Interest rates hit 2006 low

According to Bankrate.com the average California Jumbo interest rate is below 6%!!! With everyone predicting 7% to 8% interest rates, and indeed it hit 7% earlier this year, the sentiment was that the market had to fall. But what now?

I've been saying for several months now that I thought San Francisco would get hot again by or during the Spring of 2007. With interest rates this low, that's making my prediction a stronger one.

I keep hearing reports of how tough it is in nearby markets - but near San Francisco is NOT San Francisco. Prices are UP this year compared to last year, and 2006 was "slow" in comparison to the last couple of years.

What will 2007 bring? Honestly it is anyone's guess. But there are plenty of Buyers around, still not that much for sale, and buying power is at it's highest since 2005. Buyers ought to be on the look out and ready to snap up anything they like before prices rise again, and Sellers should gear up for a Spring-time Listing.


Condo prices up 2.5% & SOMA high-rises

From the San Francisoc Chronicle on the high rise developments in the SOMA & South Beach neighborhoods
"Luxury Residences"

Finally some quotes from general media sources that are catching up to what I've been saying for a while now. This from the above article:

"So far, the San Francisco new condo sales, for the most part, have been sheltered from the kinds of decline other segments of the Bay Area housing market have seen. At the highest end, the market is an island governed by its own set of rules with buyers who have few financial constraints or in some cases are shopping for their second or third home."

Luxury market hits record high

According to First Republic Bank's "Prestige Home Index" San Francisco's luxury market ($1 million or higher) is now at a record high of $2.96 million. That is a 1.1% increase in the 3rd quarter over the 2nd quarter of this year, and 4% higher than the 3rd quarter of 2005.

So much for the Bubble pundits - one of whom I just saw is going to try to charge for his blog. All he does is posts rants and raves about the market and people in it... now I can't see if he'll avoid this report since it flies in the face of his never ending bubble prediction.

Interestingly too is that San Francisco's luxury price of $2.96 million is higher than both San Diego's at $2.18 million and Los Angeles at $2.37 million.


Most Active Home Sale months in San Francisco

I nearly forgot, but while researching for my previous post, I took a close look at number of homes sales per month. This is the "scary" number the mass media reports to say "homes sales dropped 34%" or whatever the latest figure is. Yes but... did price drop??? My previous post answers that - seasonally they do from one month to the next month, but year over year has been flat to slightly up the last 7+ months.

But what about those scary home sales numbers? Well, 2006 total homes sales appear to be off by about 20% from last year. But last year was the best on record. I believe this year will be the 3rd or 4th best on record, so plenty of homes are selling. But upon closer inspection, both years proved what most Realtors know.... that the highest number of sales occur in May & June.... BUT this is a tad misleading because this is when they "Close" and are reported as "sold". With most homes closing in 30 days, the actual sale is a month earlier. So if you're wondering when to sell, April & May are the most active months.

Next on the list are February & March, and then July through October. These 6 months appear to be roughly similar. The worst time to sell is December and January, with February a hit or miss month.

October Sales Data - results just in

San Francisco's market was down 0.9% from this October compared to October 2005. This according to DataQuick News.

But looking back to September's report, San Francisco Median Homes prices are up 3.35% in October over September.

This led me to look even closer, and it's very interesting. In 2005 prices peaked in July & October at $776k and $778k respectively (this is new and resale homes & condos per DataQuick). Then prices dropped, as they always seem to do November through February, and caught back up to the prices of 2005 from March through October of this year. The bottom line is that prices are mostly flat in a long term trend (well, a 10 month trend).

Here's the chart I created from the DataQuick reports:

You can see that earlier this year was well above early last year, whereas more recent months roughly match 2005's performance.


San Francisco - a "superstar city"

Finally an explanation that improves upon my explanation of the San Francisco market:

This Business Week Online article explains that Economists from Wharton & Columbia business schools coined the term "super cities" for cities like San Francisco and Boston that have two factors that most other cities don't have.

1. People all over the world love San Francisco and want to live here. Not true of St. Louis, Houston, and numerous other cities. You know this if you ever travelled abroad and told them you were from San Francisco.

2. San Francisco and Boston both have limited supply - you can't build on 3 sides which are water, and in San Francisco, money gravitates to an even smaller part of the city - basically the northernmost neighborhoods from Pac Heights northward.

This article further states that it isn't only the limited land, but the regulatary zoning measures that limit building height and size. In San Francsico you're only seeing new high-rises in SOMA & South Beach. If you want Golden Gate Bridge views, or proximity to it, there is NOTHING new going up other then tear downs being rebuilt to the same small-ish sizes.

This is murder on first time home buyers which is why there are so many hateful activists and sour bubble proponents. They or their constituents are priced out of the San Francisco market, and it's becoming a town only the wealthy can afford. This could have negative long term effects - like negative population growth since so many people can't afford to live here, but if you can afford to buy here, rest assured.... many more wealthy people are being created every day around the world who would love to live here too. And while my personal political beliefs do NOT like what is happening with the disparity between the Haves and Have Nots, and I think something has to be done, the fact is that the Haves are growing in size and wealth, which will continue to drive prime SF prices for the foreseeable future.


Another Home Value tool - free and online

Cyberhomes.com is a new internet tool from Fidelity National Information Services that estimates home values, very similar to Zillow.com.

The site is in beta, and I've found several problems with it. For example, I entered 1921 Jefferson Street and tons of nearby properties showed up, but none of the condos in the building I was searching for came up. I had to look at the "comparables" to find the condo in the building I wanted. I also did one Value comparison with Zillow. 1500 Bay St #203 is worth $684,000 on Cyberhomes, but only $620,000 on Zillow. Read my previous post for why I'm skeptical of ANY online generated value. For the best home value without speaking to a Realtor, try mine at Evaluate-My-Home.com.

The site was occassionally painfully slow to move around on, but all in all this should be a very useful counter point to Zillow, and another free internet tool that continues to give more and more power and knowledge to consumers.


Sellers can "shop" your offer if you let them

Earlier this year the Realtor Association made it an ethical duty for it's members to "advise potential clients of the possibility that sellers or sellers representatives may not treat the existence, terms, or conditions of offers as confidential unless confidentiality is required by law, regulation, or by any confidentiality agreement between the parties."

They point out that California law doesn't require Sellers to keep terms confidential. They advise concerned Buyers to submit a "confidentiality agreement" which the Seller can choose to accept, reject or ignore.

Why the "new" concern? Interestingly it's been a misperception of most practicing Realtors that offers could not be disclosed to other Buyers in an effort to drive the sales price up. I even watched a "Million Dollar Listing" TV episode in which one of the Realtors stated this, and the screen had a little caption stating that it was illegal to tell other buyers about offers. In fact, it's neither illegal, or unethical. I personally think it often can be the "right" thing to do for both Buyers and Sellers.

A recent example is a Condo that got 4 offers on it, and the 2nd best priced offer was the "best" in my Seller's eyes, except for the price. This particular Buyer had shown enormous interest in the Condo, so we told him how much the higher offer was, and he chose to beat it to get the Condo. You might think this unfair to the original highest offer, but there were a multitude of problems with their offer and we just didn't trust their intentions to follow through on their offer.

So the Seller got an even higher sales price, and the most interested buyer got the property. Whether you think it's a good idea or not to share the details of other offers with other buyers, the bottom line is that it is NOT illegal.

Free Booklet: "General Information for Buyers & Sellers of Real Property

The San Francisco Association of Realtors puts out a San Francisco specific "General Information" document that is currently 45 pages long. You'll note in the Table of Contents that much of it is probably not of interest to you, so there's no need to read all 45 pages. However, it does an excellent job of explaining basic real estate procedures how to "Take Title", "Obtaining Homeowner's Insurance", describes various Taxes, the Escrow process and more.

I can email you a PDF version of this free booklet, so if you're interested, just send an email to me at RobR@kw.com with your request.


Fixers - are they the deal you think they are?

When the market is hot, everything is hot, and oddly enough it's almost more so for "fixers" or homes that need work. Many buyers still want a "deal" and they think they can buy the less attractive home at a discount, and earn "sweat equity" by fixing it up.

In reality most non-contractors under estimate the cost and time of repairs. Plus, the competition for the fixer ends up driving the price up. Even in today's more realistic market, you still have a LOT of interest in fixer uppers, so here are a few tips to make sure the deal you find, really is a deal.

1. Know your exit strategy - are you buying to sell for a profit down the road, or buying because you want to create your ideal home, and profit is not the goal. Don't try to do both, because if profit is your goal, you MUST be frugal in all aspects of the fix and skip the more expensive but "ideal" choices like top of the line appliances. Buy the best value ones. Also, don't over-improve for the neighborhood or the condo complex. You are better off being the least expensive home in the neighborhood rather than the most expensive. Bring the home up to the standard of the neighborhood, and not much more. Comparison shop for all products and services.

2. Set your maximum offer price, and be willing to walk away if other buyers bid it up. If you pay too much for a fixer, then you might as well just buy a newer home and save your time and energy if you won't get a monetary gain for all your effort.

3. Make your offer contingent on inspections, and then bring in contractors for estimates on bigger repairs so you know the "true" cost when buying. If you discover you made a mistake, either cancel the contract subject to your Inspection contingency, or ask for a price reduction in the amount of the repairs you had not expected. You can buy a home with foundation damage, severe mold, or roof problems that scare other buyers away if you know from a contractor how long it will take to repair, and how much, and when added on top of your purchase price it really is a deal.

4. Pre-plan your profit and make it high enough compared to the value of your time and effort. If you're only going to save $20,000 and it's going to take you 6 months of time and frustration, is it really worth it? That's a decision only you can make and will be situational for each buyer and property.

5. Consider the neighborhood - if it's a bad neigbhorhood and isn't likely to improve by the time you sell, you're going to want a bigger discount since better neighborhoods maintain their value and sell easier.


Zillow complaint sent to FTC

As this article says "... it is almost an open joke, the information on this website." Whether this non-profit group's complaint to the FTC about the obvious inaccuracies of the Zillow service goes anywhere or not, it should be easy enough for any consumer (potential home buyer or seller) to easily discover that Zillow is nothing more than a "toy" as one blogger called it, or a "research tool" as Zillow calls it. The bottom line, never trust any home valuation unless it's been done by an expert, who has visited the home, and thoroughly evaluated all possible comparable properties. And for a superior San Francisco home valuation service, check out www.Evaluate-My-Home.com

San Francisco's Luxury market

The luxury market is unique from the rest of the market, but it's sure fun to watch. So if you'd like to spy on the luxury market, here's the blog for you:


Days on Market - not always what it seems

A client of mine let me know how excited he was about a TIC (Tenancy-in-Common) he saw at 1551 Filbert Street. Priced at $729,000 the apartment had apparently been on the market for 34 days. This is about the time that San Francisco listings become "stale" and ripe for negotiation. What's more, the person hosting the Open House claimed that he was the owner, and if the Buyer worked without an agent he'd save on both ends of the commission and would drop the price to $685,000.

My client shyly shared this story with me because he didn't want to upset me, nor miss out on the opportunity. But this is just where the story begins, and the reason why I say over and over again "be careful of listing agents who say you don't need your own agent."

The reality of this listing is that it's been on the market for over 10 months. It's been taken off the MLS (Multiple Listing Service) twice, only to be re-listed soon after. The effect of the re-listing is that it appears to be a NEW listing, and the Days on Market (DOM) starts all over again. The first time it went on was January 26th 2006 priced at $749,000. 5 months later they dropped the price to $729,000, and 5 weeks after that they took it off the market for the first time - this was July 27th, 2006. On July 31st it was re-listed at $729,000 and after 25 days was removed once again. On Sept 11th 2006 it went right back on, priced once again at $729,000. My client visited it for the first time on Sunday October 15th. Per the MLS, they never went into contract, so they either never got an offer in 10 months, or never one they accepted for which the Buyer cancelled. Either way, this is RIPE for negotiation, and my initial reaction in seeing the 10 months of no offers was that it isn't even worth $685,000.

The next step for me - after discovering that with 10 months of marketing, a price change, and 3 listing periods, they STILL can't sell it - is to find out why. The obvious answer is that it must be priced too high, so I'll need to run a "CMA" (Comparable Market Analysis) to find the sales prices of similar properties that have sold recently. To do that I need to know the property's features. One is it's size, and here's another VERY UNUSUAL item in the listing that ALL buyers would miss. The Square Feet is listed as 980, but the "source" is "measured by Agent". That's the first time I noticed that, and since the person hosting the open house also seemed to indicate that he was the agent as well as the owner, it all started to sound a little too fishy... enough so that I'd suggest not trusting his measuring ability.

But here is a rough CMA - a report of all TIC sales in the past 6 months with 1 to 2 bedrooms, and 1 bathroom, within a 1/2 mile radius of 1551 Filbert (reports expire after 30 days - email if you'd like it recreated and emailed back). The "average" sales price is $645,850 which is often the most likely fair market value for the subject home. So his offer of $685,000 doesn't sound like much of an offer. On the other hand, two other apartments in the same building sold for $769,000 and $708,500. Frankly, I think both over-paid since the $769,000 took 94 days to sell, and the $708,5000 104 days to sell. I'd never advise my buyers to pay "asking" price on anything that's been on the market more than 60 days, but that's negotiation for you. But since the more recent sale was $708,500, this is the MOST the remaining apartment is worth in my mind. But since it's been another 4 months without a sale, I'd definitely go lower than that.

Secondly, in 6 months only 10 other comparable TIC's have sold, or an average of less than 2 per month. Yet 11 are on the market right now, which is 6 months worth of inventory. So it could be 6 more months before 1551 Filbert #4 sells (if it ever sells the way it's going). Thirdly, while the average of those that sold is $645k, the majority sold for $675,000 or less with 4 in the mid to low $500's. Additionally, while this apartment has parking, it is a shared "tandem" spot, which certainly reduced convenience and reduces the property's value.

Finally, I ran a CMA for Condos which are known to be worth more than TIC's for several reasons (see my previous post), usually running 10% to 30% more than TIC's. So this Condo CMA shows the average sales price of similar size and location Condos is $728,000. In other words, at the current 10 month long listing price they have it priced like it was a Condo, and not a less valuable TIC. Knock off 10% (the least I'd suggest) and you've got a $655,000 fair market value which roughly matches the TIC CMA.

My client is debating making an offer because, after hearing all of the above details, he is turned off to the property. But if he still likes the place, I'm encouraging him to make an offer matching the "average" of $645,850, or maybe even less and seeing how the other side responds.

For similar due dilligence on any property you are interested in, feel free to contact me.


Contingencies: What they are, how to use them

When making an offer to purchase a home, you must decide whether or not to make the offer "contingent". A contingency gives you the right to cancel the contract if you can't satisfy the request made in the Contingency. Please note, this column in NOT intended to be legal advice, and I am not an attorney. For important contractural decisions please consult your own attorney.

The two most common examples are:

1. Loan contingency - you specify the loan you expect to get, and if you discover that you can't get the terms you need or want, you have the right to cancel the contract. You can state the interest rate you want, and other loan terms, in your contract, and if rates shoot up, or lenders later determine you're not credit worthy, you have the right to cancel since you can't get the specified loan.

2. Inspection Contingency - in San Francisco this can either be a "Pest Inspection" contingency, and/or a "Property Inspection" contingency which is commonly referred to as a "Contractor's Inspection". In either case, you hire a professonal to inspect the house, and if you don't "approve of the report" you have the right to cancel the contract. Some agents and Buyers mistakenly think you must provide the reason for your non-approval. You don't - you just say "Buyer does not approve the Property Inspection report and hereby cancels the contract."

Other contingencies may include reviewing and approving of Condo documents for Condo buildings, Sale of the Buyer's property before Closing on the new home, the property appraising at or above the offer price, and virtually anything else you want to "inspect" or "approval" on.

Use of Contingencies make your offer "weaker" in the Seller's eyes because you are giving yourself legal means of cancelling the contract. Often "weaker" offers are only accepted when the offer price is a lot higher than other offers - and you don't want to over-pay do you?!?!?!

It can be a terrible experience for a Seller to believe their house is sold, only to have the contract cancelled, requiring them to go through the entire marketing period all over again. Of course NOT using ANY contingencies means you have virtually no legal grounds for getting out of the contract if you discover something very bad about the house after getting your offer accepted. So the trick is to find a middle ground, as such:

Limit the number of contingencies, and shorten the time period for which you will remove the contingency. Making your contract Contingent on BOTH a "Pest" AND a "Contractor's" inspection, AND giving yourself 21 days in a 30 day escrow period can be VERY disconcerting to a Seller. They won't have peace of mind for 3 weeks.

My suggestion is to choose ONLY the "Contractor's" inspection, while setting up the appointment to inspect immediately so you only need to give yourself 3 to 7 days to approve. One contingency within 1 week feels GREAT to the Seller.

While this will appear to be VERY strong to the Seller, you can do many things with this one contingency. You can cancel the contract if you find something you don't like. Or, you can waive the contingency "subject to" almost anything you want thus re-writing the contract. The Seller can always say "no", but since this is a "new" offer AFTER the home is already under contract, you are more likely to get this "weaker" offer accepted now vs. the initial Offer phase.

An example might be: waive property inspection contingency "subject to reduction in offer price by $50,000". Or "subject to roof inspection, foundation inspection, mold inspection to be performed and removed in 21 days". Ouch, that hurts the Seller, but it's more likely to be agreed to now that you're in contract.

Now I personally don't recommend any of the above unless you really do find problems with the house that you were unaware of, but I do favor limiting the contingencies while essentially keeping yourself entirely protected.

Please note, I am not a lawyer, and this is not legal advice. Any contractual decision you have should be made with the advice of an attorney.


Be wary of "Discount" Brokers

Reading real estate industry news you'd think there was a conspiracy by "full service" agents against "discount" agents and brokerages. What the press fails to realize is there are very real reasons why Buyers and Sellers alike should avoid these companies like the plaque. (see my previous post for how you can get your own discount with a full-service brokerage or agent).

I don't want to name names, but let's look at some of the models:

1. The agent gets paid a salary, not the commission. The company keeps a majority of the money, and gets away with this because they give their agents an office, health insurance, maybe a car, leads, marketing material and so on. It's like working at any regular 9 to 5 job, except they are Realtors. This company is a "discount" company because they "give back" or "rebate" 20% to 30% of the commission to the Buyer or Seller.

Great for you - right? Not so fast. Who does this company attract as agents? Successful established agents have their own offices, stationary, car, and plenty of clients. So they don't come to this company. Only brand new agents, or agents that have failed on their own come here. So if you Buy or Sell through them, you work with a rookie or "unsuccessful" agent. Now let's take a step further. Good Rookies eventually become experienced and successful, but at this point they realize they could double or triple their income if the company wasn't giving 25% away, and taking most of the remaining 75% for themselves. So they leave, thus leaving behind only the worst and newest agents.

2. Low flat fee, or very low commission - say 1% per side instead of 2.5% to 3%. Again, who benefits here? If the company can attract a large volume of clients, the company benefits, but the agents work three times as hard to match the results of full-service agents. So the good ones, you guessed it, they leave.

3. A new version tells Buyers to find the home on their own, and then call in to a "virtual" agent who will advise them and help them write up the contract. This company kicks back a majority of the commission to the Buyer. Again, the "virtual" agents are not well paid, and probably have no idea just how difficult it is to navigate the San Francisco real estate market. I'm guessing Buyers using these companies house hunt for months or years on end with unsuccessful bid, after unsuccessful bid, until finally they severly over pay, and their "savings" ends up being a financial loss.

To sum up, let me share one story:
I got a Listing after the Seller fired his "discount" firm because after 45 days there were hardly any private showings, and only about 10 people at the Open Houses. PLUS, and this is bizarre, the Open House agent showed up with his wife who was not in the business, and who just sat in the Condo all day. Meanwhile the agent put out his Bible in addition to property information. Now I don't care if this was in the Bible Belt of our country, homes are de-personalized so that ALL Buyers can see themselves living there including those with other religious beliefs. Either way, it was strange because the agent was strange, and probably could not get a desk in a full-service brokerage if he tried.

When I got the listing, my full-service marketing machine quadrupled the Open House and private showing traffic, and we sold it in 2 weeks for 8% over the asking price.

The last reason why we full-service agents don't like discount agents is that there are a myriad of ways of killing a transaction, or inviting law suits. If you WANT that home, and the discount agent messes it up, what then? You can't get it back when someone else buys it. And since California is the most litigious State in the country, the last thing I want is an unprofessional rookie putting me and my client's in harms way.

I didn't even touch on negotiation skills, the ability to accurately research a home's true market value, and so many other things earned through experience, dedication and skill that we (well, some of us :) bring to the table. The bottom line, there are real reason why I and you should avoid or be VERY wary of these companies.


San Francisco up, Bay Area down

According to Dataquick the Bay Area's median sales price dropped 0.8% in Sept '06 over Sept '05. Read the general press and you miss the fact that they also break out individual areas like San Francisco so you can see how the city alone did. The news verifies what I've been seeing.... the Median sales price is up 3.5% in the city during the same time. The next closest increases were Santa Clara at 1.7% and Marin at 1.4%. Contra Costa County wasn't so lucky dropping 5.5%. So San Francisco did twice as well as the next best areas in terms of price appreciation.

The bottom line is that San Francisco is an unusual area that is world renowned, and essentially land locked. Not all neighborhoods are up in San Francisco, but when you can get views of the Golden Gate Bridge, play volley ball next to the Bay, and get great dining, culture and night life, real estate stays in demand no matter what's happening in the suburban neighborhoods outside of the city, or the rest of the country.

So if you're looking to buy or sell, it is a pretty solid market for both.


Value of a "Pre-Approval"

Unless you are paying all cash for your home, you MUST have a Pre-Approval letter from a Lender. Pre-Approval means you went through an entire application process. Pre-Qualification means you spoke with a lender, and based on what you told them (rather than showed them) about your income and assets, they estimated what you could afford.

The reason you must go the extra step is that Seller's and their Listing Agents will not take your offer seriously if they are not 100% sure that you can follow through on your offer. The Pre-approval letter lets them know that you presented tax records, bank statements, and other financial information, and a Lender committed to providing you with a loan (subject to the property and appraisal).

A Seller may actually accept a lower offer and skip over yours if they are not confident you can "perform". See my previous post "Getting Low Offers Accepted" for why this works.

Send me an email to Rob@SFisHOME.com and I'll send you the contact information for two lenders I work with on a regular basis who will do the Pre-Approval for free. Just imagine finding the perfect home, and NOT being able to buy it when and how you wanted. A pre-approval, and some smart negotiating will make sure you do get it.


Aerial Property Photos - see before you buy

Google Earth is all the rage, but Microsoft is trying to one up them with superior photos taken from helicopter's rather than Google Earth's satellite images. The Microsoft service is called Live Local although the link is local.live.com

You can either see an actual photo of the home or condo building you're interested in, or have fun and just type in a landmark like "golden gate bridge, san francisco, ca". You can switch between the crystal clear helicopter photos which are called "Bird's eye" view by clicking on "Aerial" which will take you to satellite images similar to Google Earth. Or while still in "Bird's eye" you can click on anyone of the 8 thumbnail photos to move in any of those 8 directions. Or click on the N, S, W, or E buttons to see different angles of the same property.

Finally, Live Local also lets you get driving directions, and switch to a regular map interface.

Unlike Google Earth you do not need to download anything, but you miss the fun of feeling like you are traveling from one destination to another. For all of the options, ease of use, and crystal clear photos, I'm a bigger fan of live.local.com. Use it in conjunction with my MLS Map search site SF-MLS-Search.com and you never have to leave your home to search for a new one. Add PropertyShark.com and Zillow.com and you'll find out just about everything else you want about any home. As a Realtor with MLS access I'll still have much more information to share with you, but you'll be able to do 80+% of the homework (or snooping around) with these free and fun internet tools.


Too many homes to remember? Try this...

Common real estate advice is NOT to see too many homes in one day. Afterall, they all blend together after the 5th or 6th one, so seeing any more than that should be out of the question - right? You mix up one home's kitchem with another's deck, with another's garage, and so on. The entire day is practically a waste, and you are no closer to finding a great home. But with trial and error I discovered a simple tip that, despite it's simplicity, has worked enormously well for my Buyers....

After seeing the 2nd home on your tour (which are often Sunday Open Homes) rank your favorite, and discuss with whoever you are with why it's your favorite. After the 3rd or 4th home, rank your top 1 and 2 homes, and completely rule out those not in your top 2. After your 5th and 6th homes, rank the top 3... BUT only if a 3rd home warrants consideration with the top 2. Don't bother to remember homes that you really aren't interested in.

If you rank, and re-rank the top homes EACH TIME you see a new home, and discuss what you liked, you'll actively recall only your top homes over and over again, and never bother to recall the ones you don't like. Not only do you recall your favorite homes, but you'll very quickly rule in, or rule out the home you just saw very quickly. And my, how exciting to see a new home that trumps your previous favorite. And while not exciting, you can just run in and out of homes you don't care for.

My Buyers have ended up wanting to go back and revisit their favorite home before calling it a day to re-compare it. If they decide to make an offer they feel confident because they had truly compared it in every imaginable way to all of the other homes they saw.

Of course there are times when 1 or 2 stood out a bit, but hardly anything they really wanted to write an offer on. Knowing the market myself, I could advise them that we had a bad day and there really are better homes so it would just be a matter of time if we kept coming out to see the newly listed homes. Or other times I could advise that we did see an excellent selection of homes, and that clearly what they were looking for would probably never be found in either that area, or that price range, no matter how long we looked, so we needed to go back to the drawing board.

The bottom line is that the ranking (and don't forget the re-ranking) gets you to your goal faster, and helps you get out of the aweful experience of hunting for something that doesn't exist when you're not on the mark. Do it yourself, or do it with me or one of my "Showing Agents" and I guarantee a better house hunting experience.


Secrets to getting low Purchase Offers accepted

I've been in many competitive bid situations and have learned that it is NOT always the highest price offer that gets accepted. I've saved client's money by getting lower offers accepted, when together we've navigated the offer and negotiation process better than our rivals (other buyers and their agents). In this post I'll share some of my "secrets".

Secret #1 is sales 101. It's figuring out what else is important to the Seller, and to the Seller's Agent, besides price. If price is all they care about, then the highest price would get accepted every time, and surprisingly, that is OFTEN not the case. So what could be more important than price? Here are a few:

1. Time - maybe they need extra time, or are in a hurry. Standard Close of Escrow in San Francisco is 30 days, but any number of VERY important reasons to the Seller might require a 2 week, or a 2 to 3 month Close. Hint - ask! Ask why they are selling, when they need to move, and when they need to Close Escrow.

2. Their move - related to time is whether or not it would be best for them if they could stay in the home after Close of Escrow to coordinate their move. I've won in many competitive bid situations simply by offering to allow the Seller to stay for 30 days rent free. "Oh no" you say, "that means I'll be paying two mortgages, or rent and a mortgage." Yes you will, so reduce your purchase price the equivalent amount - it's a monetary wash, and surprisingly the "free" rent feels better to Seller's then the slightly lower offer price even though it's the same monetary result.

3. Trust - this is the ultimate secret in ANY sales situation. You must develop trust, credibility and rapport, especially when you don't know each other. "Why" you might be asking. Well, what if you have the highest offer, but the Sellers and their agent do not believe you'll follow through on the Offer. If you cancel the contract later on, their home goes back on the market, and now it has a stigma of "something must be wrong with it". This will cost the Seller both time AND money.

Let's stop here because this is the one secret that has benefited my clients the most, and where other buyers and their agents are probably making their biggest mistakes.

The Ultimate Secret:
I tell my clients to introduce themselves to the Open House agent (who is hopefully the Listing Agent) whenever they find a home they really like. They need to impress upon him or her that they really love the home, and get themselves remembered. If I'm not with them, they MUST call me immediately so that I can do the same thing. With thousands of Real Estate Agents in town it's impossible to know all of them, so if it's an agent I don't know, I've got to introduce myself early on too.

The mistake other agent's make is in telling their Buyers to refraim from looking too interested, or from giving out their names or contact information. They think either they'll "give away their interest" thereby costing them money (the opposite is true, and I'll explain why and how) or that an unscrupulous Listing Agent will try to "steal" their Buyer. Whatever the reason, it's a bad mistake. I'd rather have my clients spend an hour there chatting away, expressing enormous interest in the home, introducing their child or dog, or finding something in common with the listing agent. This gets my Buyers "known" and is the first part of developing Trust. I then do the same thing by visiting the home at the Broker's Tour, calling the Listing Agent with "smart quetions", establising interest and trust. My clients and I will then set up a private showing appointment to go back again, and continue expressing our interest up to the time we write the offer.

What happens is that the Listing Agent begins to root for us. He/she tells the Seller all about our interest and the Seller starts hoping and rooting that we'll write an offer. We'll write a "strong" offer (not necessarily strong in price, but in other things that are important to the Seller - because I asked what else was important), and I'll present the offer in person rather than fax it, and so on. There are many little things I do to develop trust and credibility, but you get the gist. And in so many cases, our competition will be un-known because the Listing Agent doesn't remember them ever seeing the home, and the offer will be sent via fax with terms that simply don't work for the Sellers. In some cases the price will be $10,000 or $20,000 or even higher, but everything else about the offer feels bad.

So how on earth can the Seller accept this higher offer from an "unknown"? It's tough, if not impossible. Yes they might counter us higher, but we've earned the right to say "no" and get away with it because we've done everything else right. The other buyers haven't, so they can ONLY win on price. We can win on so many other levels.... so there it is... the secret to getting lower offers accepted... it is not only possible, I've done it a bunch of times.


Negotiating Commissions: What Agents won't tell you

Everything is negotiable. When an Agent tells you "I can't" or "I won't" he/she is either telling you their personal policy, or their company's policy. There is no State, Local or Federal law that mandates commissions. It is ALL negotiable. If you can dream it up, it can be done (one such story is below). Whether or not it's the smart thing to do for you is more than one blog post can handle, but I'll try to share what most Agents either don't know, or aren't willing to tell you.

Commissions 101:
Seller's generally negotiate commissions with their agent, the "Listing" Agent. San Francisco's most common commission is 5%. Most of the time 50% of this commission is offered to "Buyer's Agents", and most times a Buyer's Agent is involved. So most agents earn 2.5% of the sales price in every transaction they're involved in. 2.5% of a $1 million property is $25,000, but then most Realty firms take 30% to 50% of that commission. So the Agent's "gross" commission is $12,500 to $17,500, and from this we pay for nearly everything a typical office worker takes for granted; health insurance, office supplies, office space, marketing, taxes, etc, etc. Taxes alone mean we probably net no more than $9,000 to $12,000 on a $1 million sale. But since you're probably not crying for us agents, let's move beyond Commissions 101.

Dual Agency:
This is when an agent represents both the Seller and Buyer. This most often happens when the Buyer is searching for homes without their own agent (not wise, but many Buyers start out this way before they consider themselves "serious"). The Listing Agent offers to help them write up an offer, or have a colleague write up the offer (often for a very small cut). Thus the Listing Agent earns close to or the full 5%. In this instance the Buyer can try to reduce the purchase price by 1% or 2%. Sounds easy, but it can be very difficult since most unrepresented Buyers don't know what's possible, or how to do it. Again, this is a long subject on negotiating in general, and is often property and situation specific. One strong piece of advice - ask a LOT of questions. You want to know the Seller's motivation for selling, how long it's been on the market, what comparable properties have sold for, and more. You might over-pay for a "stale" property by $50,000 and save yourself $20,000 in commissions which is still a $30,000 loss to you by trusting the Listing Agent to represent you. Be very careful with agents who say you don't need your own agent.

Don't negotiate with the person with all the power and leverage. As a Buyer, a Listing agent in a Seller's market has no reason to give you a commission break. There are 10 buyers behind you trying to buy the house for full price with full commission. Additionally, in a Seller's market, Buyers are a dime a dozen. A Buyer's Agent has too many Buyers and can't get them into homes given all of the competition to "win" the bid. So if you ask for a piece of their commission, they'll just move on to another Buyer. And without a Buyer's Agent in a Seller's market, you stand little chance of "winning" a bid against buyers with knowledgable representation unless you severly over pay.

However, as a Seller in a Seller's market, you are in total control. You can negotiate an extremely low commission because nearly any decent agent will sell your home quickly for top dollar (but be wary of branded "discount" brokers - that's another blog for another day), and the Buyer's Agents won't have much choice but to accept what you give them since it's so hard to find homes for their clients. Similarly, in a cold Buyer's market, the Buyer is in total control. I had one Buyer who made an offer that excluded the commission from his offer, and made his own Commission offer. In this particular case the Seller had agreed to pay 6% total with 3% to each side (it was a tough property to sell in a slow market, so he paid top dollar in commissions hoping the job would get done - ie Seller had no leverage). The Buyer deducted 6% from his offer, and wrote up a "Commission Offer" paid by the Buyer of 5% split evenly between the two agents. The Seller's net was still the same, and both the Buyer and Seller got tax advantages (although relatively small) while the Buyer effectively paid 1% less than he had to. The reason this worked was that the property had been on the market for 3 months and the Listing Agent really had no choice but to agree since no one else was making offers. I represented the Buyer and just did what he wanted, and what was in his best interest. My Buyer actually saved more than 1% because our offer was very low as well. The Seller very reluctanly sold at this price because my Buyer made it clear he was willing to walk away if his price and terms were not met. Again, this was a very stale, unwanted property.

Today's Market:
In today's more balanced market (albeit still a Seller's market in most of San Francisco, just not over-heated) I personally find it far easier to attract Buyer clients. Therefore, it is fruitless for a Buyer to try to negotiate a commission with me up front. However, if they find a stale listing, the above strategy could work. In the above case I was paid a fair commission, and we just needed the other side to agree. Since the market still favors Sellers (Sellers with realistic expectations that is) they are the ones with the most leverage to negotiate. I personally have some unique "Win-Win" commission programs for Sellers that I would not offer in a Buyer's market, but am offering now.

An entire book could be written on this subject, so I suggest you interview several agents, and ask a lot of questions until you find the agent you like, with the "deal" you want. Hopefully I'll be one of those agents!


Greenspan: "the worse may be over"

Alan Greenspan apparently agrees with me (see my previous posts "Van Eck", "Bubble", "Market Update")

The Washington Post, among others, reported that former Federal Reserve Chairman Alan Greenspan's said that prices may be lower in 2006 vs. 2005, but that "the worst of this may well be over."

The bottom line is you should listen to market stats from people with access to the best and NEWEST information. The worst sources are general news sources like the local paper, national weekly magazines, and TV news. Your mother-in-law who attends Bingo for her information isn't the person to listen to either, nor are your well intentioned friends. The newspapers get old information (new to them is 3 months old) and report on it as if it's happening now. NO IT'S NOT, it is OLD NEWS.

As a Realtor with access to the latest Sales data in the Association's MLS system, I can tell you how quickly (or not) homes are selling, how much they are selling for compared to any time period you are interested in, etc. Plus, as an active Listing and Selling Agent of homes in San Francisco, I can report on foot traffic at Open Houses, and how many Buyers and Sellers are contacting me. From January to March of 2006 it was bad, really bad in some areas. To me, that was the Bubble. Certain areas in San Francisco got hammered dropping at least 20%. More popular areas were only down slightly or flat, but certainly not active. However, activity seemed to pick up in the ensuing months, and immediately after Labor Day my phone started ringing off the hook by Buyers & Sellers alike. Throughout the city other Realtors are reporting similar activity. It seems to be a pretty darn hot market right now. Watch out, we could take off again.


How to Buy below-market in San Francisco

With the over-crazed Seller's market gone, but still more of a Seller's market than a Buyer's market, how do you find bargains, or buy below-market in San Francisco?

1. Ask your agent for properties that have been on the market for more than 60 days (even more than 30 or 45 days might be enough). "DOM" stands for Days on Market, and after about 21 days on the market the listing is "stale" meaning it's nearly forgotten by Buyers and Agents alike. The #1 reason for a stale listing is a price that is too high. #2 is a home that shows poorly - ie bad smells, extremely cluttered with older, mis matched furniture, etc.

2. Look in neighborhoods that are slower than others. Your agent can run reports to show you the average DOM by area, zip code or neighborhood. The higher the average, and slower the market, and therefore the more desparate the Sellers should be. Secondly, ask for a report that shows the past 6 months of activity. You want the area where there are many more For-Sale "active" homes than there are homes sold per month. So if only 18 homes sold in the past 6 months, but 12 are For Sale now, you have an average of 3 homes selling per month, and therefore 4 months of supply before the For-Sale homes sell. The longer the supply, the more desparate the Sellers will be.

3. Be prepared to negotiate and walk away when you don't get your price. This is VERY unusual in San Francisco the last 5+ years. So many Buyer's Agents either don't know how to negotiate, or don't realize they can. They are used to Sellers and Listing Agents pushing them around, so they are only too happy to get a home into contract at any price, vs. realizing that they are often the ones in control now, and can push back on behalf of their Buyer clients.

4. Not all Sellers are realistic, so keep track of homes you offer on and get turned down. If they are still listed for sale 30 days later, there is no harm in trying again. The Seller may have finally seen the light.

There are still many HOT neighborhoods in San Francisco where bargains are nearly impossible, but there are many other neighborhoods that are quite slow right now, and the saavy Buyer can find bargain homes.


Free Credit Report - and why you NEED it

Have you seen the commercial with guy asking "I'm thinking of a number between 300 and 800, do you know what it is?" For the life of me I can't recall what he's selling, but he's talking about Credit Scores. Fortunately you don't need him, or any other company trying to sell you something to get your scores. BUT, if you're going to buy a home, the higher your credit score, the more you can save in mortgage costs, so checking your credit is a MUST. Do NOT under estimate these savings. And do not delay if you are thinking of Buying a home within the next 12 months because it takes time to clean up your credit reports.

Yes, I said reportS. There are three, but don't worry about that, just visit www.AnnualCreditReport.com. By law, you get one free Credit Report per year for any reason. This one site will lead you to the three credit reporting agencies, Transunion, Equifax and Experian. To get your report is free, to get your score from each agency costs money. If you want to see your score, I highly recommend taking advantage of their initial offer when you first get to the site. You'll get a score for about $5 or $6, but if you wait to get your score, minutes later the cheapest you can get it is often $15. But the Reports are what I want you focused on. Or you can go to MyFico.com
and get a free 30-day trial, but you must remember to cancel the membership. MyFico's home page also shows you what interest rates you can get by Score range. You'll see just how much it's worth to you.

Once you have all three, be sure to save them or print them out, and then pour through them looking for "bad" or mis-information. I found $10,000 in unpaid medical bills on one (only one) of the three bureau's reports, AND the bills were in someone elses name completely. Yet that name was on my report dragging down my score as if I actually had two names. What's more is that I actually was called about 10 different names on this same report. These were easy to fix, I called the 800# and the customer service guy had it all removed in minutes because it was so obviously not me or mine.

Aside from obvious mistakes, you should be looking for the following items:

1. credit card balances that are too high. High credit limits are great, high balances are not. The ideal is to have balances that are 15.5% or lower vs. your limits. One way to improve your score is to pay down your balances, but another EQUALLY effective way is to call each of your credit card companies and ask for a limit increase. When you call, do NOT allow them to check your credit. If they insist, hang up and try again, OR ask for a supervisor, and the key question is "how much are you authorized to raise my limit to right now without damaging my credit score with an unecessary look?"

2. Too many "bad" cards. Close you department stores cards now. And stick with only the "best" names in banking and credit. AmEx is #1, then names like WellsFargo, Chase, CitiBank, Bank of America - are all good. ANYONE who does a LOT of TV advertising is BAD, BAD, BAD. You know who I mean... they advertise that they are good, but they are terrible for your credit. If you don't know who I mean, just stick with the advice - if they advertise on TV, stay away. When you do close a card, make sure the Credit Report says "Closed at Consumer Request". Do not let it say they closed it for you - that's bad.

3. "Inquiries" of your credit. If you go to a Dept store and agree to a credit card, they will check your credit. This is an inquiry, and drags your score down. If you did not authorize the inquiry, write a letter (yes, written is better, and certified mail is best, and the nastier, more threatening you are, is best-er :) You'll see on each Credit Report a long list of "soft" inquiries that the report lets you know does NOT effect your score. They don't, so don't worry about them. But if you got an inquiry, and didn't get the card, get rid of it. If they inquired, and you did get the card, there is proof you allowed it, so don't fight it.

4. Any late payments are bad. Fight these if you can... and that leads to advice on fighting anything on your report....


1. Put it in writing, send it certified mail, threaten the heck out of the Bureau. The squeaky wheel gets the oil, everyone else gets put into a big pile that barely gets touched

2. If they don't remove something, or they put it back on, then write a new letter asking for a "reinvestigation" and again, be nasty, and DEMAND that you be given the name, phone number and email address of the Bureau's representitive that did the reinvestigation, as well as the names and numbers of the people they contacted for the investigation. If this doesn't work the first time, the 2nd and 3rd reinvestiation certainly will get them to just take the problem item off.

3. Do not hire a 3rd party company to do the above for you. They charge too much, and generally have a non-skilled person just doing what I'm suggesting. But if you want to go the extra mile, find a lawyer who fights credit bureau's, and just CC him/her on every letter. Also threaten to report the Bureau to the FTC (Federal Trade Commission).

4. Start this 3+ months before you need it. If you pay your credit card balances down, they credit bureau's don't report that for 30 to 90 days. But even if you're buying in the next 30 days, you are better off doing it than not, so get started now.

There are other advanced suggestions, but this will take care of 95% of your problems, and dramatically raise your credit scores. And whatever you do, when you are in the process of buying a home, do NOT make any other big purchases like a car. If you do something to drag down your credit at the last second, you may not get a loan at all - or at least not one that is any where as good as what you were expecting.

Call or email me if you'd like to ask a question about your credit.

Cost of a Buyer's Agent

Buyer's Agents are "free". Free means you don't have to pay them, but of course they do get paid to help you. Listing Agents represent Seller's and agree to the commission. The vast majority of San Francisco homes are sold with a Buyer Agent representative, so Listing Agents know to advertise a certain commission to Buyer's Agents to encourage them to bring their Buyers. Some naysayers still see this as a conflict of interest with Buyer's Agents trying to push Buyers to buy. Certainly, there are those kinds of agents, but most Buyers of any product can usually see the sleazy, untrustworthy, "sales" guy/girl a mile away. Plus, you should sign a "Buyer-Broker" agreement which spells out your Agent's duty to you. If you don't sign the agreement, your supposed representative is actually legally representing the Seller. This can be a problem.

But the real problem is with the Listing Agent who is DEFINITELY representing the Seller's interest over yours. If you run into a Listing Agent who says "don't worry, you can just write the contract with me", you ought to be smelling something fishy. He/she is just trying to make both ends of the commission, and/or will likely skew all data, information, and reports in favor of a higher sales price, and other things that favor the Seller. I've seen properties that have sat on the market for 3 months sell for the "asking" price intead of below it when a Buyer came along who was represented by the Listing Agent and not their own representative. A good Buyer's Agent knows a "stale" listing is ripe for under-bidding.

A good Buyer's Agent can do so much more for Buyers, but at the very least, since the cost is "free", and Listing Agents care about you second, if at all, you ought to find a good agent as early in your home search as possible.


Most & Least expensive Listings in SF

I usually get buyers looking for homes or condos well below the lowest possible prices in San Francisco, but thought it would be interesting to share the most expensive homes for sale, as well as the least expensive. Check out the following:

2845 Broadway. Remember Michael Douglas in "The Game" calling the cops and saying he lives in the "biggest house on Broadway. Well, I guess he was talking about this $65 million home. Interestingly enough it sold for $32 million in November 2002. The above link will only be active for 30 days, so if you're reading this late, drop me an email and I'll send you the new link.

Personally, I'd rather live in the most expensive Condo in the city at 990 Green St, #6. Check out those photos.

Now for the cheapest. This Studio apartment with no parking, 83 McAllister St #312 for $260,000. You'd get a golf course mansion in many States, but this puts you a block from busy Market Street in a closet size space.

The cheapest home, 74 Neptune Street, is a $449,000 fixer that is tenant occupied and is "subject to court confirmation".

So if you're looking for a Single Family Home under $500,000, you may have to look outside of San Francisco unless you want a problem property.


PropertyShark.com - great property tool

I believe Buyers & Sellers ought to have more information, and more control, and the internet is doing just that for them. In my continual search for best of breed internet services, I'm adding PropertyShark.com. It allows you to find property tax records, including past sales, for almost any property in San Francisco. I have private access to sites like this one, and do all of the homework for my clients, but if my clients are anything like me they'll want to see the actual data for themselves. PropertyShark.com provides a wealth of information, so when you find a property you like on either of my MLS sites, SF-MLS-Search.com or CleanOffer.com you can then go to PropertyShark.com and find out almost everything about it that I've got access to.... still not everything, but an big improvement never the less.


Housing boom going to continue?

Finally I've found articles that actually take the opposite tack as most others... read this one from a Van Eck-Tillman Advisors who supposedly has predicted all major market moves for 32 years.

After reading the above, we may actually be in a lull, with a new housing boom coming as soon as Buyers realize the newspapers are wrong. So check out my internet links for home searches in San Francisco, and if you're interested in investment properties outside of city, I've found some pretty good investments, so drop me an email if you're interested.


Yes, another "Bubble" comment

Each time I read another article, I can't help but add my two cents. There are so many "Bubble Blogs" out there with 100% certainty that we're about to have a major crash just like the dot-com crash or the early 1990s when home prices took a dive. Unfortunatly for them (fortunately for us homeowners) the comparisons are way off. One big one is that job losses and unemployment caused so much of the duress in the 1990's when Seller's had to sell, and there were few buyers. Now, job reports are all positive, and Seller's are not under duress. Another is that there was an 18 month supply of homes in the early 90's, now it's about 6 months which is dividing line between a Buyer's market and a Seller's market. We've got a LONG way to go to 18 months supply.

The reason bubble pundits are so positive is that in 2007 about 12% of the nation's mortgage debt will switch to adjustable payments. But is this 12% of all homes? Not likely. About 8% of all homes change hands each year. With about 40% of loans being the risky ARMs the bubble pundits are so worried about in the last couple of years, that means about 3.2% of homes are at risk each year for the 2 or 3 year period that ARM's were so prominent. These ARM's also varied in length, generally from 3 to 10 years which spreads it out even further.

But let's say that 3.2% of homes are at risk each year. First off, 8% of homes change hands each year. That leaves nearly 5% not at risk, who don't need to sell. Plus, don't you think ARM holding homeowners know their rates are going to adjust? Don't you think they realized that they needed to Sell or refinance before their ARM's adjusted? If they got a 5 year ARM, maybe they realized that 3 to 5 years is the average length of time many homeowners stay in their homes? How many of these homeowners will really be at risk? My guess is a very few will not act proactively and end up in Foreclosure or in a rush sale. Definitely not enough to "crash" the market. Additionally, banks HATE foreclosure. And with money supply so massive, it's likely that Banks will do what they can to alleviate the situation, including offering great refinance programs. Banks are used to a very brisk mortgage business, and are doing what they can to keep that business high. So the so-called bad debt is likely to be sold, or rolled into a new mortgage. Yes, foreclosures will rise, and yes the media will jump all over thos new numbers. Personally, that just means it will be a GREAT time to invest in real estate to pick up cheap properties in an overall strong real estate market.

Finally, many of those whose ARM's are going to adjust are in the money - they're homes have appreciated quite nicely, so they can refinance and either keep their payments low, or cash out. Or they can sell comfortably without being upside down and having to do a Short Sale. The bottom line.... the bubble pundits need to look a little harder at the facts they use to justify their predictions. 3 trillion in adjustable debt coming due in 2007 sounds horrible at first glance, but upon closer inspection, it's likely to be a minor blip on the housing market radar.


Home Size - the meaning of Square Feet

A common question among home buyers is what is included in "Square Feet" measurements. I'll explain what a home appraiser explained to me, and add my own thoughts that you ought to be aware of when comparing homes.

First, no outdoor space of any kind is included in Square Feet (SqFT) measurements. That includes decks, yards, roof decks, etc. Of course each of these add greatly to value. Imagine a deck right off your kitchen allowing you to BBQ or just relax right outside. Two condos with 1,200 SqFt would justifiably feel much different in size, so when comparing Price Per SqFt be careful to take this into consideration.

Second, I was told appraisers measure from the outside of the walls in, and include ALL interior space. This means closets are included, and it of course means an extra wide hallway that can only be used as a hallway, and foyer's or other types of "wasted" space are included. This is VERY important too. The same 1,200 SqFt Condos would have dramatically different living spaces. In many older Victorian or Edwardian Condos you'll find very wide hallways. Whereas in new Condos, or even in other Victorians, you'll find minimal hallway space. I've seen 1,600 SqFt Condos that felt smaller than well laid out 1,200 SqFt Condos.

Lastly, it is not unusual to see significant differences in SqFt measurements. One appraiser might measure from the outside of the wall inward. This adds about 1 foot of space if the walls are 6 inches thick. And then there are just plain old mistakes made in measurements. So as a Real Estate Agent who does VERY thorough "CMA's" (Comparative Market Analysis) to help my Buyers and Sellers understand the value of homes, I DO use price per SqFt to make comparisons. But it is only one of the many things I compare and analyze. I'll try to visit the comparable homes, but when I can't I thoroughly review the photos from the Listing, I read the marketing and "agent-only" remarks, I check the tax records for SqFt size, and I'll call both the Seller's agent and the Buyer's agent in the transaction for the comparable home that sold. After gathering and analyzing all of this information, only then will I be able to include or eliminate some of the ones that seemed comparable based on SqFt size.

The bottom line for you.... as long as the space is livable, and what you want, that should be much more important than a home that claims to be larger, yet doesn't feel it.

Supply-Demand & the "Bubble"

U.S. Population growth is roughly 3 million people per year, yet in one of the most expansive housing booms in history the U.S. added "only" 1.8 million new housing units. With all the bubble fears, builders may slow in new construction, but population growth seems to be rising.

The current average household size is about 2.37 people per household, yet new home growth vs. population growth is equivalent to building one new home for every 1.53 people. While this might seem that we're overbuilding, in fact household size seems to be shrinking rapidly with more single people buying homes, delaying marriage, and limiting their households when they finally do marry and have children. Plus, the retiring Baby Boomers are buying second and even third homes, which is 1 person per household if you consider a retired couple with 2 homes.

Whats more, certain states are growing even faster than the U.S. in population vs. housing unit growth. Arizona's new construction must squeeze in 2.29 persons per household, yet this is a retirement and second home mecca (and you thought Arizona was a bad investment now - NOT!!!). Texas is at 2.17 persons, and Utah at 2 persons per household. California is "only" 1.59 person per new household being built, but that is higher than the national average, and here in San Francisco, the persons per household is likely much lower than the rest of the country, AND we're not building many new units.

As of today, Monday August 28th 2006, interest rates have slipped for 5 consecutive weeks. Rising rates is the #1 culprit cited by Bubble maniacs as the cause of the so called Bubble. But with rates staying steady, and population on a never ending upward spiral with land not increasing, demand should continue to outweigh supply and continue to increase property values for eternity. Personally, I think the bubble has already burst earlier this year. Now home prices are steady, and are likely to start an average increase each year around 3% or so. However, when you read news reports in the coming months that show a turn down in prices, longer time on the market, and fewer homes being sold, keep in mind that what you're reading is older news. The news about the decline I saw from September 2005 through March of 2006 has yet to come out. When it does come out it will scare the heck out of everyone. To me that means that between right now and when that news comes out will be the ideal time to pick up homes for bargain prices just before everyone realizes prices are already on the rise once again.

Sources for this article included:




Hiring a Listing Agent

First - why hire a listing agent to sell your home? Mainly because you are more than likely to get more money, and have to do much less work. "More for less" vs. trying to sell on your own, and having to work very hard without knowing the tricks of the trade that only experience can bring. What those tricks of the trade are is an entire article, or book, unto itself, but rest assured, any mistake can cost you lots of money in selling too low, or taking too long to sell, or setting yourself up for potential law suits by missing important disclosures.

I'll touch on a few of the key tricks of the trade that you ought to ask about when you are comparing and interviewing Listing Agents. Just about every expert says "interview at least three listing agents". I couldn't agree more, even though that means I'll have at least two competitors each time I meet with a potential Seller client.

So what questions should you ask each Listing Agent? Here are some key ones:
1. How will you attract the most amout of buyers to my home?
2. How will you generate and/or negotiate the highest possible price for my home?
3. What do you do differently than other Listing Agents?
4. Do you offer any guarantees?
5. What is my home worth - show me how you got to that number?
6. What commission do you charge - how does that effect my bottom line?

From the above answers you will discover how confident the Agent is, how knowledgable, and you will have much to compare between the three or more agents you interview. One of the "new" tricks of the trade is use of the internet to attract buyers. The internet has taken over for print (magazines and newspapers) in a big way, and effective use of the internet is only practiced by a small percentage of Listing Agents even though research shows this is what Buyers use to find homes. If Buyers use the internet, why isn't your Listing Agent? If you're selling on your own, are you an internet expert? Do you know how buyers find homes and what they're looking for?

What about commission. The biggest mistake Sellers make is in trying to save commission rather than thinking about how a low commission is more than likely to lead to a much lower sales price. So ask what you're likely to Net in a sale, and how the Listing Agent thinks he/she can get more for your home. But commission is negotiable, and you ought to have a thorough discussion about it. Those that say "take it or leave it" ought to be left in the dust. Keep interviewing until you find a great agent who can illustrate how the commission can actually help you sell your home.

Finally, a true testament to whether or not an agent is experienced is in their "CMA" or Comparable Market Analysis which estimates your home's value in the current market. This requires market expertise, and is one of the most critical elements in any sale since the CMA is what you'll base your "Asking Price" on. Price it too high and you may lose money in the end. In San Francisco, pricing it too low is rarely a mistake, but pricing it just right, is a must to guarantee the most buyers coming through, and the most and best offers.

If you'd like to interview me to get all of the above answers, then just drop me an email to robr@kw.com


State of the market - August 2006 update

Someone living out of state just asked, so I'll recap my basic findings given my recent Listings, and my recent Buyers who have bought properties.

1. Desireable properties, in desirable neighborhoods are flat at worst, with some areas up from last year, and some properties still getting multiple offers. Although it's usually 3 to 5 offers, not 10 to 30 offers.

2. Undesirable properties, in undesirable neighborhoods have taken a beating.

3. Areas like South Beach and SOMA where new construction continues to go up, thereby continually increasing supply is a unique area all to itself. It still looks like a stand off to me. Enough buyers are buying to keep prices from falling, but the inventory is growing every month with Seller's choosing to just wait for the right offer without dropping the price. I estimate a 3 to 4 month supply of homes for sale right now, which is very high for San Francisco. Then again, 6 months is what the experts say is the dividing line between a Seller's market and a Buyer's market. But my feeling is we may jump up to a 6 month supply in September since many Seller's wait out the Summer before listing their homes. If that happens, Seller's may blink first, and prices would start coming down.

4. Even if South Beach and SOMA come down in prices, I still don't see that effecting the very pricy north eastern part of the city, or neighborhoods like Noe Valley where there is next to no new supply. Demand is still higher than supply, and well priced homes are selling quickly. Plus there are still a ton of buyers on the sidelines just waiting for these areas to drop so they can get in. So if it were to drop, these buyers would prop it right back up.

Finally, interest rates have remained steady right around the 7% market, and as long as they don't go up further, there is no new pressure on prices.

So is it a good time to buy? Well, that depends. Not if think you'll get the same kind of crazy price appreciation of prior years. But it is if you want to buy and hold for at least a few years. Buy in a less desireable area, and you've got your bargain at 10% to 20% below last year - you can wait for the next crazy market to prop up prices. Buy in a more sought after higher priced area you will still pay a premium, but at least you don't have to fight to buy it against 10 to 30 other offers. Don't expect these areas to drop, so if you want to own a home, now is a good time to buy.

Stay on top of the market at www.SF-MLS-Search.com and email or call me if you're looking for more help.


TIC's (Tenancy in Common) basics

TIC stands of Tenancy in Common which most of the country just sees as one of the many ways a married couple can hold Title to their home. But in San Francisco it's become a way for individuals (or couples) to buy apartments in building's that are not Condos. In most of the rest of the country, converting an apartment building into Condos is a "relatively" easy process. In San Francisco, it is anything but easy. Condo conversion is severely restricted here, so buying via Tenancy in Common has become the only way for individuals to purchase exclusive use of an apartment in a building that looks, acts and feels like a Condo, but isn't a Condo (and may never become one).

To get a fully detailed legal primer on what TIC's are, you should visit either http://www.g3mh.com/articles.htm or http://www.andysirkin.com/HTMLArticle.cfm?Article=1

This post is not intended to be legal advice, and given how often things change, this post could be severly outdated by the time you read it. So this post is simply to alert buyers to what the heck a TIC is when they see it come up time and again in their general searches for apartments to buy.

The #1 reason I hear from Buyers about their interest in TIC's is that they are cheaper than Condos. Unfortunately, they are cheaper for several reasons that many buyers don't want to deal with, or can't. One is that often times the downpayment requirements are for 20% or more, whereas with Condos many buyers can get loans that require 10% or less cash. The other big issue for buyers is that TIC's require you to go on the same loan as the other buyers (or current owners) of apartments in the building. In a condo you get your own loan. In a TIC you get a loan with every other owner/buyer. In a 6 unit building that means you've got 5 other parties who share loan payments with you. There are several banks that have come up with individual loans for TIC buyers recently, but these generally require higher down payments, and have higher interest rates. Over time, these loans may get better and better, but for many these loans aren't all that attractive just yet.

So in general, if you don't have a good downpayment, and you don't care to deal with others for your loan, then TIC's are most likely not for you. On the other hand, TIC's have become so common in San Francisco that they're starting to look and feel like Condos more and more. You will or should have a TIC agreement and usually all the house rules that you get with Condo associations. The TIC agreement spells out what happens if someone defaults on their loan. And in all buildings with 6 or fewer apartments, you have a chance to Condo convert some time in the future.... at least for now. The city's board of supervisors always seems to be coming up with ways to limit or eliminate Condo conversions, so again, visit the above two sites for much more indepth information on TIC's, and for more questions or concerns, consult one of the attorney's that you'll find at both of the above sites. And you should also keep in mind, that while a Condo allows you to get your own loan, you still share common areas and neighbors and have an HOA board making decisions for the building.

So.... TIC's are cheap because they are hard to understand, they often require more cash, you often pay higher interest rates, the city seems to hate them and makes owning them more difficult when they can, and sharing ownership with people you don't know just doesn't work for some people. So if you like TIC's, keep the above in mind when you try to re-sell it down the road. The pool of buyers is likely to be far less than a comparable Condo's pool of buyers. On the other hand, if you want to own an apartment for 5%, 10% and even 20% and 30% below comparable Condos, then TIC's are the way to go. In the sub $400,000 price range TIC's are probably your only option. And in all higher price ranges you'll get a bigger, nicer TIC apartment than a similarly priced Condo apartment.

Remodeling - buy for less, sell for more

Buying a home for less can be compared to buying a car for less. Buy last year's model, and be willing to walk away during negotiations. Last year's model can be just that. In the SOMA/South Beach/Mission Bay where all the new construction is going up, you can buy a condo in a building that was "hot" last year, or 5 years ago. There is so much new construction, that there is a glut of inventory, and older condos aren't as interesting to most buyers. But this year's new construction is next year's old news, so why pay a premium when it will just be old next year?

Most of the rest of the city where there is hardly any new construction, you can look for non-remodeled, older condition homes. The trick is to find something that looks terrible, but is structurely sound. A home that smells is a perfect example. Most buyers just walk out. But most smells can usually be eliminated by getting rid of an old carpet and repainting and cleaning up.

When it comes to remodeling, you must think about whether you are remodeling for yourself, or remodeling to sell at a profit. A recent Seller of mine did a $100,000 remodel that was entirely to her taste, and not necessarily what the majority of Buyers would want. I estimated she got about $20,000 in value out of her remodel, and then she needed to sell 1.5 years later so she barely enjoyed her remodeled home. She probably could have spent $20,000 on her remodel, and gotten $30,000 or $40,000 out of it has she done it in a more generic way.

So go ahead and get hardwood floors, but you can buy good looking ones that cost less, not the highest end, and still get full value out of them. Get your home painted just before you sell, but find the cheapest painter, not the one who says he's worth more, because he really isn't when it comes to selling the home. Don't get the highest end appliances for your kitchen, get ones that look good, but cost less. Don't get custom granite counters, get the ones on sale. Don't change the structure of your home unless it will dramatically improve the value of your home.

Your goal is for it to "show" well, and cost you the least possible. When you buy, look for homes that just need these cosmetic upgrades, and find the cheapest ways of getting the work done. Then spend a couple of thousand dollars on staging, and that will make the home look even better, and sell for more. Again, take the opposite advice when buying... buy unstaged homes, that need paint. They will sell for less even though their value is virtually the same as a staged home that has been newly painted.

Condo vs. Single Family Home?

There is much to consider when deciding whether to buy a Single Family Residence (SFR) or a Condo. Size and space is one, which leads to a cost difference too. In general, Condos are much cheaper than homes, partly because you can't find 1 bedroom SFR's, and few 2 bedroom SFR's whereas these are the most common Condo sizes. But SFR's are more expensive mostly because you get much more space in an SFR even when they're listed as the same size as a Condo. For example, a 2 bedroom, 2 bath, 1500 SqFt Condo is going to be smaller than the same SFR where the SFR usually has a garage or basement area, maybe an attic and a yard, none of which are included in the Square Feet. Plus you get to store extra items in your garage or anywhere you choose.

The same can not be said of every condo where you may not have common area space, you may not have your own storage area. The rules may even say that you can't store anything in your parking space except a car. Not bikes, not anything.

So why buy a Condo? Again, they are usually cheaper. A 2 bedroom condo in District 7 of San Francisco (Marina, Pac Heights, etc) averages about $800,000. A 2 bedroom SFR is rare in this area, and probably starts at $1.2 million. The downsides of condos are that you share walls, may have a neighbor below you, and/or one above you.

If you can find a top floor Condo with as many as 3 un-shared walls you have a lot less noise or nuisance issues to worry about. Condos with "deeded" storage ("deeded" means you own it, you take title to it with your condo) will add to convenience and value and size. A shared yard, or common roof deck is a nice to have, but it not quite as valuable as your own yard or deck in your own house. However, if you can find all of those things in a Condo, while it will sell for more than other condos, it will still be cheaper than an SFR.

With condos you also don't have to take care of any of the common areas, most condos hire vendors to do landscaping, cleaning and repairs. Of course you also have forced payments, called HOA dues (Home Owners Association) to pay for common area expenses, including building insurance, but you'll end up paying similar amounts in your own home.

So size and space, vs. cost are things to consider when deciding whether or not to buy a Condo or an SFR. When using internet search tools to find homes, be sure to pre-select one or the other in your search like you can at www.SF-MLS-Search.com/welcome.php


An Educated Buyer = a Confident Buyer

When I represent Buyers, my first and continuous goal is to educate them on "their" market (the areas and homes they want), on the Buying process, what to look for in homes, the Offering process and more. Many Buyers today want control over the process, so I also offer the most advanced internet tools on the market so they can educate themselves as much as they want. Why is knowledge so important? It might seem like an obvious answer, afterall, everyone knows the "knowledge is power" axiom. But in an expensive real estate market like San Francisco, knowledge is also confidence. The "average" property in San Francisco is $750,000. But if you're looking in some of the most sought after neighborhoods like Pacific Heights, Russian Hill, Noe Valley, etc, $750,000 is practically entry level, so you're looking at $1 million and much higher. "Buyer's remorse" at these price points can be severe. So what knowledge is the most powerful when buying? I'll attempt to list the key things here:

1. Market trends and conditions for "your market" - if you want a Noe Valley 2bed 2bath Condo, then you ought to find out how many sell per month, the average price per Condo, the average size in SqFt, the average price per SqFt, the average Days on Market (DOM) it takes before they sell, and how much they sell for vs. the "asking price".

2. You can take the above a step further and see how these above numbers have changed from year to year, or quarter to quarter. Has the market picked up, or slowed down?

3. How many For-Sale homes matching your criteria are on the market right now, vs. those that are in contract now, and those that have sold in the last couple of months. If there are many more listings than sales, you've got a slow market, but if you only have a couple of For-Sale homes to look at with a bunch in contract, you know you need to act quickly when you find something you like.

4. How much you can afford - hint, speak to a lender before doing any serious house hunting or you'll be wasting your time, or worse might miss out when an opportunity arises.

The above are just some basics that if you have, you'll have an edge over less educated Buyers, AND will give you the confidence to know when something really is or isn't an opportunity. It would be a shame to find out a month after moving in that you over-paid by $50,000 or even $10,000. It's also a shame when you under-bid on a $1 million property by a "mere" $10,000 when you would have gladly spent that to get that particular home.

A good Buyer's Agent will not only do the above research for you, they'll analyze and interpret the data, they'll prepare a new report everytime you find a home you want to make an offer on, and they'll KNOW that only through a very thorough education process will you feel confident in your decision, and great about your new home many months or years after you move in. Good data, and a great Buyer's Agent, are worth their weight in gold.


Internet Property Tools

The dramatic change that the internet has brought is in giving control back to consumers. This is especially true in real estate. Not too long ago you had to contact a Listing Agent to request a "CMA" or home value report. Now you can get them at sites like mine www.Evaluate-My-Home.com or sites like www.Zillow.com (see my May 25th blog for the good and bad of that service.

Worse in the old days was that you could never find complete home information unless you called the Listing Agent. You'd see wonderful photos of homes in magazines or newspapers, but there would be no price, or no property address and other critical pieces of information. Now Realtor Association "MLS" (multiple listing service) sites usually give buyers 95% of the information they want. Some are still pretty bad like the San Francisco site at www.SFARMLS.com which is slow and clunky with a weird seeming "District" search tool. How is a Buyer to know that District 7D is "Cow Hollow"? So while it gives you the information, there are better ways to get to the same data. Many third party companies are creating over-lays to get more user-friendly access to the San Francisco MLS. I pride myself on providing Buyers with "best of class" internet search tools and am one of the few Realtors in San Francisco to offer two of the best sites:

1. www.SF-MLS-Search.com is a way to search the MLS via a Map. You can choose to search by District, or by zip code, or address, but the Map search is by far the most popular

2. www.CleanOffer.com is a "private" site that claims to have "complete" data. But Buyers like it because you can exclude "in escrow" or "active contingent" properties which are those where the Seller accepted an offer but the offer still has some "contingencies". In San Francisco about 90% of these properties end up selling, so it's annoying to find a property that you can't actually buy. CleanOffer allows you to only see "Active" properties. Plus it allows you to save your favorite properties, and save your searches, among other things. On CleanOffer you must register and select an Agent who has pre-subscribed for you. I've done that, so if you don't have an agent, feel free to enter "Rob Regan" as your agent.

All of the above services are free. Bookmark them and come back time and again. And if you see other great internet real estate tools that I don't offer, please tell me about them so I can decide whether they're worthy of me giving you free access.

40 year mortgage & other exotic loans

I just saw a quote from a lender I work with showing the difference between a 30 year and a 40 year fixed rate mortgage. I was a bit surprised that on a $500,000 loan at 7% you only save $219 per month. What that means is you can afford $33,000 more loan by going with the 40 year fixed. If you've got $100,000 in cash for a downpayment, and can purchase either a $600,000 or a $633,000 Condo, that really isn't that much help.

On the other hand, why not get a 40 year fixed? Chances are you won't be in your Condo for all 30 or 40 years. Many people want to pay down their mortgages as quickly as possible so that they can own their home free and clear. This would be a nice thing to have, but then again, even our current 7% mortgage interest rate is extremely low historically. You also get the benefits of "leverage". If your $600,000 condo increases in value by 5% you've generated $30,000 in new wealth. If you only have $100,000 invested in the condo that is a 30% return on your investment. If you knew you could pay 7% interest to generate a 30% return, you'd do it in a second. If you've paid off your condo and own it free and clear, you generate the same $30,000 but it's only a 5% return and you've got a full $600,000 tied up in your home that can't be used in other investments elsewhere.

So I like the 40 year fixed loan. What has changed is that I'm not as much of a fan of the interest only ARM's. Many "experts" think these were always bad loans. But if you got a 10 year fixed ARM and sell in 5 years, you never face the dreaded adjustable years of your mortgage. Last year you could save 2% or more in interest between a ARM and a fixed rate loan. Now the difference is a 0.3% or 0.4%. That is only $126 monthly difference. Of course you also get the added benefit of not having to pay the principle in the interest-only ARMs. That's just over $400 on a $500,000 loan.

So instead of being able to afford a $600,000 property with $100k in downpayment you can now afford a $700,000 condo. This DOES make a difference. After 5 years of paying interest only vs. a fixed rate, its $35,000 in principal, or $98,000 over 10 years. So is it worth being able to afford a bigger, nicer place and trust that your property will appreciate enough to make it worth it? That's a decision only you can make.


Making "low ball" or under asking offers

With a slower market more and more buyers are making low offers. The last few years nearly every property sold well above the Listing price. These days, Buyers are hearing that the market has slowed and often making below-asking offers within a few days of a property being put on the market. Even though virtually none of these offers are being accepted, you see buyers persist for months making offer, after offer wasting everyone's time. Instead, that Buyer (and his or her Buyer's Agent) ought to ask what they can do differently to get a "low-ball", or at least a lower than Asking offer accepted.

I have several suggestions:

1. expect most of these offers never to be accepted. If you find your dream home and really want the property, make a "serious" offer that the Seller will actually consider

2. do your homework on the property's value, and be prepared to defend your offer with the Seller and/or Listing Agent. Most Sellers find low offers insulting, so do what you can to soften the blow. Come prepared with market stats and comparable properties that sold close to your offer. If you don't have a ryhme or reason, they'll likely toss your offer in the circular file and not return your phone calls.

3. you should probably hold off making a low offer until the property has been on the market for at least 3 weeks. At about the 3rd week (at least in the fast moving San Francisco market) Sellers start to get anxious. If they have not received any offers, and your offer comes in $100,000 below their asking price, which might be $150,000 below what they had hoped to get, this is probably the first time during the listing period where they'd take your offer seriously.

4. be professional and be nice - don't fax over a sloppy offer with no prior contact, no evidence that you've ever visited the property, and without some of the essentials that go with offers like a pre-approval letter for any loan you may be getting and a copy of your "earnest money" check. And you or your Agent ought to drop the offer off in-person in a professional looking package. Low offers are usually not taken seriously, so make it a serious looking offer at the very least.

Before writing a "low ball" offer put yourself in the shoes of the Seller and try to figure out when, how and why they might consider your offer. One last piece of advice is to call the Listing Agent and ask about the activity of the listing. Just making this connection with the Listing Agent will help any offer you might make down the road, and the information can't hurt. I'm continuously amazed when Buyers fax over sloppy offers, like throwing a piece of bread on a hook into the ocean, and wondering why they can't catch a fish or a house.