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Are the TICs at 226 27th in Noe Valley for You?

June 29, 2012 By Leave a Comment


Whenever a gaggle of new units hits the Noe Valley market offering 2BRs in the $400,000-$500,000 range, I start receiving inquiring emails from various prospective home buyers. I explain to everyone that the units are tenancy-in-common (TIC) interests, and then am usually asked to explain how TICs are different from condos. From there, I’m either scheduling a showing or being told that TICs are not an option.

So I thought I’d cut to the chase and write a public service blog post that will help any buyers out there who are curious about the TICs at 226 27th Street in Noe Valley. I viewed four of the units this week on broker tour, and have also been watching the former apartment building being renovated over the past several months.

226 27th Street is a ten-unit TIC building originally constructed in 1963. There are one-, two-, and three-bedrooms available, and all have covered independent or tandem parking spaces. Prices range from the high $300,000s for the 1BRs, to the high $400,000s for 2BRs and into the $600,000s for the 3BRs. Monthly HOAs are in the $385-$578 range. There are in-unit washer/dryers and a small yard for a common area.

Here are shots of a typical kitchen and bedroom in the building:


Nothing fancy, but decent space. The living/dining areas are fairly small, as are some of the bedrooms. The proposition here is reasonable space in a convenient location, half a block from the J Church and about a ten-minute walk to the BART 24th & Mission station. There are also many restaurants and shops nearby. (I live around the block, so I can personally attest to that fact.)

Obviously, the prices are much lower than the typical condo prices in the neighborhood. So why not run out and purchase one of these units? Here are the key things you need to consider (applicable to 3+ unit TIC buildings):

A TIC is different from a condo. Multiple individuals share ownership of a property in a TIC. Each individual has the right to reside in a particular unit, but does not own the unit itself. Rather, each person owns a percentage of the building. With a condo, you own your unit and a percentage of the common area.

The TIC holy grail has traditionally been condo conversion. San Francisco regulates how many TICs can convert to condo status. There is such a backlog in the system at this point, that it’s important to note that anyone purchasing a three- to six-unit TIC building now will probably never be able to condo convert. You can’t legally convert more than six units into condos.

You need “fractional financing”—or cash—in order to purchase a TIC. TICs traditionally had group loans, where all owners shared one mortgage. However, fractional financing has taken the place of group loans over the past several years. These types of loans are different from those you would obtain for a condo or house. Only two or three lenders offer fractional financing. So if you’ve been preapproved for a condo or house loan, you will need to get preapproved separately for fractional financing.

There are still risks to owning a TIC, despite not sharing a loan. The bank can’t foreclose on the whole building if a co-owner defaults on his or her mortgage. (This is the case for a TIC group loan, by the way.) But there are still certain risks to be aware of. For example, property taxes are a shared effort, and everyone is on the hook if one co-owner suddenly can’t pay his or her portion of the property taxes. Additionally, a contractor who didn’t get paid for one of your co-owners’ kitchen remodel can slap a mechanics lien on the property, for which all owners are then responsible. But the main legal risk, according to a prominent attorney in the field, is that if there’s a dispute where a court will be called upon to interpret and implement the TIC agreement, it will have less guidance than a court interpreting a condo’s HOA documents, as there’s more law on the subject.

What are the basics on this fractional financing? There are no fixed-rate, 30-year loans—only one-, three- and five-year adjustable rate loans, with a minimum of 20% down payment. You also need proof of six months’ of mortgage payments in reserve in a bank account and high credit scores. Interest rates may be a bit higher than that of a more traditional condo loan, though the fractional loan rates have come down a lot. (They’re currently below 5% on the 5-year adjustable rate mortgages.)

Resale value will not be as strong as that of a condo or house. The main reason behind this fact is that you will be reselling a TIC interest, which has a smaller buyer pool. Buyers will need to qualify for the fractional financing, and will also need to be comfortable with the risks involved with TIC ownership.

So why even consider a TIC? Despite the risks, they offer more space and a better location than a condo at the same price point. If you think you may be interested in pursuing such a purchase, contact me and we can talk.

Filed Under: Noe/Eureka Valley, TIC's & Multi-Unit Bldgs Tagged With:

Just Sold: 1388 Gough #407

June 27, 2012 By Leave a Comment


I just closed the sale of my 2BR/2BA condo listing at The Post International (1388 Gough) in the convenient Cathedral Hill neighborhood. Featuring a spacious floor plan with a kitchen open to the living and dining areas, as well as two large bedrooms and baths, #407 also included parking, storage and in-unit washer/dryer. The Post International is a 72-unit building with a recently renovated fitness room, common-area garden, 24/7 security, and conference room. It’s located near Japantown, Hayes Valley, Civic Center and Lower Pacific Heights.

On the market only a week, we received two offers. Listed at $699,000, the unit sold for $715,000.

Filed Under: Condos, Neighborhoods Tagged With:

Sellers on Hook to Disclose What They Know

June 25, 2012 By Leave a Comment

Yes, there are probably sellers out there who don’t disclose everything they should. But I don’t typically assume that sellers are hiding pertinent details about their homes. The homeowners with whom I’ve listed properties have generally tended to go out of their way to disclose even the most minor deficiencies.

Not to pat myself on the back, but I typically sit down with sellers while they complete the extensive disclosure package, going over each form line by line and clarifying the questions. It’s this approach that I believe leads to more thorough disclosures for buyers. It also gives me the opportunity to learn all the property details before the marketing begins, which results in clear, accurate fact presentation to agents and prospective buyers.

California requires an extremely long list of seller disclosures; we are not a “buyer beware” state. (However, this isn’t the case for foreclosure properties, which are, in my opinion, “buyer beware” scenarios.)

Sellers, hook up with a reputable broker, provide the required San Francisco building/hazard reports, and take the time to thoughtfully complete your disclosure package—preferably with your agent sitting next to you. The couple of hours you take to fill out paperwork will certainly not exceed the time it will take to sit in mediation, arbitration or in attorneys’ offices down the line.

Filed Under: Home Buyer Tips, Home Owner Tips Tagged With:

The Story Behind “Unwarranted” Spaces

June 20, 2012 By Leave a Comment

In real estate circles, San Francisco is famous for the prevalence of “unwarranted,” or “illegal” rooms. Homeowners also sometimes tire of the city permit process, and elect to do kitchen/bathroom remodels or construct decks without pulling permits.

How does work without permits affect a home? Ultimately, the property’s safety may be compromised.

For major renovations—say, adding a unit or bedroom and bath—a homeowner will apply for a permit from the city. Besides serving as a revenue stream for the city, a permit warrants that the appropriate city inspectors have reviewed and approved electrical wiring, plumbing, etc., and that everything is up to code.

When your job is completed and approved by the city, the signoff ultimately goes on your property’s 3R, or building permit history, report. This is one of the key reports provided to future buyers in a sale. Completed permits give buyers peace of mind that any renovations or repairs that typically require permits were done according to building code.

Some work done without permit is safe and will never present any issues. However, if a homeowner decides to, for example, upgrade a foundation, a city inspector may spot the unwarranted room within the property. At that point, he or she can ask to see plans and permits for that room, ultimately requesting that you legalize it.

And if you decide to buy a house with an unwarranted unit and rent out that unit, you may run into problems if a neighbor decides to notify the city. In that case, inspectors would visit your property and potentially request that you dismantle the illegal unit. (Or legalize the property by creating two units, which may not be structurally possible.)

When evaluating properties, it’s important to check building permit histories to ensure that they match up to the details of the home. For example, if a kitchen was obviously remodeled sometime after the construction date of the property and there are no permits on file, it’d be a good idea to have your inspector flag any potential code items he or she sees. Of course, you can’t tear open walls, but some things are apparent code violators to a trained eye.

It’s challenging to put dollar amounts on unwarranted work. Instead, make sure you use the right comparative sales in your evaluation. For example, a “room down” or “bonus room” in a two-bedroom single-family home isn’t technically an official bedroom. (The dollar amount may be the difference between two- and three-bedroom homes values.) In this case, the best comps would be those with similar layouts (not three bedrooms).

In all cases, I don’t recommend omitting inspections—especially when unwarranted work is disclosed or suspected.

Filed Under: Home Buyer Tips Tagged With: ,

Condo Primer for New Buyers

June 18, 2012 By Leave a Comment

There’s a high inventory of condos in the San Francisco market right now, and deals abound. But before you rush out to take advantage of the low interest rates, it’s important to consider the complexity of owning this type of property.

Here’s a quick condo primer that will help you evaluate the fundamentals of a unit and its homeowners association:

HOA dues: How much are your monthly HOA dues, and what do they cover? Is the total amount in line with buildings of the same scope? Are there any unit owners who are behind on their HOA dues?

HOA reserves: How much does the HOA have on hand in the event a major component of the building needs to be replaced?

Rental capability: What is the restriction on renting your unit, should you decide to move and not want to sell? And how many units in the building are rented?

Affordable housing designations: Is unit resale restricted by any city ordinances, such as affordable housing laws?

Pending litigation: Is the HOA involved in any lawsuits?

Special Assessments: Will there be any future, per-unit charges in addition to the existing HOA dues?

Parking: Is the parking space deeded to the unit, or is it leased separately? Are you able to rent your parking space in the event you want to? Will your car fit in the space?

Pets: What are the number or pound restrictions for pets in each unit? What restrictions exist for pets off leash?

Insurance: Is the insurance policy current? Does it include earthquake insurance? (You’ll know if the HOA dues are substantially higher than usual.)

Renovations: What’s the process required for remodeling any part of your unit? Similarly, did the previous owner complete any renovations, and were they done with permits?

Available Services: Is there a lobby attendant? Fitness center? Common garden or roof deck? HOA lounge? Check out every aspect of the building—even the trash and recycling room.

Move-out Fees: Is there a fee for moving in, and what days/timeframes does the HOA permit moves to take place?

Readers, please feel free to add your own points based on your purchase experiences.

Filed Under: Condos, Home Buyer Tips Tagged With: ,

Open House Spotlight: 1444 York

June 15, 2012 By Leave a Comment


Buyers will inevitably bounce off the walls when they see the latest hot Mission house at 1444 York. Featuring a living room with fireplace, formal dining room, two good-sized bedrooms and bonus room, the 1920s home is aesthetically appealing and appears to be in very good condition.

There’s also a large garden and two-car parking. How much, you ask? List price is $649,000. Seems low, but keep in mind that buyers won’t go too crazy when they discover that this is the 1400 block of York, which is right off Cesar Chavez and is essentially in a less-than-desirable corner of the Mission.

Open Sunday June 17th from 2:00-4:00!

Filed Under: Mission Tagged With:

Good Deal: Stately Monterey Heights House

June 13, 2012 By Leave a Comment


The 3BR/2.5BA, 1896-square foot single-family home at 138 San Felipe in Monterey Heights has expansive ocean views from two levels and gets great natural light. Situated on the edge of St. Francis Wood, the home is not too far from the West Portal retail area and public transportation.

So when will a smart buyer snap up this property? Last sold for $1,50,000 in 2007, 138 San Felipe has been on and off the market a couple times since then—most recently for $1,190,000 before being withdrawn last month. The main level has a living room with wood-burning fireplace, formal dining room, eat-in kitchen, and powder room. The upper level features two bedrooms and bathroom, and the garden level has a private suite that’s perfect for guests. Plus, there’s two-car parking and a decent-sized yard.

Now listed at $997,000, 138 San Felipe is below the $1,242,214 average single-family home price year-to-date. The crafty buyer will immediately add value by updating the kitchens and bathrooms, and landscaping the garden.

Filed Under: St. Francis Wood Tagged With:

What You Can Buy in Noe for $1M

June 11, 2012 By Leave a Comment

One of the most popular neighborhoods in San Francisco is Noe Valley. It has a diverse housing inventory, from Victorian single-family homes to contemporary condos and Edwardian TICs. We take a look today at what’s available in the $800,000-$1M price range:

4272 24th Street
$849,000

4272 24th Street is a spacious Victorian 2BR/1BA flat on the main retail strip between Castro and Douglass. There are fewer businesses along this stretch of 24th, but most importantly, you are steps away from my favorite restaurant, Firefly, as well as VIP Groomers and the new Philz Coffee shop. 4272 24th Street is on the first level of a two-unit building, and there are nice period details such as a living room fireplace and bay window. The second bedroom is one half of the double parlor. Also included are a new rear deck, shared garden, in-unit laundry, additional storage, and one-car garage parking. HOA dues are $250/month. And yes, it goes without saying that this location is near tech shuttle stops. The property was last sold in 2006 for $835,000.

144 Day Street (below)
$839,000

144 Day Street is situated on a 4,000-square foot lot and is wider than the average home. I think this 3BR/1.5BA single-family home has great potential, especially considering that there’s a 600+ square foot basement along with a two-car garage. This is one of those properties that will be best served with a gut renovation. The block itself isn’t prime Noe Valley, but it’s within walking distance of the J Church, as well as the stores, shops and restaurants on the south end of Church Street. Did I mention it’s near tech shuttle stops? I want to make sure to point that out. 144 Day Street is being sold through a trust sale with court confirmation, so the selected offer will be subject to overbidding in court. If you’re interested in this sort of thing, make sure you know what you’re getting into when you’re making your offer.

4235 23rd Street
$879,000

I’m liking this 2BR/2BA, 1110-square foot remodeled Edwardian condo at 4235 23rd Street (above) a lot. It has a large, light-filled eat-in kitchen and overlooks the private deck and garden. There’s a formal dining room and comfortable living room with large bay windows. And you can throw in coved ceilings and inlaid floors throughout in this first-floor flat within a two-unit building. One-car parking and storage are included, and HOA dues are paid on an as-needed basis. You’re about two blocks from 24th Street, so this is a prime Noe location (near tech shuttle stops).

Filed Under: Noe/Eureka Valley, What You Can Buy Tagged With:

Former Mayoral Manse On Market Again

June 7, 2012 By Leave a Comment


Less than a year after former Mayor Newsom sold his 4BR/3.5BA Ashbury Heights home at 1581 Masonic in an all-cash transaction for $2,750,000, the property is again up for sale.

The fully detached, gated residence features grand common rooms, a major chef’s kitchen, spa-like bathrooms, wine cellar, and four walk-out terraces. 1581 Masonic is now listed for $2,895,000.

If you missed it last time around—a likely situation, as the house was only on the market for two days before the buyers plunked down their cash and snapped it up—you can take advantage of this weekend’s open houses and check out the property. Twilight preview tonight from 5:30-7:00pm; Saturday June 9th from 200-4:00 and Sunday June 10th from 2:00-4:00.

Filed Under: Haight/NoPa Tagged With: ,

TIC Market Slower, But Still Strong

June 6, 2012 By Leave a Comment


The tenancy-in-common (TIC) market in San Francisco may not be the busiest it’s ever been. After all, condo prices have fallen since the 2005-2008 market heights, and most buyers would prefer to own their own unit (vs an interest in a building, with fellow owners all on the same title).

But the TIC market is certainly not dead. A total of 120 TIC interests have sold year to date, at an average of $598,422. TICs are taking longer to sell than other property types, and those 120 TICs took an average of 80 days to sell. There are 90 TIC interests currently in contract, and 54 TICs on the market (including a newly renovated, seven-unit building on Dolores at 22nd Street).

The bottom line is that buyers will consider TICs if they can get a better location, space and price than that of a condo. Taking one of these attributes out of the mix results in a property that will sit longer than its competitors. For example, a 2BR/2BA TIC listed at $749,000 in the more remote neighborhood of Clarendon Heights has been sitting on the market since March. On the flip side, the 2BR/1BA TIC with leased parking at 31 Camp in the hot Mission Dolores area went into contract in 14 days—much faster than the average TIC.

Fractional financing for TICs is still widely available, though only a couple lenders are issuing such loans. Interest rates are much lower than they were in the past. (I remember when 7% was an expected interest rate.) And these loans continue to perform well, with little to no foreclosure activity involved, according to Sterling Bank & Trust, the leading TIC lender in the city. However, if you’re trying to sell a TIC in a building that has a group loan (i.e., everyone on the same loan), you’ll probably have an extremely difficult time selling unless the other owners are open and able to a fractional loan refinance situation.

What fractional financing has done is make it acceptable to own a TIC, without factoring in the goal of condo conversion. I tell my TIC clients that if they’re purchasing an interest in a 3+ unit building that’s never set foot in the condo lottery, they will most likely be selling that property as a TIC.

Filed Under: TIC's & Multi-Unit Bldgs Tagged With:

Walk Score Winners: Cow Hollow, Cole Valley, South Beach

June 4, 2012 By Leave a Comment

These condos in the $1.2M range are great options for anyone looking for a spacious, centrally located property in proximity to restaurants, cafes, shops and services:

2912 Fillmore, Cow Hollow
$1,175,000
95 Walk Score

2912 Fillmore (above) is a top-floor 3BR/2BA, 1367-square foot condo in a six-unit building. It has an updated gourmet kitchen open to the living room, and lovely period detail throughout including high ceilings and moldings. The living room features Golden Gate Bridge and Bay views, and there’s a common roof deck, too. No parking, but you basically fall out your door and are in the midst of all you’ll need. HOA dues are $314/month. 2912 Fillmore was on the market in March and was tenant occupied, but the unit is vacant now.

1416 Shrader, Cole Valley
$1,195,000
91 Walk Score

1416 Shrader (above) is located in the heart of desirable Cole Valley. This top-floor, Edwardian condo has been renovated and offers 3BRs/1.5BAs across 1634 square feet. The living room has a fireplace, and there’s a kitchen open to the dining room which has a wall of windows and built-in bench seating. There’s a 320-square foot bonus room adjacent to the shared garden that’s ripe for future development as an office or guest space. One-car parking is included, and the HOA handles expenses in a pay-as-you-go situation. 1416 Shrader is a short distance from downtown Cole Valley, as well as the Muni line there.

501 Beale #10h, South Beach
$1,174,900
89 Walk Score

The Watermark is one of my favorite South Beach buildings. This corner unit (above) has 2BRs/2BAs with 1161 square feet. There are pano views to the east and south, as well as a large private balcony. Corner unit #10h features maple floors and marble baths. Amenities at The Watermark include 24/7 concierge, fitness center, pool and BBQ. HOAs are $750/month, but that covers the aforementioned amenities, as well as one-car parking. The building is a stone’s throw from the Giants ballpark, Market Street and Embarcadero transportation, and numerous restaurants and cafes.

Filed Under: Cole Valley, Pacific Heights, SoMa/South Beach Tagged With:

Open Floor Plan & Views Kick Butt in Golden Gate Heights House

June 1, 2012 By Leave a Comment


I’m a sucker for a big house with an open, spacious floor plan that gets great natural light. So I was drawn to the 3BR/2BA affair at 2021 14th Avenue in Golden Gate Heights. Clocking in at 2250 square feet and offering king-of-the-world ocean views, the property has been remodeled from the studs out and features floor-to-ceiling views from the living/dining areas and master bedroom. List price is $1,295,000.

There’s custom recessed lighting, a speaker system, fireplace and dramatic vaulted ceilings. Of course, the tradeoffs are that you aren’t in walking distance of much, and you’ll be seeing a lot of fog and wind. But if views and a unique setting are paramount, this place is for you. First open is this Sunday, June 3rd from 1:00-4:00.

Filed Under: Neighborhoods Tagged With: