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SF Market Sees Return of Multiple Offers

February 20, 2012 By Leave a Comment


The two-unit building above at 208-210 Caselli in Eureka Valley is the latest property in San Francisco target by a multitude of serious buyers in San Francisco. Vacant and featuring two 3BR/2BA units with wood-burning fireplaces, open floor plans and hardwood floors (plus two separate garages), Caselli was listed for $1,399,000 on February 9th. The sellers received 14 offers all over the asking price yesterday (on a holiday, no less).

And Caselli is not the only example of a multiple-offer magnet. There was 1462 11th Avenue, a 2BR/1BA single-family house with an okay bonus room on the garage level that was listed at $649,000. The home  is being sold via court confirmation, which means the accepted offer will be subject to an overbid in court. However, that scenario did not deter the eight buyers who made offers. The winning offer? Somewhere in the neighborhood of $820,000, with a first overbid of $862,550. Another example was over at 119 Joost in Sunnyside, a 3BR/1BA single-family home within walking distance to downtown Glen Park. Listed at $689,000, the sellers received about ten offers and the selling price is reportedly well above $700,000.

To be sure, buyers aren’t flocking to just any property in any neighborhood in the city. Making the cut are typically vacant two-unit buildings or single-family homes in central locations near public transportation, restaurants, services and cafes. Particularly popular are areas like Noe Valley (see the recent SF Chronicle article about my ‘hood here); Mission Dolores; Eureka Valley; prime parts of Bernal Heights; the Inner Sunset/Richmond; and Sunnyside.

What’s fueling this sudden urgency among buyers? For one thing, the low interest rates are convincing people that they can lock in a favorable fixed rate and put their mortgage payments on auto pilot. I also think the reality is setting in that prices are not plummeting in the near future, and that we may have hit our low point in the more popular neighborhoods. Get in now before prices go up any higher, the thinking is likely going.

I do have one piece of advice for buyers: Use the list price as a mere reference point. For example, if the average value for a 2BR house in your favorite neighborhood is $800,000 and a great home comes on the market listed at $695,000, chances are good that the house will sell for significantly more than asking.

Filed Under: Home Buyer Tips, Home Owner Tips, Market News

Bright Future for TIC Lending in San Francisco

February 13, 2012 By Leave a Comment


I was invited to a TIC Roundtable last Friday sponsored by Sterling Bank and Trust. The officers and lender reps were in attendance, as was TIC attorney Lyssa Paul. We had an interesting Q&A about Sterling’s goals in the TIC lending arena, as well as identified a few trends in the TIC market—all while sitting 40 stories up in the Transamerica Building.

A few highlights:
The outlook for long-term TIC financing is strong. Sterling has consistently underwritten TIC loans, while other lenders have been in and out of the market. The bank’s conservative underwriting approach allows it to assume less risk and therefore grant loans. They also plan on increasing their TIC loan volume, and are pleased with the headway they’ve made in the past six years in San Francisco. Also, it’s unlikely that a secondary market is going to materialize for TIC loans.

TIC loans will continue with three-, five- and seven-year ARMs. The reason there are not longer-term loans that can more effectively fix low interest rates is because Sterling is a community bank that funds loans through its security deposits and short-term funding sources. So they have to match what they loan with what they pay on interest-bearing accounts. So there are no plans for a 30-year fixed loan in the near future.

First-time home buyers still rule as TIC purchasers. Sterling reports that 80% of its TIC borrowers are first-time home buyers. The other TIC purchasers seem to be cash buyers looking for pied-a-terres in the city, most notably in north-end neighborhoods.

TIC loans continue to perform well. Of the 800 or so fractional loans Sterling has on its books, only about eight of those loans were connected to foreclosure or a short sale. And the latter only occurred in the past couple years. The foreclosures were related to homeowners who had gone into the purchase with only 10% down; Sterling briefly offered that option, but doesn’t do so any longer for obvious reasons.

TIC agreements are still critical. Attorney Lyssa Paul says that one of the main issues that consistently arises is the lack of a TIC group’s ability to produce a current TIC agreement. Either some groups didn’t have one drawn up, or they haven’t updated them.

Buyers and sellers need to update TIC agreements during a sale. Sellers and buyers need to be aware that whenever there is a TIC interest transfer, it’s necessary to engage an attorney to remove the seller’s name from the TIC agreement and replace it with the buyer’s name. And all TIC group owners need to additionally sign the updated agreement. This has apparently been a factor that has delayed TIC closings.

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Top 10 Condo HOA Battles To Avoid

January 9, 2012 By Leave a Comment

Condo living has its definite upsides, but it can also involve HOA disputes that you’d rather avoid. I wanted to round up the top ten issues that cause problems among condo owners, courtesy of my attorney friends at Goldstein, Gellman (g3mh):

1. Noise and nuisance. Everyone loves quintessential San Francisco architecture, but let’s face it; Victorians and Edwardians offer their fair share of footfall transmission and conversations through the walls. Set your expectations and get used to the idea that you will hear your neighbors from time to time.

2. Pets. Condo CC&Rs (the document that governs the HOA) specify pet restrictions, which sometimes stipulate keeping pets leashed in the hallways or limiting size/number of dogs and cats. Keep this in mind if you’re thinking of getting a second dog and your CC&Rs limit the number of pets in a unit.

3. Window maintenance. Though the roof of a building is a shared HOA responsibility, owners may have to deal with their unit windows individually.

4. Leaks. Water intrusion from one unit into another does happen from time to time, especially if there are washer/dryers in a building. Who’s responsible for paying for damage can be a huge issue of dispute. Owners and HOAs should have a clear and documented understanding concerning payment responsibilities, the HOA’s right of entry to make repairs, and obligations of owners to carry insurance above and beyond the HOA’s master insurance policy.

5. Improvements and alterations. If the CC&Rs specify that owners need HOA permission for remodeling, that’s the way it goes. It’s not a great idea to try to sneak contractors through the hallways.

6. Unit rentals. If you’re going to rent out your unit, make sure you conform to CC&R rules that may restrict short-term stays. Some HOAs also limit the number of units that owners can rent at a given time.

7. Assessments. Also known as HOA dues, assessments are usually charged on a monthly basis. It’s best to deal with delinquent HOA dues quickly, as collecting payment from a delinquent owner can be a headache.

8. Inadequate reserves. Most larger buildings should have a certain amount of money on reserve in the event of a building issue, such as a roof replacement or paint job. However, many smaller buildings don’t carry large reserves. Though this is reasonable, the pay-as-you-go plan can backfire when a building needs critical work.

9. Use restrictions. This can relate to a wide range of issues, such as maximum occupancy, parking, satellite dishes and noise. There are many laws that may affect the enforceability of use restrictions. For example, California statutes prohibit housing discrimination based on race, color, religion, sex, sexual orientation, and marital status. It’s important that HOAs keep these laws in mind before enforcing a particular use within a condo.

10. “Nonstandard” units. Smaller buildings which start out as rental apartments and later convert to condos may include a unit—such as a penthouse, or detached cottage—that’s very different from the other units. It’s important for CC&Rs to be clear how these different units fit into the HOA, especially where maintenance is involved.

 

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What You’ll Need To Get Your Loan

October 11, 2011 By Leave a Comment

If you’re intending to purchase a property in the next several months, it’s important to note what documentation you’ll need to provide to the lender in order to get loan approval.

Many prospective buyers cringe at the thought of pulling together reams of receipts, paystubs, and W-2s. But if you start doing that now, you’ll be ready to go in the event you stumble upon that perfect condo in  South Beach.

Here’s the list of documentation you will generally need in order to verify a home loan application, courtesy of my friends at Guarantee Mortgage:

1. Two most recent paystubs

2. W-2s for 2009-2010

3. Two most recent statements for all checking, savings, CD, money market and/or securities brokerage accounts

4. Most recent statement for all retirement accounts (IRAs, SEP-IRAs, 401ks)

5. Most recent statement of stock options, employee stock option purchase plans, etc. if part of the down payment or closing costs of a purchase

6. 2009-2010 1040s (federal tax returns, all pages)

7. Mortgage, real estate tax and insurance premium statements for all properties currently owned

8. Leases on all rental properties you may own

9. Divorce decree and settlement statement, if applicable

10. Name, address and phone number for your landlord covering past 24 months

11. Twelve most recent cancelled rent payment checks or bank statements if your landlord is a private party

12. Copy of your state-issued driver’s license or passport and your date of birth

13. Copy of current mortgage statements on all outstanding mortgages.

Filed Under: Home Buyer Tips, Home Owner Tips

How Neighbors Can Affect Property Values

September 14, 2011 By Leave a Comment

So I had clients who stopped in at an open house I recommended they see over the weekend in the Lake neighborhood. They were interested in one of the units in a two-unit building that was pretty great. The building had a nice floor plan, was located on a lovely stretch of Lake Street and parking was included. The garden was cute and private. They basically liked everything about it—except the bee hives in the yard next door (see above).

In a city as dense as San Francisco, it’s so important for buyers and sellers to consider the “neighbor factor.” In the case of the aforementioned building, the presence of multiple bee boxes in what appeared to be a not very well-maintained yard next door was essentially a deal breaker for my buyers. Though the bees probably stick to their hives, my clients were concerned with their future children being in close proximity to the swarms. And I have to say that I can’t blame them. We live in an urban area, and what one’s neighbors do (or don’t do) has a definite affect on surrounding properties.

I remember previewing a property in the Mission a few years ago and seeing an ATM machine strewn on the ground in the yard next door. And there was also the time I checked out a property in Noe Valley with an apartment building across the yard that featured a naked man wandering around inside his unit. Another time, my clients and I were touring a home in Sunnyside and the adjacent yard was covered in dog feces. Not what you want nearby when you’re having guests over for a barbecue.

My point is that buyers and sellers have to be realistic about what’s going on around properties in which they’re interested, or which they’re selling. Buyers should get a sense for whether they’re comfortable with whatever might be present in the yards nearby, as well as the overall condition of the surrounding homes. And sellers need to recognize that negative situations like the ones I’m mentioning can certainly have an affect on the price they can command for their home once it’s on the market.

As for the bees? If you’re looking for a great home in the Lake area that also might offer you the possibility of getting to know your neighbors and having a regular source of local honey, give me a call. I’ve got an excellent home for you!

Filed Under: Home Buyer Tips, Home Owner Tips

The 5 Biggest Home Seller Mistakes

July 27, 2011 By Leave a Comment

We’re approaching the busy Fall real estate season, so I thought it might be a good time to give a shout out to all those prospective San Francisco home sellers out there who are thinking of putting their homes on the market in September or October. I’ve been doing my job long enough to recognize good and bad seller strategies and decisions. So I thought I’d round up the bad ones to potentially make things smoother for some sellers this year.

Here are my top five home seller mistakes. Avoid them if you can:

1. Trying to save money by eliminating staging. There was a time when properties were flying off the shelf, whether they were vacant, featured unmade beds in the photos or had someone home watching television during broker tours. Those days are gone. Buyers want to see some effort on the part of sellers. It’s important to take pride in how your home shows to agents and buyers, and investing in things like landscaping, painting and hauling clutter are equally as important as staging. Plus, staging costs aren’t as high as they were when the market was hot. So you can probably get a decent deal from a quality stager.

2. Immediately hiring the high-volume neighborhood specialist as your listing agent. Yes, you’ve seen his or her name plastered all over your neighborhood. But it’s worth noting that sometimes, home sellers take the path of least resistance, which factors into their decision making. Most agents in San Francisco sell in multiple neighborhoods, and know the micro markets well. Your listing agent decisionmaking should absolutely factor in local market knowledge, but don’t forget about the rest. Marketing and technology platforms, solid agent networks and service levels should be priorities. If your listing agent can’t produce an outline of what he or she is planning to do from start to finish, it might be time to consider other options. And more importantly, make sure your agent isn’t the type to railroad you into accepting an offer that may not provide the most beneficial price and terms just so he or she can move on to the next transaction.

3. Pricing your home too high. This seems obvious, but it isn’t. You talk with multiple agents, they essentially show you all the same sets of comparative sales, and you decide that your home should be priced above those averages. Yes, your home is nicer than most. But buyers are looking for value, and homes priced well over the average price ranges in the neighborhood will most likely sit. You’ll then have to go through price reductions and the reality that your listing is getting stale. Keep it fresh from the start with a list price that will attract buyers—and possibly multiple offers.

4. Ignoring the first reasonable offer that comes in. You put your home on the market, and within a week, your agent is presenting you with a solid offer from qualified buyers at a reasonable price. But you think you might want to hold out for more interest, so you take a pass and wait for all those other buyers to materialize. Unfortunately, they don’t, and now you’ve lost your first and only good offer. Of course there’s always a chance new buyers can emerge. But there’s certainly something to be said about seizing the day.

5. Being satisfied with a minimal marketing program. As I mentioned before, marketing strategies are crucial to a successful sale. Make sure your agent and his or her company are in a position to really make a splash when they market your home. Connecting with your targeted buyer demographic is critical; about 90% of prospective home buyers are doing online searches. If the buyers you’re trying to reach aren’t impressed with what they see online, you can bet they won’t visit your home during their crammed open house tours. And they need instant access to relevant property facts (QR codes, anyone?).

Filed Under: Home Owner Tips

You’ve Won the Condo Lottery–Now What?

May 4, 2011 By Leave a Comment

The annual condo lottery took place in San Francisco earlier this year, resulting in suddenly lucky TIC owners winning the right to start the path to condo conversion. I thought it would be a good time to take a look at the TIC and condo markets and give everyone a heads up on what to expect–whether you’ve just won, or may be on track to win next year.

Things are a bit more complicated in the current economy, and that means buying and selling TICs or condos can present their own sets of challenges. If you’ve just won the lottery, you’re probably a couple months in to the conversion process. And all your TIC partners are excited about what they’ll be doing after you’ve converted the building. Many TIC owners have held their properties for far longer than they’d ever dreamed, so moving the family out of that one bedroom now finally feels possible. Others love where they live and will just appreciate owning their own condo.

It’s important not to overlook every detail as you take a step closer each month to conversion. For example, if more than half the units in your building are rented vs owner occupied, you’re going to have to work through that detail so it doesn’t become a roadblock during a refinance or sale. And everyone’s ability to refinance will depend on how much equity exists.

Both the TIC and condo markets are doing reasonably well, particularly in high-demand neighborhoods that provide easy access to public transportation, restaurants, retail areas and freeways. A total of 496 condos and 63 TICs sold in the first quarter of this year. Compare that with 403 condos/63 TICs sold in the same quarter of 2010, and we’re looking at some pretty respectable numbers. So I believe we’re heading into an increasingly better market where these types of properties are concerned.

The best tip I can give condo converters is to do your homework up front. You’ll need your resources up front (attorneys, contractors, surveyors, etc) and now would also be a good time to chat with your favorite Realtor and loan rep so you have a heads up on what to expect at the time of conversion. Get a sense for your building’s value, as well as what your own unit would be worth as a condo. And recognize that all TIC owners have to work together regardless of what happens. I often consult with building owners about these situations, and I have a strong team in place. So feel free to give me a shout anytime, and we can find a convenient time to talk details.

Filed Under: Home Owner Tips, TIC's Tagged With: , ,

Should You Buy Earthquake Insurance?

April 19, 2011 By Leave a Comment

I’m often asked about earthquake insurance—do most homeowners in San Francisco have it? Do the majority of condo buildings have an earthquake policy? I wrote about the subject more than a year ago, but figured I’d bring it up again because the question is always a popular one in California.

Only about 12-15% of California homeowners have earthquake insurance, and I believe that ratio drops further in The Bay Area and San Francisco. The reason behind this is that earthquake insurance is very expensive. In a condo building, it doubles your homeowners association dues (HOAs). Additionally, most policies come with a 10-15% deductible. This means the damage to the building would have to be pretty severe in order for you to use your coverage.

What do you look for when evaluating how well a property will hold up against an earthquake? Take note of its overall construction material (i.e., wood-framed buildings tend to hold up better against ground shaking). Review the hazard report rating (i.e., is the building located in a Zone A–the most susceptible to an earthquake, or a Zone D/E, which would have a better chance in an earthquake). And consult a general contractor about how seismically sound the property may be (i.e., foundation bolted, etc). If a property was built before 1906 (year of the big earthquake) and it’s still standing, that’s a good indication that it’s been constructed well.

I have sold many condos in San Francisco over the past decade, and maybe one or two condo buildings I’ve sold actually had earthquake insurance. Ironically, the buildings with earthquake insurance tend to be harder sells, because the HOA dues are prohibitively expensive for buyers. If you’re buying within a building that doesn’t have earthquake insurance, the HOA would have to decide whether to obtain that coverage. It’s not available on individual units.

If you’re interested in more information, contact your favorite insurance rep and inquire about the specifics for earthquake coverage.

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Here’s the Latest on FHA Condo Loans

March 17, 2011 By Leave a Comment

There’s been a lot of discussion among my colleagues and buyer clients about what condos might be available to buyers with FHA loans. So I thought I’d share the highlights, based on my recent conversations with lenders.

FHA loans are relatively straightforward for single-family homes. But for those buyers who can afford a property in the $400,000 range, a single-family home is typically not an option unless these buyers are extremely flexible on location. So many buyers in this price range seek condos, which can be a little more restrictive and challenging to purchase with an FHA loan.

The FHA allows a maximum loan amount to $729,750, with a 3.5% down payment, according to Gil Mora at Bank of America. But many buyers end up borrowing far less than the maximum limit, which lands them in the condo price range.

There are two ways you can go with an FHA loan in this case:

1. Purchase a condo in an FHA-approved building. There are many buildings in San Francisco that are currently in this category. You can see the list by clicking here, selecting California in the state drop-down box, and typing in San Francisco in the city field.  About 25 buildings have resales on a regular basis, such as 199 New Montgomery, Symphony Towers, and certain Diamond Heights Village units. If you are interested in a unit within one of these FHA-approved buildings, things can be relatively smooth. However, some lenders will not grant FHA loans within buildings wherein more than, say, 30% of the units have been purchased by such loans. In Bank of America’s case, their temporary limit is 50%.

However, BofA will grant an exception if certain conditions are met (project is complete and not under construction; 100% of the units have been sold; no entity owns more than ten units in a large project or more than one unit in a smaller building; owner-occupancy ratio is at least 50 percent; control of the homeowners association is in control of the building; the building’s budget provides for the funding of replacement reserves for major expenditures in an account representing at least ten percent of the budget). So if you’re dealing with a building that’s not new construction, it’s likely you’ll be able to get the exception.

2. Write an offer on a condo and request approval for an FHA loan. Obtaining approval for a loan typically takes about two weeks, according to Gil Mora. Some lenders charge a fee for this process (BofA does not). It’s important to understand exactly what the FHA needs in order to approve a condo building. Here’s the current list that Gil shared with me:

HOA certification:  To verify presale, occupancy, completion, special assessments. This is a 12-page document that the property management company or HOA representative needs to fill out. There is sometimes a charge for completion.

Full condo name:  Condo ID and Association TAX ID number

Condominium declaration (recorded):  “AKA” Master Deed “AKA” CC&R’s.  Must be submitted as electronic PDF required

By-laws:  Executed copy required

Articles of incorporation:  Filed and endorsed copy required

Budget:  Proposed or Current Fiscal Year required with an itemized line reflecting 10% reserve allocation and all HOA financials

Reserve analysis:  Less than 12 months old.  Note:  Only required if budget does not reflect an itemized line for 10% allocation on the budget

Executed management agreement or Self Management Statement on the association letterhead

Evidence of insurance:  Hazard, Liability and Fidelity bond (AKA crime or employee dishonesty, 20 units or over need Fidelity Bond)

Condominium plat map:  That shows the exact location of the building and utilities on-site.  Map must include lot, block and plat number.  Recorded copy required.  Reduced 8.5 x 14 copies also required.

Condominium plan:  Recorded copy required (may be one in the same as Plat but if not, both are required)  Reduced 8.5 x 14 copy required.

FEMA flood map:  We will order at branch level

Litigation, if applicable:  Copy of Litigation and Attorney Summary.

As you can see, there’s quite a package of documentation required for FHA approval. It’s really critical that your real estate agent, listing agent, title company and lender are able to communicate frequently and easily in order to pull together everything necessary. FHA approval of the building will be, of course, tied to your financing contingency. So the faster your group is able to assemble the package and submit it to the FHA, the faster you’ll obtain approval and have your financing cleared.

It’s also key to understand that some of the aforementioned conditions and documents may not exist for smaller, more casually run buildings. For example, many two- to -four unit buildings don’t have much in reserves (and don’t have 10% of the budget in a reserve account), nor will they necessarily have a thorough budget or reserve study on hand. So if that’s the case, you may move on to a unit in a building that will be able to satisfy the FHA requirements.

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Some Sellers Eventually Do Get Serious and Sell

March 15, 2011 By Leave a Comment

Not every home that goes on the market is owned by sellers who are ready to part with their property. But eventually, certain factors may fall into place, and sellers hit upon that moment when they successfully work with an offer and accept it. Case in point last week was the sale at 2416 Gough (at Vallejo) in Pacific Heights.

The 6BR/3.5BA, 3500-square foot single-family home was listed in August 2010 for $2,775,000. (The property was last sold in July 2008 for $3,025,000.) After a series of price reductions, the list price ended up at $2,125,000, when it finally went into contract. The sale closed last week for $2,075,000.

But the sellers obviously had to move on, and the market dictated the price of this home. So buyers, if you see a property you like and it ends up sitting on the market, give it a shot and write an offer. If the first offer doesn’t succeed, circle back and try again if you think it’s worth it. That seller may finally be ready to sell.

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Make Sure Your Home Looks Good Online

March 9, 2011 By Leave a Comment

Of all the decisions sellers need to make when they are getting ready to put their home on the market, property presentation is one of the most important. Yes, this is Real Estate 101, but based on the showing condition and photos of some homes I’ve recently seen, I believe it’s time for a refresher on this topic.

Take the photo above, for example. It’s one in a series of dismal and somewhat threatening photos of a property currently on the market. That’s the yard, which smacks of child abduction more than children playing. If you’re selling your house in today’s market, it’s critical to give it your best shot. You are competing for a narrower pool of buyers who are the only ones left able to get loans or pay in cash. If you skimp on property prep, staging and professional photography costs, a couple things will happen.

One result is that buyers won’t even visit your property. They’ll look at unfavorable photos online and move on to the next place. I know from my own buyer base that people are busy, have limited time to see homes, and only go to the ones that look good. Another result of poor presentation is that buyers will feel that if you’re skimping on presentation, they, too, can skimp on an offer price.

So do yourself a favor if you’re planning to put your home on the market this year: Do the best you can within your budget, and make sure you don’t have any Mystic River-esque photos in the MLS. Hire a Realtor who will put a bit of thought into how you can best position your home to attract the most qualified buyers possible. Combine those efforts with a reasonable price, and you’ll have the best possible chance of completing your sale.

Filed Under: Home Owner Tips

Sorting Out Post-Condo Lottery Confusion

February 24, 2011 By Leave a Comment

Whenever San Francisco holds its annual condo lottery in February, the winning homeowners put their game plans together. Some immediately embark upon the condo conversion process, while others quickly decide to sell.

My colleagues and I have noticed a few listings coming on the market that are being classified as condos—but which are really TICs in buildings that recently won the lottery. It’s important to note that until a building is fully converted and all units are officially condos, you can’t call a TIC a condo. Even if everything is on track for condo conversion.

This is a good distinction to make if you’re a buyer who’s not interested in completing someone else’s condo conversion. And sellers, it’s important to recognize that condo conversion does incur quite a few fees, so expect buyers to factor those costs into the price they pay for your TIC.

Filed Under: Home Buyer Tips, Home Owner Tips, TIC's Tagged With: ,

Do Your Homework Up Front in Short Sales

February 22, 2011 By Leave a Comment

“BOM” is shorthand for Back on Market, and several properties earned this status over the past week. Three of them started off as short sales, meaning that their sellers could very possibly be foreclosed upon if they’re unable to find new buyers.

I point this out because it’s key for buyers who make offers on short sales to do their homework up front, and understand the full scope of the short sale process.

The three BOM short sale properties include the one above at 643 5th Avenue—a 3BR/1BA, 1700-square foot single-family home in the Inner Richmond listed at $895,000. There’s also a house on 22nd and Church in Noe Valley for $720,000 that needs some work, and a 2BR/1BA starter home in Sunnyside for $529,000.

Short sales are being approved much more easily in 2011, but buyers need to know that when they make an offer on a property that’s being sold in this manner, they will have to wait around for weeks or months to find out whether the lender will approve the sale. It’s expected that a buyer making an offer on a short sale home will do so in good faith, and won’t flake after a month passes without a response from the bank. This does sometimes mean missing other opportunities that come on the market in the interim.

And if the lender(s) respond with a counter offer, buyers should not be surprised. The reality of short sales is that they aren’t necessarily “deals;” lenders are taking a loss to begin with, and they do their homework with respect to current market values. Short sale properties are typically listed at lower prices to attract interest; it’s up to all parties involved to strategize so that the lender accepts the contract. That might mean going through a couple counter offers. A good listing agent will have a strong sense for what the lender will accept, so by the time a buyer’s offer is finally reviewed, the price should be very close to acceptable.

Buyers need to do as much reconnaissance work as possible with the guidance of their agent before submitting an offer and making a contractual commitment. Disclosures can sometimes be very limited (more so with condos, as sellers may not want to pull together HOA documents if they will be charged for them). Your agent should be able to guide you in researching the permit history and in the case of a condo, HOA health.

It may be worth it to have a walkthrough with a general contractor so you can get an idea about how much money you may end up needing to spend on improvements (more relevant for single-family homes). For example, the 22nd Street property I mentioned has a brick foundation and a city easement between the property and train tracks nearby. In this case, it’d be really important to attain a comfort level with those details prior to submitting an offer.

Once the lender has accepted your offer, the escrow can close in normal fashion (of course, most lenders respond with a two-week required close, but that’s another story). And yes, unexpected events can occur to throw things off track. But if you do your due diligence up front and work with an experienced buyer agent who’s closed short sales, your short sale can be a success without a lot of stress.

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Strategic Remodeling Can Turn a Profit

February 3, 2011 By Leave a Comment

When consulting with home sellers, I’m often asked whether it might make sense to, say, remodel a kitchen or bathroom to potentially increase the ultimate selling price. The answer: A profit is possible, but it depends on all the variables involved.

Most of the time, remodeling to sell is not wildly advisable. This is because all buyers are different and have individual tastes. So that CaesarStone countertop you install may or may not be viewed favorably by the buyer who ends up writing an offer on your home (especially if it’s somewhat out of synch with the older oak cabinets you don’t want to spend the money replacing). That buyer may actually be deducting a few thousand in order to replace the counters or bring the cabinets up to speed.

I think it’s best is to make remodeling decisions throughout your ownership, with an eye toward what will have the best chance for adding to the home’s overall value. You can’t go wrong with tasteful kitchen/bath updates or garden landscaping that you’ll enjoy yourself. No, you may not recover all the money you spent, but those updates will count for something at the time of resale.

The annual “Remodeling 2010–11 Cost vs. Value Report” provides breakdowns in multiple cities for numerous types of remodeling jobs done at mid-range and high-end levels. It analyzes estimated costs, and the percentage you can expect to recoup if you undertake those projects. At the top of the list for returns in San Francisco are jobs such as window replacement; attic bedroom remodels; deck additions; bathroom and kitchen remodels; and garage door replacement.

Less likely to break even or turn a profit are projects like roof replacements; master suite additions; and home office remodels. Though you typically can add value by installing a garage, the report essentially says that you won’t recoup your costs. (It also lowballs the garage addition cost, so I’m not sure how accurate this is.)

I sometimes see laundry lists of “improvements” included by sellers in disclosure packages. Quite frequently, many such improvements are actually defined more as maintenance items. So as a seller, it’s important to note that replacing a water heater, repairing a roof or siding may not be items buyers feel compelled to cover in their offer price.

Another important factor is working with permits. Trying to save time and money by failing to take out permits for jobs that normally require them can certainly come back to bite you in the end. For example, I’ve seen a good number of homes for sale that disclosed kitchen remodels that were not done with permits. Ditto that for “rooms down” functioning as master suites on the garage level. Buyers can be wary of unpermitted work for safety reasons (incorrect electrical wiring or plumbing behind the walls), and you can actually lose money in the end.

Bottom line: Before embarking upon a home project that will cost a fair amount of money, it might be good to check with your Realtor to get a sense for whether you can expect to recover at least part of the cost when reselling. This is where the “strategic remodeling” comes in handy.

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Good Luck in the Condo Conversion Lottery!

February 2, 2011 By Leave a Comment

Our city’s annual condo conversion lottery takes place today. I’d like to extend my best wishes to all those TIC owners who have been waiting years for their multi-unit buildings to earn the right to condo convert. TIC ownership in San Francisco is no cakewalk, especially for those sharing loans with their TIC partners.

I’m hoping that our current Board of Supervisors will make headway toward clearing the backlog of homeowners who live in their units and aren’t causing any threats to the housing stock or renters in the city. These are folks who purchased TIC units as a way to own a home they could not otherwise afford were it a condo or single-family.

I spoke yesterday to The Bay Citizen/New York Times reporter Scott James about the current state of the TIC market, so more to come on that. But today is for congratulating lottery winners and sending positive energy to the homeowners I know who have been waiting four or more years to win.

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