the prime rate hadn't budget since mid 2006.

The first to be affected will be those with home equity lines, as they are directly linked to the prime rate. Credit cards in some cases are also linked to the prime rate, but they will take longer to adjust. Those who have adjustable rate mortgages and are soon facing a reset may have a bit of relief as well.

We have yet to see what effect this short term rate cut will have on new mortgages. The long term mortgage rate is determined by the market and inflation. The best thing you can do is shop around. Don't take the first quote you are given; visit two or three different lending institutions before you commit.

Don't be fooled by teaser rates! The interest rate advertised in the paper is not necessarily the rate you will get, or the rate you want if the terms of the loan are undesirable. The banks will do whatever they can to get you in the door; many walked through the door because they saw an advertisement for 1.25% home loans. That is how we ended up in this mess. That person is now facing foreclosure as they owe more than they did when they purchased and their loan has just reset to an amount they cannot afford.

It has been said that one or two percent of the population will be directly affected by this change, which is substantial. The Fed is scheduled to meet again at the end of October and then again in December. Of course we do not know for certain that there will be another cut. My father says that if you talk to six different economists you will get nine different predictions. What we really need in this market is trust...from the buyers. People just need to keep buying houses. If everyone was scared off by fear of the economy crashing, well, then it would.

I toured properties all over the city today. There is a lot out there; something for everyone. Talk to your lender and see what you qualify for. The time to buy is in a slow market; if you wait for the market to improve you have already lost your window.

Monday, September 17, 2007

Purchasing Tenant Occupied Property

What do you look for in a home...three bedrooms, two baths, big kitchen, nice outdoor space, lots of light, and parking. Did I forget anything? Oh yes, of course, that the property is VACANT! Assuming you are looking for a home for yourself as opposed to investment property, you most likely want to move in right away. You are probably not looking to get into the landlord business which is what you have to do when purchasing a tenant occupied property. The whole process of transferring tenant occupied property is unpleasant for everyone involved. It is important for all parties to inform themselves of their rights and understand their role in the transaction.


Your property is tenant occupied and you have decided to put it on the market. The first thing you must know is that this will affect the purchase price and the length of time on the market. Vacant properties sell quicker for a higher price. Having said that, you cannot evict tenants in order to sell; that is not one of the fourteen just causes for eviction in San Francisco. If you have a friendly relationship with your tenant, have a talk with them before you list your home. They may decide that they don't want to be around while the house is on the market as it is a huge inconvenience for them. They may decide on their own to start looking for a new home immediately. That, of course, would be your best case scenario. Always keep the communication lines open with your tenants; if they do decide to stay, you must let them know in advance of any and all showings. Keep them in the loop of how the sale is going and what the time line looks like. It will be unpleasant for them. Try to understand their situation and be as courteous as possible.


Purchasing a home with tenants means you have become a landlord. Any and all leases and security deposits will be handed over to you in the sale. As I mentioned before, you may have gotten a break on the price of the home because it was tenant occupied, but remember that you may need that cash for tenant relocation fees and attorney's fees. Assuming you purchased this property to be your primary residence, you will have to evict the tenants. In this case you would use the Owner Move In (OMI) eviction which is one of the just causes to evict in San Francisco. You must give 60 days notice and pay relocation fees. Click the link to see a full list of restrictions and qualifications. Before you purchase, be sure to look into the tenant situation. Are they cooperative? Are they paying market rent? If so, it will be easier for them to find a replacement property. Lastly, if you do have to evict the tenants, be sure to use a landlord/tenant attorney and follow the procedure exactly.


Let me apologize to you if you are a tenant whose building is being sold. This will not be a fun process for you. I met a woman in my open house this past weekend whose building had just been sold. Luckily for her, she was not evicted. The new owner bought the property as an investment, but she said that the year leading up to the sale was a nightmare. There were constant threats of eviction. When the property finally hit the market she had to deal with open houses. Make sure you know your rights. In San Francisco you have many.

The key for all parties involved is communication. It also helps to be sensitive to the other person's situation, on both sides. Renters are being uprooted and most likely will not be able to find a comparable home as the rental market has gone up lately. On the flip side, buyers have scraped and saved to purchase property in this expensive city and just want to live in their new home. This scenario is not ideal for anyone but is a reality for many. Some tenants, like the woman I met this weekend, may be fortunate enough to use this situation as a jump start to buy their own home. It's time to start paying your own mortgage! Give me a call!

Saturday, September 15, 2007

Foreclosures in SF

Everybody is talking about the recent fall of the sub prime market. What everyone really wants to know is how their local market will be affected; and, more importantly, how they will personally be affected. I don't want to trivialize what is happening in the financial world, but as the president of San Francisco/Peninsula Coldwell Banker points out, "99.2% of mortgages are not in foreclosure". It really depends on how you look at the numbers.

If I told you that according to Data Quick the number of homes that actually foreclosed in San Francisco went up 444% from 2006 to 2007, you would be shocked. If I told you the actual numbers were 9 homes foreclosing in 2006 compared to 49 foreclosing in 2007, that might put things into perspective. The loans least likely to foreclose in the Bay Area are in San Francisco and Marin counties. Also in the same study, the number of defaults went up 102.4% from 2006 to 2007, from 127 homes to 257 homes. Less than 20% of those defaulting on their loans are ending in foreclosure.

So what is the recipe for disaster? High cost loans and high loan to value ratios is much of it. Lenders were making it possible for people with low credit scores and little to no money down to finance a home. They could get a loan, but not a good a loan. Low credit scores bring interest rates up as do low down payments. The upside to all of this is that many families were able to realize the American Dream, and a majority of them have not defaulted on their loans. Only 10 to 15% of all loans are sub prime, and only 10 to 15% of those have defaulted.

In San Francisco, the neighborhoods with the highest concentration of sub prime loans are in the southeastern corner of the city: Bayview, Visitacion Valley, Excelsior, Outer Mission, Crocker Amazon, and Ocean View. If you see foreclosures or short sales, it will most likely be in one of those areas.

The prices of San Francisco homes in general have not been negatively affected as we continue to see the median price go up. If you are a buyer in today's market, you are most affected by the tightening of lending restrictions. One of our clients was pre-approved for $1.2 Million one day, and it dropped to $900,000 the next. They are now happily in a home they purchased for just under $900,000 thanks to Anja and her stellar negotiating skills, and it is probably for the best for them not to have stretched themselves too thin.

The number of foreclosures will continue to rise through the end of the year, and prices may be slightly affected negatively, especially in those neighborhoods I mentioned, but San Francisco's market as a whole is still going strong.

There are 850 open houses scheduled for tomorrow; one of them is just right for you! See you out there!

Friday, September 14, 2007

Writing An Offer

For those of you who are out there looking to buy your first home, it is important you realize that there is a lot more to it than just shopping. Once you have been pre-approved and have discussed the details of what you are looking for with your Realtor, it is only a matter of time before you find the right place. When you see a house you are seriously considering, you will first request to see a disclosure package for that house. That package contains anything and everything (and more) about the property including the seller's disclosures, any and all inspections that have been done, a preliminary title report, a building report which includes permit history, etc. I will probably cover each disclosure separately in the future. Once you have reviewed the package and decided you want to move forward, it is time to write the offer. In San Francisco, the offer is a seven page contract where you will outline the amount of the purchase as well as all of the terms. There are many things you can do to make an offer more attractive to the seller besides simply raising the purchase price:

Initial Deposit: Ideally this will be 3% of the purchase price. This is also known as Good Faith Money, letting the seller know you are invested in the sale.
Down Payment: The larger the better for your loan and for the seller's confindence in the sale.
Contingency Periods: I will outline the specific contingencies, but I wanted to give you an overview first. If your offer is accepted, you will have a contingency period that has been agreed to in the contract to fully approve of the property before you move on with the sale. In this time, you will do your inspections, appraisal, and secure your loan. You will also be looking over any disclosures that you did not receive before the offer was made. In the offer, you will specify the length of time, in calendar days, that you will need for each contingency. Once the contingency period is up, assuming you are satisfied with your findings, you will remove those contingencies in writing thus fully committing yourself to the sale. The seller will always prefer shorter contingency periods because the chances of the buyer backing out of the sale once contingencies are removed is much smaller.
Financing Contingency: Although you want to make this as short as possible, you also want to make sure you have enough time to complete the task at hand. This is a very important reason to do your homework before offer time. If you have already been working with your lender and they have already fully approved of you as a borrower, all that is left for them is to approve of is the property you are purchasing. Check with your lender and see how much time they need, and that is how long you will make your contingency period.
Appraisal Contingency: Again, your lender can tell you how quickly they can get this done as they will be ordering it. You will pay, but it will be added on to your closing costs at the end of the escrow period.
Inpection Contingency: Give yourself enough time to schedule the inspections and then receive the written reports a couple of days later. Anja and I will often schedule the inspections before we know whether or not the offer will be accepted. That way we can get into the home in the next day or two and the buyer is confindently able to remove them a couple of days later. Remember, after the first inspection you may find something else that needs to be looked into, so you want time for a second inspection if that should happen. Like I said, you want enough time to satisfy yourself, but time is of the essence.
Escrow Period: An average escrow period in San Francisco is 30 days. Again, shorter makes it more attractive to the seller. If your lender says that your loan can be fully approved in 14 days, you can try a 21 day close. Remember at closing you will need to come in with all of your cash for down payment and closing costs. You may also need to consider a rental lease, and when it would be best to give notice to your landlord. It is a good idea to give yourself a week or so of overlap. That way you can take your time with the move and possibly have a thing or two done to the new house before you move in, like flooring or painting.

Those are a few things you will need to consider when making an offer. If you are in a competitive situation and you have the same purchase price as another buyer, your terms may very well be what sets you apart. Be cautious but competitive. Decide how much you want the house, and that will help you set your limits on what you are willing to give.

Thursday, September 13, 2007

The Mission District

The second neighborhood in our District 9 series that we will be exploring is the Mission District. The Mission, named for the Mission Dolores which was the first church in San Francisco built in the late seventeen hundreds, is now known for its colorful and vibrant mix of Latin Culture, artists, and most recently young professionals. Although it began as a working class neighborhood for Irish, German, and Italian immigrants, since mid century there has been a huge settlement of Mexican, Central, and South American families which has created the Mission District as we know it today. It is also a popular neighborhood with the city's artist community because of its past affordability, but prices went up with the dot com boom and young professionals came into the picture. This wonderful mix of people has an equally diverse collection of businesses to support their needs. There are many commercial areas in the neighborhood: 24th St, Mission St, Valencia, and 16th St just to name a few. There are too many types of businesses to name ranging everywhere from taquerias where you can have a taco for two dollars to a local designer's shop where you can buy a beautifully made pair of pants for two hundred dollars.


The average price of a home in the Mission is $814,548 according to This is just a tiny step above the average price in Bernal. The difference is that the majority of the housing is condominiums or TICs. The average price has actually gone down in the second quarter, as condo prices in general in San Francisco went down a little over 5% from the first quarter to the second quarter according to the National Association of Realtors. There are currently 57 available residential listings in the Mission; only 4 are single family homes, 38 are condos, TICs and lofts, and 15 are multi unit buildings. The prices presently range from a $210,000 studio TIC on Woodward Street to a $3 Million dollar, 8200 square foot, amazing live/work space on 15th Street. What will the average price get you? How about this for a great value; a 3 bedroom, 2 bath, 1870 square foot, two level condominium at Bryant and 23rd for $829,000! The price has just been reduced by $20,000, AND the seller is offering a credit of $5,000 towards the buyer's closing costs. Now that's something you don't see all the time in San Francisco. What's wrong with it you ask? Just because something has been sitting on the market longer than usual doesn't necessarily mean there is something wrong with the property. More often than not it is just overpriced. I think with this property in particular, Bryant is not the coziest of streets which may discourage some buyers, and as they say, "This property is not a drive by" which means that the building's exterior may not be as wonderful as what you will find inside.

Other Amenities

Another very important feature of the Mission is it's two BART stations on 24th St and 16th Street. This makes the neighborhood very accessible from all over the Bay Area. There are also quite a few bus lines that run through the neighborhood. Schools are no exception to the diversity of the neighborhood including public, private, Catholic, and charter schools. Parks are scattered throughout, as are community gardens, and we can't forget the beautiful and colorful murals for which the Mission is known.

Wednesday, September 12, 2007

Weekly Sales Report

It's Wednesday again and as promised I will conduct our mini market study based on Coldwell Banker's sales meeting. As I mentioned in the last report, the size of our office is large enough and covers all of San Francisco, thus giving us a clear idea of what is happening in the market as a whole. Today I walked away from the meeting with one word going through my mind...INVENTORY! Aside from Tuesday Tours, where all of the properties in San Francisco are opened up for the agents to see, Coldwell Banker has another tour on Wednesdays after the meeting for just our agents to see our office's new inventory. On average, this tour probably consist of about eight to ten properties. Today there were seventeen properties on tour. That means one office in San Francisco brought seventeen new listings onto the market this week alone. I took a look at the tour for the Lombard Street office. They usually have a smaller tour than our average, but today they came in strong with thirteen new listings! These numbers may not sound huge to you, but consider all of the real estate offices in San Francisco and the numbers multiply quickly.

Buyers Market

Did you ever wonder why the market in San Francisco is so competitive? It really boils down to a very simple supply and demand concept. In the last few years, demand has outweighed supply, thus keeping prices going up and creating a seller's market. If there is only one house for sale in the neighborhood, but twenty people want that house in that neighborhood, a bidding war begins and the seller is in complete control. On the other hand, if ten homes hit the market at the same time, the demand for each home is lessened exponentially thus giving the buyers the upper hand. Even recently as the market has softened, we were seeing a fairly even playing field for buyers and sellers. If we keep seeing large numbers of properties hit the market each week, we will certainly be on the road to a buyers market. What that means is that the buyer has more room to negotiate on price and terms rather than having to overbid and purchase a home as is.


Opened Escrows: 16 (sales now pending)
Closed Escrows: 31 (solds; 16 over asking price, 7 under, 8 sold at asking price)

Clearly the majority sold over asking which tells us we are not quite in a Buyer's Market yet, but inventory is growing rapidly so if you are thinking of buying...get out there, the scales just may tip in your favor! Give us a call!

Tuesday, September 11, 2007

Oh, We're Just Looking

Much of my time is spent talking to home buyers I meet at open houses on the weekend. We talk about many things; families, schools, the city, neighborhoods, but out of everything, the most common thing I hear people say is, "Oh, we're just looking". While there is nothing wrong with "just looking", and "looking" is a necessary part of "finding", our jobs as Realtors is to make sure you are ready to buy when that time comes. That time is, of course, when you walk through the doors of a house and it suddenly feels like you are home. It can happen suddenly, unexpectedly, and it can catch you off guard. Yes, folks, I am talking about falling in love! Cheesy, perhaps, but true. Much of buying a home is about financial planning, crunching numbers, making sure you are making a sound investment, but another huge part of it is emotional. If you are in "just looking" mode, and you are not properly prepared to buy, you might not be ready when you do find the right house. There are a couple of important preparation steps you can take so that when you have finally found what you've been looking for, you can make an offer without hesitation.

Getting Pre-Approved

The first thing you need to do is figure out how much you can afford. You do this in two ways: you decide how much you want to spend each month, and the bank decides how much money they want you to borrow. These two amounts don't always match up but the important thing is that you do not stretch yourself beyond your comfort zone. You may actually qualify to borrow more than you want to spend. When figuring out comfortable monthly payments, be sure to include property taxes (1.14% of purchase price in San Francisco) and hazard insurance. Part of the process of being approved by a lender is filing out a loan application. They will ask you about your income, debt, and assets, and they will run your credit. Credit is important; your credit score will dictate what interest rate you qualify for. The bank will run the numbers and come up with an amount they feel comfortable lending. They will also provide you with something called a "Good Faith Estimate" which is an itemized estimation of your closing costs at the amount you have been pre-approved for. They will also give you a pre-approval letter stating that they have reviewed your finances and will lend you a certain amount of money provided the property you are purchasing is worth the amount you have offered. In San Francisco, you cannot make an offer without this letter. Your offer would not be taken seriously.

Building Your Team

Another very important part of your preparation is finding a Realtor. Just like your loan consultant, you want to work with a Realtor you feel comfortable with and trust. Your Realtor can help you understand what goes into making an offer before it's time to sit down and do it. There is a mountain of paperwork involved in this transaction; Anja and I like to sit down with our buyers early on and take them through things little by little so that you are not overwhelmed when it comes time to submit the offer. If you are actually thinking of buying, make sure you are ready to find the right house. Get your team in place. Your Realtor and your loan consultant are your best friends in this process.

Monday, September 10, 2007

Selling For The Highest Possible Price!

The decision to sell your home is obviously a huge one and not one to be taken lightly. For whatever the reason: a transfer from work, expanding the family, downsizing, or simply wanting a change, preparing your home for the market is always the same. The easiest way to sell a home is when it is vacant. Of course circumstances won't always allow this to happen, but whenever possible you should move out first. Statistics show that a house that is presented well, meaning vacant and staged, sells higher and faster than one that is not. I always think of the old phrase "It takes money to make money" when I am coaching a seller. This is not the time to cut corners as the return can be huge. If you have moved out, there may be sprucing up left to do and it would be a great idea to have a consultation with a stager to help you see what you can do inexpensively to brighten the place up for the sale. Some examples would be new carpet/refinished floors, a new coat of paint, new fixtures, new hardware on cabinets; these are all minor changes that can make a space look that much more polished and attractive to buyers. Once you have emptied out and cleaned up, it is time to bring the staging in, and that is better left to a professional! They may even do a thing or two to your garden. Anja and I sold a house in Bernal Heights last year that had a very small almost unusable garden. The sellers installed a small deck themselves and Anja had her team come in and prune the trees, plant some flowers and install sod. It was done in a weekend and we were delighted to find out that it was one of people's favorite features of the house!If you can't move out for the sale, the process is still very similar. The first step is a deep spring cleaning. You're going to be moving out anyway once the property is sold, so it is time to purge. Get rid of everything you don't want; box up the things you don't need right then and put them in storage. Clean off all surfaces; you don't really want the house to look lived in. Think more of a hotel. Minimal furnishings and decor; NO CLUTTER! I know, that's the hardest part. You can still consult with a stager; they can work with your things and they can still give you tips on small upgrades you can make.

If you are thinking of selling in the future and are looking for ways to improve on your property, the biggest bang for your buck is adding a bathroom. If you have a two story home but only have a bathroom on one floor, installing one on the other floor could give you up to 20% more on a sales price. Making the master room into a master suite is another way of adding that second bathroom. To keep the cost down, try to stay close to the plumbing lines and see if there is a large closet that can be converted into a bathroom.

Whether it is just replacing hardware and painting or adding a whole new bathroom, you will get your money back in a higher sales price and a shorter marketing period. Long gone are the days of anything and everything selling in less than a week for 20% over asking! We have heard it over and over again in the past year or so; a house that is presented well and priced correctly will sell at the highest possible price.

Saturday, September 8, 2007

Grand Tour

It's time for Sunday Opens! The count of open homes in San Francisco has more than doubled from last week. Many homes that were on the market didn't have open houses because of the Labor Day weekend, and other sellers like to wait to put their homes on the market until after the holiday weekend. September and October tend to be strong months in the San Francisco real estate market, so we are all anxious to see how it will go this year amidst the credit crisis. The consensus I am hearing from the buyers who are visiting my open houses is that they feel it is a good time to buy; they realize that prices haven't dropped in most cases but have leveled and aren't shooting up, at least at the moment. The buyers are out there, and they are looking for deals. I used to say that there are no deals in San Francisco but these days you may be able to find one. Especially if you aren't looking where everybody else is looking, or for the same thing everybody else is looking for.

Anja and I offer something to our clients called the Grand Tour. You tell us what your price range is, and we will take you through the city and show you, in each neighborhood, what you can get for your money. You may find neighborhoods you didn't know existed, or rediscover places you'd been but hadn't yet considered. $700,000 may barely get you a one bedroom condo in a place like Noe Valley, but in Mission Terrace you can get a two bedroom single family home with a garage and a garden! And it's close to Bart! I'm not saying everybody should up and move to Mission Terrace; maybe the one bedroom in Noe is better for you, but it's good to know your options. That way when you make your final decision you know you've made an informed one. Also, when you first set out to look you may think you know what you want, but you may end up with something completely different; sometimes it all comes down to the feeling you get when you walk in the door. Anja had some clients last year who were looking for a fixer in a cozy neighborhood and ended up with a brand new condo on Geary! You just never know.

Friday, September 7, 2007

Ellis Act

The Ellis Act is a state law passed in 1985 that was intended to allow building owners to retire from the landlord business. It is now most often used as a way to "change the use" of a building. It is a lawful way of evicting all of the tenants, and in most cases here in San Francisco those units are then converted into Tenancy In Commons and sold separately as percentage ownership in the entire building. There are many requirements that must be met such as:

1. All tenants must be evicted; not only those who pay the lowest rent.
2. Tenants will receive relocation fees of $4500 per person at a maximum of $13,500 per unit. Elderly and disabled tenants receive an extra $3000 each.
3. Landlords are to give 120 days notice; one year notice for elderly and disabled.
4. The Ellis Act is recorded onto the deed and stays with the building even when ownership is transferred.

In order to prevent landlords from using the Ellis Act as a tool to get higher rents by evicting tenants with low rents and replacing them with tenants paying higher rents, there are rental restrictions placed on a building that has been Ellis Acted. Those restrictions are:

1. No unit in the building can be rented out for the first two years.
2. For the first five years, any unit that is rented out must be rented at the same rate as when the Ellis Act was put in place plus any allowed increases that would have otherwise been allowed under rent control.
3. For ten years after the Ellis Act, the tenant who was evicted has the first right of return should any of the units go back on the rental market. They will pay the same rent that they paid at the time of eviction, plus any allowable increases, provided they have registered for the unit.

Most of the Ellis Acts in San Francisco are for the sale of a building, either as a whole or as separate units. In the case of a sale, the seller would be affected as it lowers the value of the building; some say up to 20%. The buyer is affected because of the rental restrictions. As I said, the Ellis Act stays with the building and so do the restrictions. Aside from the rental restrictions I have mentioned, there is another big one. If you are purchasing a Tenancy in Common and are hoping to one day convert the unit into a condominium, if there was an elderly or disabled person displaced during the Ellis Act you cannot condo convert if the eviction happened after November 16, 2004. My advice when dealing with an Ellis Act is this: If you are considering Ellis Acting a building, call a landlord/tenant attorney. If you are considering purchasing an Ellis Acted building, think about whether or not you might want to rent that unit out in the next ten years. Also, you can look into the eviction and find out if there were any protected tenants (elderly and disabled) displaced. If not, and you just want to owner occupy the property, proceed and enjoy your new home.

Thursday, September 6, 2007

Bernal Heights

For the month of September, we are exploring neighborhoods in San Francisco's District 9. The first in the series will be Bernal Heights, otherwise referred to as 9A, which is located on the hill at the southern border of the Inner Mission. The majority of homes in Bernal are single family homes, and it is a very popular neighborhood for young families. It is also an excellent place for dogs as the very top of the hill, Bernal Hill Park, is also a dog run where you can let your pups run freely off leash. The average purchase price here is just under $800,000 and the homes currently on the market range from a small artist's cottage listed at $499K to a luxurious new home designed by architect Craig Steely listed at $2,295,000. The wide range of property types is a direct indication of the diversity this neighborhood has to offer. So what can you get for the average price? Here's one example: 57 Bessie Street is a three bedroom one bathroom home just a block of way from Precita Park, two cafes, an Italian restaraunt, and a market. The home is listed for $849,000 and has been on the market for almost one month now. A month on the market is on the longer side; in this case I believe the problem is that there is no garden, but the house itself has been upgraded nicely and it does come with parking. Just a tip; when a home seems to be sitting on the market longer than the average time, it may be a good time to negotiate a lower price.

Cortland Avenue is the main commercial drag in Bernal Heights and you can find pretty much everything you need there. There are grocery stores, a video store, cafes, restaurants, public library, community center, shops, yoga and Pilate's studios, and much much more. Aside from Precita Park there is also Holly Park which has all new play structures and a nice view of the city. Public transportation in Bernal is limited to buses, but there are a number of them that run throughout the neighborhood. There are three public elementary schools, one Catholic, and one small but popular Montessori preschool. Bernal Heights is a small community in a big city; you get the best of both worlds.

Wednesday, September 5, 2007

What Can I Afford?

Everyone would agree that the most important factor in purchasing a home is money. Whether you are buying purely for investment or because you become emotionally attached to a home and are thinking more of quality of life, it all comes down to money. We are currently in a state of crisis because over the past few years lenders have been passing out loans like candy, and unfortunately not everyone could actually afford the loan they were given. The first broker I worked with used to say, "All you have to do to get a home loan these days is fog a mirror!" It looks like that is changing now, but only because an estimated 2 million adjustable rate mortgages are scheduled to reset this year. Of course not all of these will default, but many borrowers with poor credit who had already pushed their income to debt ratio to the limit will certainly be over their heads. Who's to blame for this problem? Some say the consumer and other say the lender. Of course, both hold some responsibility. The buyer needs to be sure they understand the terms of the loan. READ THE FINE PRINT! You need a loan consultant you trust! I received a phone call a few months ago from a man who needed help trying to figure out if he should sell his home or buy his ex wife out. I did some research into the title and found that he owed more than he did at the time of purchase. This was news to him, and although they weren't in a default position as they could afford to make the payments, he could not afford to sell the home as he owed more than the home would have been worth on the open market. He had a negative amortized loan and had been making the minimum payment each month without realizing that this caused the loan balance to increase over time. He didn't know; wasn't told. Should he have read the documents more carefully? Sure, but I believe that is called predatory lending. English also happened to be his second language.

So how much can you afford? As I mentioned before, banks have tightened requirements. You need to have good credit and a minimum of 10% down, but most importantly you need to decide how much you can comfortably afford to pay each month. Many times people qualify for more than they actually want to pay. Once you have a comfortable monthly payment amount in mind remember that amount needs to include not only the loan payment but also property tax (1.14% in San Francisco) and home owner's insurance (home association dues if you are purchasing a condominium). One other cost to consider when you are going to purchase a home is closing costs. On average, closing costs are 1.5% to 3% of the purchase price. They can be higher if you are paying points (prepaid interest) to lower the interest rate on your loan. Closing costs for the buyer include lender's fees, escrow fees, title insurance, and inspection costs. Closing costs are not taken out of the down payment; they are a separate cost. This is probably the largest purchase you will ever make (aside from your second or third home of course). Take your time. Surround yourself with a good team , don't over extend yourself, relax, and enjoy your new home.

Tuesday, September 4, 2007

San Francisco's District 9

Part of searching for a home is searching for the right neighborhood, so part of what we will be doing with this blog is featuring a different San Francisco District each month. We will explore the district's subdistricts and neighborhoods and what they all have to offer. We will look at everything from home prices to restaraunts, shops, schools, parks, transportation, etc. Because we are in September, the ninth month of the year, I thought we would begin our district series with District 9 which also happens to be where I live. There are currently 272 active residential listings in District 9. The leader in that group with the largest number of available properties is the South of Market neighborhood as you will see in the breakdown:

Bernal Heights: 31 active listings
Inner Mission: 55 active listings
Mission Bay: 40 active listings
Potrero Hill: 35 active listings
South of Market area: 73 active listings
South Beach: 37 active listings
Central Waterfront: 3 active listings

Stay tuned as we continue to explore District 9 neighborhood by neighborhood throughout the month of September.

Monday, September 3, 2007

Get Busy To Buy In 2007

As we come out of what was a beautiful Labor Day weekend, I feel like it is time to gear up for the rest of the year. If your plan for this year includes buying a home, then I suggest it's time to get the ball rolling. You have probably already been doing some research on the Internet; studies show that is where close to 80% of all home buyers begin their search. The Internet is, of course, amazing. It has everything you need; you can look at available homes in your area, you can get information about neighborhoods, schools, crime statistics in the neighborhood, you can even find where the nearest sex offender lives. Once you've gotten your fill of info via the Internet, you will probably hit a few open houses. You may narrow it down to the neighborhoods you love or only hit those in your price range, or you might just wander in as you pass one on your way to the cafe. Either way, you will begin running into real estate agents, and believe it or not, that's a good thing. When you are in the market to buy, a buyer's agent is one of your best friends. The other best friend is a good mortgage broker. The first part of your search for a home should actually be a search for the right team. Once you have your team in place it is really time to begin the search.

Once your loan consultant helps you determine what you can afford, your real estate agent will help you narrow your search down to the right neighborhoods and the right homes. You may search for a month or two before finding the right home. You may or may not get the first home you make an offer on, and once you do get an offer accepted you will have an escrow time of approximately one month. That brings us to November if all goes well! Like I said, if you see yourself in a new home in 2007, I'll see you next weekend at an open house!

Sunday, September 2, 2007

Sunday Opens

What a beautiful weekend we are having! I hope everybody is out and about on this fine Sunday afternoon. It's open house day! Throughout all of San Francisco the count for open homes today is:

109 Single Family Homes
186 Condos
21 2-4 Unit Buildings

That should keep you busy between 2:00pm and 4:00pm! A little piece of advice I have for your open house tour is to go with a list of homes that fits your wants, needs, and budget. It's easy to get distracted out there with all of those signs leading you every which way, but at the end of the day you might realize that you've only seen homes that are way over your budget and although they were probably all lovely homes, you haven't gotten any further in your search. The chronicle has a very complete open home list in their Sunday paper, and if you are working with an agent they can give you a small list of homes each week that fit your profile.

Another interesting statistic for now is the amount of price reductions we have had in the past two weeks. There were 306 price reductions in San Francisco alone; 188 single family homes, 106 condominiums, and 18 multi unit buildings have lowered their prices in the past two weeks. Some of the reductions are nominal; possibly only a gesture, but others are significant price reductions of 10% and sometimes even more. This is a great time for buyers to negotiate, not only on price but also on terms such as contingency time and escrow time. In a market like this buyers finally have some pull and should take advantage of this. I do, however, want to point out one very important distinction: selling prices being lowered does not necessarily mean that home values are depreciating. It probably means that the seller's expectations were too high to begin with and the sales price was inflated. It is only once the house is sold that we can compare that sold price with it's comparables to look at market trends.