Good Value in Behind-the-Scenes Home Improvements

I meet with new buyer clients frequently who tell me they’re okay with “doing some work” and not paying for another owner’s remodel. And many times, that’s a sound plan when it comes to kitchens and bathrooms. After all, these renovations are typically pretty straightforward, and they provide an instant bang for the buck. Buy a house with a tired, 1940s kitchen and bath, tart them up, and you’ve added immediate value.

However, there are certain property upgrades that should be appreciated and valued more than I think they are in San Francisco. A chef’s kitchen with a CaesarStone counter and a slick, high-end soaking tub in the master suite are all fine and good. But what about an upgraded foundation–or a substantially repaired one? Or a new furnace/ductwork; roof; seismic upgrades; repaired dry rot/termite damage; upgraded plumbing and electrical? Though you can’t necessarily see these sorts of repairs in slick marketing photos, they’re important building components that need periodic attention.

A good portion of the aforementioned items can be fairly expensive. For example, the foundation repair/improvement work being done on my own two-unit building is so not cheap. We found a leaking drain pipe under the concrete that wouldn’t have been addressed had we not opened up the ground. And the seismic upgrades we’re doing at the front & rear of the building will also contribute to a more solid footing. Sure, we have a remodeled kitchen and bath in our unit, which is great, but future owners will most likely not have much else to do in light of the work we’re doing.

I’ve seen some good buildings sit on the market a while because owners were trying to recoup all the money they spent on certain structural items. It’s difficult to quantify how much money you can expect to recover on, say, the $20,000 roof you installed, or the $10,000 on plumbing and electrical upgrades. These items will certainly add value, but how much value will be up to buyers. In general, they’re the type of items you address as part of long-term property maintenance. And hopefully, the buyer who likes your house will be savvy enough to appreciate the upgrades and repairs.

The Ins & Outs of Leased Parking

You start your home search with a parking space as part of your criteria. And then you see the perfect condo, but it has what’s defined as “leased parking.” What exactly are the ramifications for this?

The SF Realtor Association recently changed the data fields in the MLS to include leased parking and its related details in a given listing. Previously, you either had some type of deeded parking, or not. Some agents indicated “1L” in the data field, which resulted in listings showing a parking space that technically wasn’t going to be sold with the unit. So the new leased parking fields are a good thing, in my opinion.

The main distinction to make with respect to parking is that a space is included with the purchase, or it’s not. There are also variations on parking that comes with a unit, such as deeded, assigned, tandem or independent style.

A leased space is not included in the purchase price, and it doesn’t run with the property. The seller typically has leased the space for a while, or has just secured it so the property can be marketed with a solution to the no-parking problem. The seller has a signed agreement with a third party, and that third party also has to approve the buyer if the lease is to be transferred to the new owner.

Leased parking can be in a private garage, or it can be in a lot or even a public parking garage. You’ll want to visit the space and consider the distance to and from your unit. If the space is in a parking lot, know that someday that lot may be a condo development.

Most importantly, there is no guarantee that the leased space will be available throughout your ownership, or that you’ll be able to transfer the lease in the future. But having a leased space available addresses immediate concerns (i.e., where am I going to park?!). Neighborhoods that have major parking challenges—the Mission, Russian Hill, the Haight, Hayes Valley, to name a few—often also have leased parking available, and securing that lease may entice some buyers to move ahead with a purchase.

So if you’re considering a property that has leased parking, just know that there is no guarantee you’ll have that space forever. It’s also a good idea to get a sense for how available other leased spaces are in a particular location, in the event you someday have to replace that space. And also note the monthly cost of that space, because it will be in addition to HOA dues, too, if you’re purchasing a condo.

SF Property Taxes Due This Week!

You’re trying to juggle all the moving parts in your life, and suddenly you realize that your property tax bill has been sitting in a pile in the office for the past several weeks. Yikes.

Because the second installment of San Francisco property taxes is due by 5PM on April 10th. If the city doesn’t receive your payment by then, you’ll be considered delinquent.

You can pay your property taxes online, but keep in mind there’s a 2.25% fee. So if you cut that check this week and postmark it by midnight on April 10th, you’ll be safe.

If you’re a new homeowner, you should be aware that there’s no foolin’ around when it comes to property taxes. If left unpaid, they quickly become a lien on your home.

For more on paying your property taxes, visit the Office of the Treasurer’s Web site.

Short-Term, Furnished Rentals Good Seller Pit Stops

I’ve met recently with a number of homeowners who are considering selling their properties, but don’t know where they’ll be able to buy next. Though they know they’ll do extremely well in the current market with the sale of their property, they’re nervous about competing with buyers to purchase their next place.

Here’s a suggestion that will work for these potential sellers: Rent a short-term, furnished rental. There are actually quite a number of these available at any given time, in all parts of The Bay Area. (Short-term, unfurnished rentals are more of a challenge to find, given the demand for long-term apartment leases.)

Just hit Craigslist for the area in which you’re interested in moving; it’s best to be in geographical proximity to your destination. Type in “furnished” or “short-term” in the “apts/housing” section, and a host of entries will pop up.

I recently spotted two-bedroom, short-term/furnished apartments in the Sunset ($1800/month), Marina ($3800/month; Mission Dolores ($3900/month) and a Noe Valley one bedroom ($2550/month) on Craigslist that could totally work as seller pit stops.

These rentals aren’t cheap. However, you’re able to put your belongings in storage and then move them to your new home once you purchase it, negating the need to move twice. You also won’t get too mired down in a rental, because both the price and the lack of your own possessions will keep you motivated to find the home that’s right for you.

And best of all, you’ll eliminate the possibility of making decisions under pressure, allowing you to think clearly and ultimately make the right purchasing decision for the long term.

Off-Market Sales a Win-Win for Buyers & Sellers

I’ve been talking to a number of homeowners lately who are interested in selling their house, condo or TIC—but don’t know where they’ll go. The fact that we’re in a seller’s market is great for them, but it’s also daunting when these homeowners think about competing with other buyers and purchasing their next home in a timely manner. Many have children, hectic lives, and busy jobs, all of which make the thought of buying and selling property a logistical nightmare.

One option to consider is selling your home off market. I’ve had seller clients achieve this very successfully, and it benefited them in several ways. They could skip the time and money spent on staging their homes, as well as avoid throngs of people coming through their home (many of whom probably wouldn’t end up writing offers, anyway).

Sure, there’s the widely held belief that the more buyers who come through, request disclosures, and write offers, the higher price a seller will attain. This is not necessarily the case. We’re all familiar with the “list-low” strategy aimed at attracting every possible buyer to the property, but in the end, what sellers really want are the handful of offers from the most qualified buyers who are paying a desirable price.

In an off-market scenario, sellers can list their property a bit closer to the price they’re really looking for, and it’s also a great way to test the waters on that price without the clock ticking in the Multiple Listing Service (MLS) and on Redfin and the other sites buyers reference for days on market and other details. And savvy buyers are typically willing to get with the program and consider meeting a seller’s price when they realize that they won’t be competing with the general public for the property. (Many buyers in San Francisco would prefer to opt out of seeing staging and low list prices and cut to the chase of getting the home they want at a fair price that’s in line with the comps.)

Sellers can also breathe a bit and get more flexible timing in off-market sales, particularly if they don’t know where they’re going next. Obtaining what’s called a “rentback” allows a seller to remain at the property for a 30-60 time period while they find a new home and purchase that property. This can be done on or off market, but such a scenario could also include some time up front for the seller before the buyer even gets his or her loan process going.

If you’re a seller, consider your off-market options. I’m discussing this type of sale with multiple homeowners, and have a marketing strategy in place. Please don’t hesitate to contact me if you’d like to chat in more detail about your real estate situation.

When’s The Best Time To Sell?

I recently blogged about the best day of the week on which to list your home. But the question I’ve been asked at least twice a week by potential sellers over the past couple months is: When is the best time to sell?

Ask any Realtor out there now in San Francisco, and he or she will respond, “Now!” Yes, it’s true that our property inventory continues to be low in relation to the number of qualified buyers looking for homes. But I think there are a few key points worth making for all the potential sellers out there.

San Francisco did have its down market a couple years ago, but values have come back, and there seem to be anywhere from four to 30 buyers for every property that comes on the market. (Single-family homes are garnering the crazy, 20-offer activity, and condos/TICs receiving four- to ten offers. Of course, activity will depend on your neighborhood and level of amenities your home offers.)

Buyers started getting off the fence last year, realizing that we’d hit bottom and that they could also now get loans again. And as San Francisco attracts many well-paid workers, buyers don’t seem to have a problem coming up with solid loans or cash for their purchases. Rents are at historical highs in the city, and it’s finally making sense for renters to buy property vs pay that $4,000/month for a two-bedroom apartment in Noe Valley.

Based on these factors, you could certainly make a case for “now” being the best time to sell. But the more I think about it, I’m going to say that listing your home in May, June, July, as well as September and October will be the best times to sell in 2013.

I’ve been selling real estate in San Francisco for more than ten years, and it never fails that the market heats up in the Spring and Fall. This year should be no exception. The weather is nicer across all neighborhoods, buyers are out and about, there are no major holidays and people are generally in town to make purchases. In terms of determining an accurate value for your property, the Spring and Fall are nice because we have a few months’ worth of data to reference in the current year.

In addition to the best time of year to sell, it’s equally important to determine the best time to sell for you. And you’ll need a solid game plan. Here are the main factors you’ll need to sort out:
- Where will I go if I sell?
- Can I buy my next home first, and sell after?
- How long it will take to sell my property?
- How much is my property worth, and how much will I need for my next purchase?
- What will I have to do to get my property ready for sell?
- What are the main selling costs?

As it takes time to develop your game plan, I recommend getting started at least a couple months prior to your targeted selling timeframe. One of the primary parts of my job is to consult with potential sellers about the aforementioned factors. If you’re aiming for Spring or even Fall, please contact me at 415.823.4656 or ebermingham@zephyrsf.com. I’d be happy to provide information and recommendations without pressuring you to “sell now!”

SF’s Seismic Retrofit Legislation on the Move

The Mandatory Seismic Retrofit Program legislation is due for its first hearing on Monday, March 18th before the Board of Supervisors Land Use and Economic Development Committee. Based on conversations I’ve had with various clients, friends, and colleagues, it seems like many people are a bit unclear about the details.

I’ve reviewed the legislation and also have spoken to Patrick Otellini, the Director for Earthquake Safety in the Mayor’s Office, so I thought I would share the information with you as it currently stands.

The proposed legislation, authored by Mayor Lee and six Board of Supervisors, adds a new chapter to the San Francisco Building Code that would require mandatory seismic retrofitting of existing wood-frame buildings which were built before January 1, 1978, have three or more stories—the first of which is a “soft” story—and contain five or more dwelling units.

Soft-story buildings are those that have a first, or ground-floor, level with either garage space or commercial businesses/storefronts. Soft-story buildings were responsible for 7,700 of the 16,000 housing units rendered uninhabitable by the Loma Prieta earthquake. And it’s estimated that soft-story residential buildings will be responsible for 66 percent of the uninhabitable housing following a seismic event on the Hayward fault.

Otellini estimates that there are approximately 2,800 buildings that would require retrofitting under the legislation. These buildings are most notably located in the Mission, Western Addition, Richmond, North Beach and Marina neighborhoods, according to the San Francisco Community Action Plan for Seismic Safety (CAPSS). The CAPSS study’s recommendations is the basis for the legislation.

The legislation has “compliance tiers” that guide how quickly certain properties need to complete seismic upgrade work. For example, Tier 1 properties are those that have senior centers or other care facilities on their ground floors. Tier 2 will include buildings containing 15 or more dwelling units, and after that will come buildings that have some sort of commercial/retail occupancy on their first story, as well as buildings that are in mapped liquefaction or landslide zones. The latter is the most complicated property type, as the engineering involved for dealing with liquefaction/landslide zones is more complex.

How does the city expect building owners to pay for this mandatory work? That’s not entirely clear as of yet. The legislation states that the city intends to consider the creation of an optional special tax financing program, which would be a combination of bonds issued by the city and special taxes paid by the building owner.

Another option in the works, according to Patrick Otellini, is for banks to provide financing to the building owners. Otellini was meeting with a group of lender representatives this week to gauge interest for this scenario. He mentioned the possibility of an owner taking out a loan for, say $100,000 (an average cost for this seismic work).

Assuming the Land Use Committee approves the legislation on Monday, March 18th, the item will then be heard in front of the full Board of Supervisors on Tuesday, March 26th, with Tuesday April 2nd being the final reading before the Board. Mayor Lee then has ten days to sign the legislation if the Board passes it, and it would then take effect 30 days after Mayor Lee signs it.

Of course, the legislation could go through many revisions between now and then, particularly after public opinion is heard.

Yours Truly, Quoted on KQED About TIC Legislation

The San Francisco Board of Supervisors Land Use and Economic Development Committee was scheduled to vote today on legislation that will potentially allow some TIC homeowners to bypass the condo lottery and pay a one-time fee to complete their unit’s conversion. As is typical with any legislation that affects homeowners and tenants, the issue is controversial.

And the vote has been delayed by a month, as Supervisor Mark Farrell reportedly wants additional time to talk with tenants’ rights groups.

I am, of course, a homeownership advocate (and former renter). And there are two sides to every issue. But I’m thinking that there’s something to this TIC legislation that should be able to work. In a city where two-thirds of all residents are renters—and property taxes help subsidize many things here—the Board of Supervisors should take a balanced view of the condo conversion issue and update its position so we don’t have a bunch of homeowners languishing in the lottery.

Check out the story (with link to the original audio broadcast) here: “San Francisco Struggles With Decision That Could Help Some Homeowners—And Hurt Renters.”

The Best Day to List a Home in San Francisco

The Wall Street Journal recently ran a piece on the best day of the week to list a property. Data was provided by Redfin, and The Journal focused on New York and the east coast. The conclusion was that Friday was the best day to list a house.

And I agree that in San Francisco, Friday is the best day to enter a property into the Multiple Listing Service (MLS) and have it go live on sites like Redfin, Trulia and brokerage sites.

Why Friday? Most buyers gear up on Fridays to house hunt on the weekend, and when a listing hits the MLS on Friday, it’s as high profile as it gets. In San Francisco, our Tuesday broker tours for the following week have a Friday/noon deadline, so agents enter most properties by that day and time so they show up on the following week’s tour. I send my clients Friday afternoon new-listing roundups, and also plot my buyer tours for the weekend on Fridays.

And people are apparently happiest on Fridays, according to The Journal, as the work week is ending. They’re more energetic and engaged, and will be more active in looking at the newest listings.

However, if you’re aiming to focus your marketing on landing private appointments, I do believe that listing a home on a Monday or Tuesday is best. Weekend open houses are done, and serious buyers are aiming to take more focused looks at properties. What I’m seeing in San Francisco, though, is that most agents and sellers time their first showings for the weekend or first broker tour.

In our busy San Francisco market, sellers could probably list their homes at midnight on a Wednesday and have 25 buyers in line the next morning outside their door. But sticking with a Friday listing is a great rule of thumb.

Wanted: San Francisco Home Sellers

It’s a seller’s market in San Francisco at the moment. Inventory remains flat, there are anywhere from five to 40 buyers for every home that goes on the market, and mortgage interest rates are still very low. And oh, yeah—rents are at an all-time high.

What this all means: If you’ve been considering listing and selling your home, now is the time to do it. And if your home has any particular challenges—lack of parking, a not-so-functional floor plan, no yard, for example—we are in a market where multiple buyers will be more willing to compromise and accept homes with such drawbacks.

If you own a single-family house, condo, multi-unit building or TIC (supported by a fractional loan), I recommend consulting with a Realtor this month to get a sense for your options. Maybe you have an investment property, or are an owner occupier who doesn’t know where to go next. It helps to have a chat for an hour with a Realtor to discuss your details:

1. How much is my property worth?
2. Can I sell and then have some time to stay in my house after the buyers are the owners, to figure out where I’m going next?
3. How long will the process take?
4. What pitfalls might I encounter?
5. What would I need to do to prep my property for sale?
6. What am I looking at in terms of net proceeds?

As many of you know, I have been helping homeowners sell their properties for more than ten years in many neighborhoods across San Francisco. Client reviews don’t lie: I have the experience, knowledge, marketing platform and strategies in place to net you the most money possible with the least stress involved. It’s all about knowing what to expect, anticipating pitfalls and navigating to the finish.

Please contact me if you’re ready to have that conversation. I would be happy to stop by and put your future in motion.

1031 Exchange: Great Way to Defer Paying Taxes After Selling

I recently attended a seminar on 1031 exchanges, as I frequently work with buyers and sellers who own rental properties in one capacity or another. The Internal Revenue Code Section 1031 allows investors to reinvest proceeds from the sale of one investment property into another similar property while deferring capital gains that would otherwise be due on the sale.

A 1031 exchange is an excellent option to have if you’re looking to move up to a bigger and better property down the line, and want to build your wealth in the process.

However, you need to be aware of the fundamentals before you can reap the benefits. Here are the four simple guidelines for exchanges, as per the Asset Exchange Company in San Francisco:

1. The properties involved must be held for “productive use in trade, business or investment” and must be like-kind. You can sell your four rental units on Haight Street and reinvest the proceeds into a six-unit rental property on Lake Street. But you can’t sell that Haight building and go buy a single-family house for yourself.

2. You have to complete the exchange in 180 days. The timeline begins when you close escrow on your “relinquished” property. There are no exceptions to this timeline.

3. You must identify your next property purchase within 45 days. After you close escrow on your relinquished property, you have 45 days to identify your replacement property. You have to identify all properties in writing, with a clear description. And there are two IRS rules for identifying replacement property. The first is the Three Property Rule, which allows for identification of any three properties, anywhere in the United States. The second is the 200% Rule, which is an option for identifying more than three properties. With this rule, you can identify four or more properties, but their combined value can’t exceed 200% of the property sold.

4. To defer 100% of the capital gains tax liability, you must meet two requirements. The first is that you have to reinvest all the cash that was generated from the sale of your relinquished property. And the new property must be equal or greater in value to the property sold. So you can’t use part of the money, or transfer any or all of the money into your own bank account. Once you touch it, you knock out the ability to do the exchange.

As you can imagine, these four points are the tip of the iceberg. There are all sorts of buying and selling situations, and it’s important to consult with a 1031 exchange consultant, as well as your CPA and attorney before making any moves. I have a great team in place if you’d like to explore your options, so feel free to contact me at 415.823.4656 / ebermingham@zephyrsf.com.

Should You Buy Earthquake Insurance?

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?

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.

All Local Worlds Collide on BlockAvenue


A new Web site called BlockAvenue.com combines “geo data” and user opinion to create an online guide that helps people understand neighborhoods, local trends, and new happenings.

The site “leverages more than 50 million data points” for the location of your choice, such as crime, transportation, restaurants, shops, school and social activity. It then mashes it up with a “proprietary social layer” (i.e., comments from users) to provide a BlockScore that will tell you how good the location actually is. Because as we all know, neighborhoods do change on a block-by-block basis in major cities, and San Francisco is no exception.

I gave BlockAvenue a whirl by typing in “Valencia and 24th, san francisco, ca.” The next page was a map of the area, showing various icons representing local businesses and amenities, as well as boxes with corresponding details for each. So along with McDonald’s, Valencia Farmer’s Market and the Mission Cultural Center, I was able to locate a sex offender on Mission Street and a ZipCar pod. I was also able to mouse over the various categories, and could check boxes if I only wanted to see crime data or just check out restaurants.

BlockAvenue seems like a good way to get to know a city on a neighborhood level. There aren’t many user comments yet, but that takes time. I’d recommend using the site, particularly if you’re deciding which neighborhoods might be a fit for you as you search for a home.

Mortgage Debt Relief Act Extended Through 2013

For homeowners considering a short sale or loan modification in 2013, most of last year was a nail biter. That’s because many loan industry insiders believed there was a strong chance that the Mortgage Debt Relief Act of 2007 would simply expire on December 31, 2012. Would these homeowners then be on the hook for paying taxes on their forgiven debt in 2013?

Last summer, I blogged about the perils of the tax relief act expiring. I had been talking with a few individuals who were considering short sales, and there was a very real chance that they ultimately could be responsible for paying a very large tax bill in the process—one they couldn’t afford.

The good news is that the “fiscal cliff bill” passed by Congress last week included a provision for extending the tax relief through 2013.

Bottom line for sellers thinking about pursuing a short sale this year: It’s best to start that process as soon as possible. Short sales require key prep work and lenders take time to approve the sales. Additionally, buyers in contract on short sales sometimes walk away in the middle of the transaction, which can significantly lengthen and complicate the sale process.

Call 311 To Keep Our Streets Clean

If you live in San Francisco, you know that graffiti and illegal dumping are two really common urban nuisances. San Francisco set up its 311 line several years ago so that people could report the mattress left on the corner, or the corner store’s newly tagged wall. And illegal dumping seems to reach a fever pitch around the holidays.

I like to remind everyone annually that it’s important to use the 311 resource to keep our streets clean and livable. Many times, I see a mattress or something else dumped on a corner, and no one doing anything about it. People think that someone else probably already reported the dumping. It actually takes a few seconds to call 311 and provide the location and description of the dumped item. (You can also send them a Tweet, too). The Department of Public Works (DPW) will take it from there. And they work weekends, too!

San Francisco’s 311 Center is also the go-to place for other random things you need, so check it out. Whether you’re a long-term renter or homeowner in the city, please do your part to make our city an even better place to be.