Save Money By Applying for Reduced “Flow Factor”

Do you have an irrigation system and are interested in saving money on your increasingly expensive San Francisco water bill? Consider applying for a reduced “flow factor.”

A big part of your water bill as a homeowner in San Francisco is the wastewater service charge that covers the cost of collecting, transporting, treating and disposing of each unit of wastewater discharged into the sewer system. The Water Department figures this out by multiplying your water consumption by an assigned “flow factor.”

The flow factor is the amount of water you use that’s actually returned to the sewer system as wastewater. The Water Department assumes the flow factor to be 90% for single-family homes and 95% for multi-unit buildings.

But you know what? You may be eligible to reduce the flow factor—and save significant money on your water bills—if you have an irrigation system on your property.

I filed an appeal recently, and a Water Department rep visited my house to measure the yard and determine what percentage of water was being used by my irrigation system. We were able to cut the flow factor from 95% to 64%, translating into significant savings.

So give it a shot. Who doesn’t want to save money on their increasingly expensive water bill? You can find more details here, including a link to the form you need to complete in order to file the appeal.

What’s Selling for Under the List Price?

A quick check at selling patterns in central San Francisco neighborhoods since September 1, 2012 yielded the unsurprising reality that most single-family homes and condos have been selling for more than their asking prices. However, I thought it was worth a blog post to shine the spotlight on three recent properties that sold for below their list price. If anything, this can instill hope among buyers that not every property involves multiple offers and overbidding.

117 Caselli
Eureka Valley
3BR/2.5BA, 1729 sq feet

117 Caselli is an attractive Edwardian on a great block in the Castro neighborhood. The kitchen was small and somewhat awkward, and the garage—which had been transformed into a living space—sat at the rear of the lot above the house. The property was listed for $1,349,000 on 8/17, and went into contract about a month later. Final selling price: $1.3M.

320 Lansdale
Sherwood Forest
3BR/3.5BA, 2032 sq feet

Situated in a less-than-walkable part of the city, 320 Lansdale is a detached, three-level home with a great room, two fireplaces and two decks. Listed at $1,295,000 on 8/17, the property went into contract on 8/30 and sold for $1.2M.

727 Moraga
Golden Gate Heights
3BR/3.5BA
727 Moraga’s proposition was that it was a modern condo in a neighborhood that attracts single-family home buyers for properties built in the 1920s-1950s. This two-level condo in a two-unit property had sweeping Bay and city views and elevator access. It was listed for $1,380,000 on 5/31, and went into contract on 8/7. Final selling price was $1,330,000.

Hipster Alert: 378 San Carlos in The Mission


I’m digging the 2BR/1BA, top-floor Mission condo at 378 San Carlos in the Mission. It’s the perfect retreat for buyers who want to fall out their door and be in the middle of everything the neighborhood has to offer.

There’s a large master bedroom, well-appointed kitchen and small yard space. And storage in the garage, along with one-car tandem parking. List price is $699,000, which seems about right for this sort of space and location.

The average Mission 2BR sold for $735,696 in the time period from June-October. For a more in-depth look at the Mission market, check out our Zephyr video here!

Foreclosures Slow, Shadow Inventory Declines

The good news keeps hitting the San Francisco real estate market. With prices up 13-16.5% over the prior 180 days in the single-family home, condo and multi-unit market, property owners have a lot to smile about.

And it seems like the foreclosure sales have tailed off a bit, as well as short sales.

Out in the neighborhoods, word is that street improvements are coming to Oak and Fell. And the tech shuttle map has been revealed!

It’s all here in this edition of the Zephyr MarketTracker.

State of the TIC Market: October 2012

A total of 144 TICs sold from June 1 – October 16th, 2012, with an average of 65 days on market and a median sales price of $602,000.

By comparison, more than 1100 condos sold in the same time period. Buyers obviously prefer condos, with the appeal being individual unit ownership and the availability of historically low, fixed-rate loans.

The most popular—and least risky types—of TIC sales are still occurring in two-unit buildings, as these properties have a much more direct path to condo conversion. After that, buyers appear to be open to TICs in three- to six-unit buildings offering fractional financing. (You can’t condo convert more than six units.)

Condo conversion wait time still remains an issue, with owners of three- to six-unit buildings hanging out for many years in anticipation of lottery wins. Owners of new TIC buildings are resigning themselves to the fact that they will probably never have the opportunity to condo convert in the course of their ownership, which affects TIC resale value along with a variety of other factors.

First and foremost is location; buyers are willing to purchase a TIC if it gives them entry into a central, desirable neighborhood that wouldn’t otherwise be affordable. Neighborhoods that saw the most TIC sales were Noe Valley, Twin Peaks, Eureka Valley, North Panhandle, and The Mission. Most of these TICs were in the one- to two-bedroom category.

But equally as important is the type of loan being offered. The traditional group loan for 3+ buildings has been largely replaced by fractional financing. Buyers are avoiding purchasing TICs in 3+-unit buildings offered through group loans, with very few exceptions.

For example, of the 55 TICs in contract in 3+-unit buildings, only a handful reportedly had group loans. And of the 144 sold, only about four changed hands with a group loan in place. A look at current listings in this category reveals that they are not receiving offers, even if the loan has a very low interest rate. And of the 40 TICs that were withdrawn or have expired since June, almost half had group loans.

Cash buyers are jumping into TIC purchases, but these sales are happening in buildings where fractional financing is being offered. And cash buyers are typically snapping up units in neighborhoods like Russian Hill or Noe Valley, where it’s a challenge to find, say, a two-bedroom view condo for the same price.

I’m not seeing investors flocking to purchase TICs; most tenant-occupied TICs have a very challenging time selling.

Financing options for TIC buyers continue to be led by fractional loans from Sterling Bank or NCB. In the rare group loan scenario for 3+-unit buildings, sellers are arranging for the existing TIC owners to qualify for fractional loans so they can refinance concurrently with the new TIC buyer into individual loans.

If existing TIC partners aren’t willing or able to go the fractional route, TIC sellers can consider providing seller financing. Or, they can hope that a buyer will come along who will be comfortable dealing with a group loan and who will have sufficient cash to cover the homeowner’s portion of the loan. (This option is only available if the group loan is assumable. If not, the group will have to refinance into a new group loan, which could be challenging.) Resale success in these non-fractional scenarios is unlikely; most such TICs ended up being withdrawn this year.

If you’re planning to buy or sell a TIC, it’s critical to do your due diligence up front so you’re aware of all the details. Please contact me at ebermingham@zephyrsf.com/415.823.4656 if you have any questions. I have an excellent team of resources in place that includes lenders, attorneys, and title companies.

Cash is King for Competition, Not Discounts

Cash buyers continue to infiltrate San Francisco’s competitive single-family home market. But those cash transactions aren’t necessarily translating into deep discounts. Instead, buyers seem to be using the cash advantage to simply win properties.

A total of 180 single-family homes sold over the past month, with 35 purchases made with cash as reported in the San Francisco Multiple Listing Service. Nine such transactions sold for less than the list price, one sold at asking, and 25 were over the asking price. It’s fair to say that many cash buyers are not looking for cut-rate prices on houses here. Buyers and their agents know that cash transactions provide a huge advantage because of the lack of complications connected to appraisals and loans.

One of the most glaring examples of cash buyers not worrying about discounts occurred in the ultra high-end market at 2969 Sea Cliff (above). The 6BR home with more than 5,000 square feet in the tony Sea Cliff neighborhood was listed at $5,250,000 and sold two weeks later in a cash sale for $5,650,000.

And then there was 1445 Cole in Cole Valley, a 3BR Craftsman listed at $1,775,000 which sold for $1.9M within 10 days.

Several buyers picked up homes in the city’s southeastern neighborhoods of Bayview and Crocker Amazon for all cash in the $300,000-$500,000 range, as well.

Of course, there are always exceptions, and 1915 Pierce was one. The 5BR home in Lower Pacific Heights was listed for $2.4M and sold in 61 days for $2.3M.

Most cash sales involving buyers paying well over list price have been happening either prior to the property going on the market, or shortly thereafter. It’s a buyer’s way of communicating to the seller that he or she won’t get a better offer.

Just Sold: 3BR Condo in The Haight


My clients just purchased 1351 Page Street, a well-appointed and spacious 3BR/2BA condo on a prime block in The Haight. The remodeled kitchen is open to the living and dining areas, and adjacent to the fireplace. All bedrooms are in the rear of the condo, with a lovely master suite that overlooks the lovely shared yard. There’s an in-unit washer/dryer and one-car independent parking.

1351 Page is a block from the Panhandle, storied Haight Street, Golden Gate Park and multiple forms of public transportation. List price: $949,000.

Smackdown: Central Sunset House vs Pac Heights Condo

San Francisco’s property value ranges largely depend upon location. For example, you’ll get more square footage and amenities for your money in a house in the western part of the city vs. one that’s situated blocks from public transportation that’s only a few stops from downtown. And in general, a house in the western part of San Francisco will have a value equivalent to a condo in the north end.

To give you an idea of the values, today’s Smackdown pits a house in the Central Sunset against a condo in Pacific Heights:

1462 30th Avenue
Central Sunset
3BR/2BA, 1500 sq ft
$849,000

1462 30th Avenue is an utterly charming, Spanish/Mediterranean home built in 1928. It features wonderful period details such as coffered cover ceilings and built-in rounded shelving. There’s a formal dining room, remodeled kitchen and two bedrooms at the rear of the main level. Downstairs is another bedroom/bath, as well as a newly carpeted bonus room and laundry room. Garage accommodates one car, and you can also enjoy a landscaped yard. The property is located right near the N Judah line, and is only 2.5 blocks to Golden Gate Park. This is a great home for buyers who want to stretch out and have plenty of room across two levels of living space.

2542 Sacramento #303
2BR/1BA, 1106 sq ft
$849,000

2542 Sacramento #308 is a top-floor condo in a nine-unit, 1960s building located between Fillmore and Steiner. It has a stylish kitchen, bedrooms with spacious closets, great natural light and a two-car tandem, private garage. Laundry is shared on the lower level. HOA dues are $584/month. This condo was in contract and just came back on the market, so it may be a good opportunity for the buyer who wants to be a block and a half from Alta Plaza Park, as well as within easy walking distance of all the conveniences on the Fillmore corridor.

Market Truly Heats Up In Third Quarter

The past quarter was inarguably the turning point for the San Francisco real estate market, with prices hitting year-to-date highs.

Buyer demand continued to increase, but housing inventory didn’t. As a result, most well-priced properties attracted multiple buyers, many with large down payments or all cash. A significant number of sales resulted in prices that were hundreds of thousands of dollars above list prices. As of this writing, single-family home prices were up 14.6% from the second quarter, with condo prices also increasing by 13.6%.

We’re now used to seeing offer dates set by listing agents and sellers even before the first open house is held, which means sellers are assuming they’ll have multiple buyers interested right out of the gate. As a result, it’s more critical than ever for serious buyers to be fully preapproved for a loan prior to visiting properties. The ability to make decisions quickly is key.

Lenders continue to scrutinize every aspect of a transaction, and appraisals can still take far too long to schedule and get through underwriting. But there have definitely been less “back on market” occurrences, and the majority of sales are closing successfully.

Sales in the luxury markets were brisk, with more than a dozen sales in the $4M+ range. Even neighborhoods like Eureka Valley got into the act, with two homes selling in this range and effectively bringing average sales for the quarter to an unusually high level.

Inventory is steadily increasing as we head into the fourth quarter, helping to scatter buyers a bit so they’re not all swarming around a handful of homes. I’m expecting healthy activity through mid December, until the industry slows down for the holiday season.