It's Not Just the Bottom Feeders Anymore!

In our weekly sales meeting this morning, one of the agents stood up and asked if we could have a discussion on how people are pricing their listings these days. She mentioned that two of her listings had received offers, but in both cases the offers were $100,000 below asking. The agents presenting the offers told her that "$100,000 under is our new mantra!" She wanted to hear from the group if we felt the same way. The discussion was interesting, and verified what Anja and I have already been telling our clients. Some important points were:

• If someone really needs to sell, they should determine the market value and price their home 10-20% below that in order to get activity at the listing price. It doesn't mean that you shouldn't sell at this time; only that you should sell at today's value.
• When making an offer, calculate in a future price decrease, and negotiate that into the purchase price.
• The value is what the market brings; it is the definition of an open market. If two or more parties are telling you that value is significantly under the list price, then that indeed is what the property is worth.

We are in a declining market, and it seems that agents (and sellers) are the last people to accept this. The point was made today that accepting this fact, and helping the market make the necessary adjustment will help turn things around. The adjustment does need to be made. Of course nobody wants to sell their stocks when they are down. They don't want to sell their house when the price is lower than it was a year ago. They feel they have lost that money, but it was only money on paper; never in their pocket. It is most important in these times to look at your investment over all. If you bought five, or ten years ago, look at what your money has done over that time period. Look at where you lived, and the quality of life you had. These things count as well, probably much more than we acknowledge.

A few years back, when the San Francisco market was in a complete frenzy, we were in the exact opposite position. When working with a buyer who was interested in making an offer, we would look at comps from six months prior and say they were no longer relevant, because the homes were appreciating so rapidly. We were regularly seeing properties go twenty percent over asking price. We were calculating the appreciation into the offer. All we have to do is the reverse for our clients today: calculate in the depreciation, look at making long term investments, and enjoy our homes!

A Different Market/A Different Approach

Here we are, less than two weeks from the most important election of our time, and almost unable to concentrate on anything else. Granted, if you have children you may be distracted every now and then with discussions of what their Halloween costumes might be, but for the most part we are frozen...almost unable to breathe until we see the outcome. We need some positive news, some encouragement that "things are going to be OK"! They will be, in time, of course, but we are worried about today, tomorrow, and next month.

In many ways, the trickle down effect is happening in reverse. Trickle down economics was first introduced during the Great Depression, and later made popular by President Reagan, saying that "money was all appropriated for the top in hopes that it would trickle down to the needy." It never seemed to work properly in its intended order. Instead, we are now seeing a much different kind of trickle. First, the major corporations, banks, and insurance companies go bankrupt. Stocks around the world plummet. People lose their jobs, millions lose their homes, it becomes much harder to get a loan, and people are frozen in fear therefore not spending money which makes things even worse.

The point is, if there is one, that times are different and difficult, but we must continue to move forward. Thankfully, the election is almost here and Obama seems to be ahead in the polls. We hope that things will change, but can't expect them to change overnight. The fact is, and most people seem to agree, that we have a good year ahead of us before we really start picking ourselves up and brushing ourselves off. Suze Orman said that the economy is in the ICU, and will be for another year or so. After that, she says, it will move into the hospital, where it will continue to need treatment for some time, and then it will finally be in recovery.

Many home buyers are waiting for prices to drop further before they enter the market. As Anja said, you need to be careful what you wish for. Remember, this is our economy you are talking about, and we don't want to see it go even further down the tubes. Everyone is affected by this in one way or another, and we are seeing the effects around us more and more each day in friends that are losing jobs, taking pay cuts, or simply not getting as much work.

It is amazing that Zephyr has a large new office tour each week. There is a lot of inventory out there, and now is the time to take advantage. Granted, prices may come down from where they are, but if the right property comes along, we can negotiate a lower price. If you get the house for 10% under list price, you should feel safe.

The main tips for working as a buyer in this market are:

• First step is to get pre-approved for a loan (this was always the first step but is even more important today
• As you continue searching, and time goes on, continue to check in with your lender to see if the loan programs you are approved for have changed
• Be ready to go, but not in a hurry...timing is important in negotiating
• Don't be afraid to make a low offer; the worst they can say is "NO"
• Once your offer is accepted, be diligent in your inspections; this will give you the opportunity to renegotiate should you find anything

It is so much nicer to be a buyer in today's market; you can breathe, take your time, negotiate, and make wise and informed decisions.

What is a walk score?

This past weekend, both Anja and I hosted an open house at 126 Noe St. This is a two bedroom, one bath condominium in Duboce Triangle, with a high end kitchen and bath remodel done in 2006. The price was just lowered to $901,500, includes one car independent parking, and extra storage in the garage. This property also has a "walk score" of 95 out of 100. This last point, along with the rest of the property profile, was printed on the flyer. It was something that many people had not seen on property advertisements, so we thought it would be a fun thing to explore.

If you are already very familiar with a neighborhood and its amenities, it may not be so helpful. But if you are exploring new neighborhoods, and especially if you are new to the city, this is a great tool to add to your home buying tool kit. The website is actually called Walk Score; their tag line is "Find a Walkable Neighborhood". It is definitely one of the most common criteria we hear from the buyers we meet, "I want to be able to walk to a cafe, a restaurant, or a BART station." Of course, these are all reasons to live in the city, and why home prices in San Francisco have been as stable as they are in this trying economic climate.

San Francisco has many wonderful neighborhoods to offer, all with their own commercial center, and wonderful places to meet, eat, and shop! Walk Score is yet another way to explore these neighborhoods. You can go to the website, and enter an address to get the score. The score is a number from 0 to 100; 100 being the best possible score. Their patented scoring system awards points based on the distance to the closest amenity in each category. A final score of 90-100 is a "Walker's Paradise: Most errands can be accomplished on foot and many people get by without owning a car."

Their website lists 34 San Francisco neighborhoods; 17 of which scored in the 90th percentile or above. Here is a look at the top ten and their scores:

1. Chinatown--99
2. Financial District--99
3. Downtown--98
4. North Beach--98
5. Mission--96
6. Nob Hill--96
7. Pacific Heights--96
8. South of Market--96
9. Western Addition--95
10. Haight-Ashbury--95

Also interesting to point out, San Francisco ranks above New York in their overall scores:

San Francisco--86
New York--83
Boston--79

So add this to your tool kit when shopping for your home, or visit the website if you are curious about what is close to your home that you may not have noticed. You simply type in the address, and you will get a list of the businesses in each category, and how far it is from the address in question. It will all be mapped out for you; enjoy your walks!

What can I buy for $350,000 or less in San Francisco?

Moving up to the next level in our study, there are suddenly many more options. There are 42 active listings from $251,000 to $350,000.

• 14 of those are single family homes
• 12 of the single family homes are in Bayview (1 in Ingleside and the other in Visitacion Valley)
• 17 of the properties are tenancies in common
• 11 are condominiums
• 5 are short sales
• 3 are in pre-foreclosure
• 2 are offered through the mayor's office of housing

It is safe to say, that most of these single family homes are in need of some TLC. Here are some examples:

This is 1650 Quesada Avenue; the cross street is 3rd Street. It is a three bedroom, one and a half bath home and is 1422 square feet according to the tax records. By the boarded up window, you can see that this home does need some work, but it is said to have "great bones" and good views from the top level. It sounds like a steal at $266,000.

The house above is 1226 Palou; cross street is Ingalls. This is a two bedroom home and is 1022 square feet according to tax records. It is clean, with a remodelled kitchen, new appliances, a new deck, and a wood burning fireplace in the living room. This home is being offered at $319,900.

Quite elegant for just $349,000, isn't it! This condominium is located at 2010 Eddy Street, unit B. It is a studio with beautiful Victorian details, views of the Civic Center, and a sleeping area. There are four units in the building, and the association dues are yet to be determined. There is no parking with this unit. It was originally priced at $385,000, and was recently lowered to $349,000.

This is a below market rate studio in the Landmark building of Union Square. The building was originally built in 1908 and restored in 2004. The unit has tall ceilings, brick and concrete walls, a contemporary kitchen with stainless steel appliances, washer and dryer in the unit, and extra storage. The building also has a bike room, a part time doorman, a roof deck with views, and a possibility of leased parking. 333 Grant Avenue #405 is being offered for a firm $256,542. It is important to note that the association dues are $753 a month.

For the last example, we introduce the Cubix Yerba Buena, a community located in the Yerba Buena Arts District. All of the units in this building are studios, and as you can see in the photo, they are well appointed and filled with light. Green building features are incorporated throughout, from drought tolerant plants on the landscaped roof-top deck to the City Car Share pod in the garage. This unit, 766 Harrison #410, is offered at $314,000. The association dues are $270 a month.

Please contact us for a full list of properties in this or any other price range.

What can I buy for $250,000 or less in San Francisco?

This is the start of a new series called "What can i buy?" I was originally going to start with a higher amount, closer to five hundred thousand, due to the high median house price in San Francisco. In doing some searching for clients who are entering the market at a lower price point, we were amazed to find that you do have options at just $250,000 and under! Fifteen options, to be exact:

• 5 of those are short sales
• 3 are in the mayor's office of housing program for lower income households
• 2 require all cash
• 2 are bank owned
• 1 is a total fixer
• 4 of them are single family homes
• 10 of them are in district 10 (Bayview, Silver Terrace, and Hunter's Point)
• 6 of those are in the same development, the Mariner's Village

This is 2025 Keith Street in Bayview. At $149,00, it is the lowest priced single family home currently listed on the multiple listing service. It is also a total fixer, and a probate sale. It is a two bedroom, one bath home of 1190 square feet, and does not have parking.

Welcome to 60 Ora Way #201, a condo offered through the mayor's office of housing. It is located in Diamond Heights; the asking price is a firm $211,791. It is a five hundred square foot studio with a sleeping alcove and one car parking. The association dues are $370 a month; the building has a swimming pool, gym, a playroom, and wonderful views. Above is 126 Kirkwood Avenue #8. It is a three bedroom, three bathroom townhouse style condominium in the Mariner's Village. It is 1360 square feet according to the tax records, and is listed at $190,000 with association dues of $324 per month. It has partial bay views from the second story, and needs some TLC. The last and most shocking example of all is that this or any property in Russian Hill is even on the list. But before you go and grab your checkbook, there are a few things you should know about it. First of all, it is a 10% interest in 1847-1857 Stockton Street, making it a tenancy in common in a thirteen unit building. That is not all, folks. It is also tenant occupied with a protected tenant, and will be delivered that way at the close of escrow. It keeps getting better, because there have been previous OMIs (owner move in evictions) in the building, so you could never do one with this unit, AND, last but not least, this sale requires all cash. And to think it has only been on the market 188 days!

Please contact us for a full list of these are any other active San Francisco listings.

San Francisco Public Schools

Like many good San Francisco parents, I spent a lot of time last year learning about the public school system here in the city. First you learn about the lottery and placement system, and then you spend your time touring the schools and choosing your favorite seven for your wish list. Also, like many good San Francisco parents, I did not receive any of the programs on my list, so my son was given our neighborhood school. Luckily, our neighborhood school is Leonard Flynn. There are two programs at Flynn; the Spanish Immersion Program (which was on our list) and the General Program (which was not on our list but what we were given). The very last week of summer, we received a phone call saying that Octavio (my son) was chosen to be in the Spanish Immersion Program, so in the end we ended up exactly where we wanted to be. There just happened to be an emotional roller coaster leading up to it!

We are now a little over a month into the school year, and we are very happy with the school. It turns out that we would have been happy with the General Program as well; the teachers are great, and all of the kindergarten teachers work closely together to come up with the curriculum for the year. It also helps that the school is a block away from our home. We step outside our door and can hear the first bell...ooohh better run so we can make the light and get there by second bell!

Leonard Flynn is one of the neighborhood public schools that has really risen up through the ranks in the last couple of years. The creation of the Immersion Program has helped, and parental involvement and fundraising is key. Last year they raised over $30,000, and their goal this year is $55,000.

With all of the uncertainty in the economy, and the flawed budgets both at the state and federal level, it is important that we take care of our schools. The quality of our public schools directly affects all of us, whether we have children or not. Shall I quote Whitney Houston? For those of you who don't know, she believes that children are our future!

As a new parent in the San Francisco public school system, I wanted to get involved. Because my son is in one school, and Anja's grandchildren in another, we decided we would like to give back to the schools. For each sale from now until the end of the year, we would like to donate $500 to your child's school. If you do not have children, that money can go directly to the school in your neighborhood, and if you have another worthy cause you are passionate about, we can point the donation in that direction. On top of the $500, Zephyr has agreed to donate an additional $250, bringing the grand total to $750 to the school with each sale. These numbers can add up quickly, and our schools, children, and community can benefit.

Can Anybody Get a Loan?

The state of today's economic crisis has people scared, confused, cautious, and certainly frustrated. When I tell people what I do for a living, they either respond with laughter or pity. In a sense, they are both saying the same thing, "Wow, are people really still buying real estate?" or "Can anybody get a loan these days?" The answer to both questions is "Actually, yes!"

Now please let me rephrase. Not just anybody can get a loan. The days of simply "fogging up a mirror" in order to qualify are long gone, and isn't that for the better? There are some basics that you must have in order to qualify:

1. Down Payment
2. Good Credit

For the most part, for a jumbo loan, which the majority of San Francisco loans are, you need a minimum of 10% down. I say for the most part, because there are also FHA loans which only require 3% if you qualify. We are currently representing buyers who are in contract for a house in the Sunnyside district (right next to Glen Park) for just under $600,000. They are using an FHA loan and have put 5% down. Many people are under the impression that FHA loans have more guidelines and conditions than a regular loan. The only difference that we have seen so far is that they required a second appraisal.

Another client of ours has just checked in with his credit union, who is offering 5% down on conforming loans. Our advice is always to check with your credit union first, if you are a member of one. They have always offered the lowest rates, and although they do indeed have more conditions to meet, it can be worth it in the end. There was a story on the news the other night that put credit unions and small local banks above the larger banks in terms of safety. Credit unions and local banks tend to be more conservative in their lending practices, and therefore are not facing the trouble that some of the larger banks are in.

You do also need to have good credit. If your FICO score is 700 or above you are fine. Below that, you will need to shop around a bit and see what the various lenders are offering. Do not assume you won't qualify, and make sure you talk to more than one lender as they all offer different loan programs. I have seen advertisements from banks offering very low fees in order to bring people through the door.

Of course, we don't know what will happen tomorrow. It seems that there is huge news every day, and it always seems worse than the day before. Today, there was "the rate cut heard around the world" where the fed cute the rate by half a percentage along with Canada, England, Sweden, and Switzerland. Unfortunately, in spite of their efforts, stocks and oil both fell sharply.

For today, here are the facts:

• Yes, there is still financing available
• Interest rates are relatively low
• You can get a loan for as low as 3%, and definitely with 10% down payment
• Yes, people are still buying and selling houses

Check in tomorrow and see if it is still true!