Is San Francisco hot again?

Could pen to paper on the bailout bill be enough to re-ignite the San Francisco real estate market? Well, I think San Francisco Sellers and their listing agents must think so. In the last full week of September in two of the hottest sections of town, District 5 (includes Noe Valley, Cole Valley, the Castro, Glen Park and many other central/south San Francisco neighborhoods) and District 7 (the Marina, Pacific Heights, Cow Hollow and Presidio Heights all in the north of SF) had 43 new listings come on the market (Condos, Single Family Homes and 2-4 unit buildings). But in just the first 3 days of October, 41 new listings have come on the market in those same SF areas. 16 yesterday, and 17 today.

I noticed the flood of new listings for a Buyer who was getting fed up with the lack of anything decent to see. I was excited for her when I was able to email her 3 new matching home listings yesterday. Then today... another 5. These are Single Family Homes in District 5 mostly priced from $1.2 to $2.2 million. That's a pretty amazing influx of new homes when you consider that in 2 days it matched the new homes of the previous 13 days.

Now the naysayers will say that's too much inventory and it will slow things down, but generally there is so little good quality inventory in San Francisco that we need supply to generate more sales, entice more buyers, and get things going again. This particular Buyer is very active in looking and will probably see all 8 of the new homes this weekend. And trust me, there will be a LOT more than 8 buyers at each of these open houses. The top 2 or 3 of these 8 probably have a chance of going into contract this week because all of the other District 5 buyers are probably as frustrated as my buyer... so the best of the bunch may get jumped on by quite a few buyers.

With the bailout bill behind us I'm going to guess that more than a few Buyers are going to feel more comfortable and get back to serious house hunting... and now with a new supply of homes to see... watch out. As with all of my predictions, only time will tell... but San Francisco is almost always a Sellers market in the more affluent neighborhoods, and the pre-bailout confusion definitely put a temporary break on things... apparently from both Buyers and Sellers... and so far the Sellers have lifted off the brakes and hit the gas pedal. Will the Buyers do the same this coming week? What do you think?

To buy a Short Sale or not to buy a Short Sale?

More short sales have popped up in San Francisco's southern neighborhoods including SOMA and South Beach. But should you buy a Short Sale, in San Francisco or anywhere else? The answer - it depends on your time line and your goals.

Short Sales take a very long time to work out. You'll always see the statement "subject to lender approval". With banks overwhelmed by short sales and the banking crisis, it takes time just to get to files. Worse, you have to get the file started, and that often doesn't happen until an offer is received. And it definitely doesn't get started until the Seller complies with all the requested information in the "short sales packet". The problem with that is Sellers aren't exactly anxious to share their bad financial news, and banks always seem to have more to ask them even months down the line.

If there's a 2nd bank, you have to go through all of the above again... but worse, you have to negotiate a settlement with the 2nd lender who will be forced to accept as little as $1,000 to agree to lose a lot of money (in San Francisco often $100k to $200k) so they aren't anxious to agree and will often hold up negotiations for weeks at a time - partly again because they are overwhelmed with files.

So... should you as a San Francisco buyer buy a short sale? If you can wait 3 to 6 months... even 9 months... just to get a response to your offer, then "yes", you're likely to get a great deal because so many others won't wait. But if you need a place to live now, the answer is "no". Not only do you have to wait up to 6 months, the bank may turn your offer down. It may also take so long that the home ends up in foreclosure. Or you may simply get beat out by a higher and better offer.

To help avoid some of the above problems with San Francisco short sales, I recommend not bothering to deal with "new to the market" Short Sales. If the Short Sale home has only been on the market for 60 days or less, wait. Around the 45 day mark you can check in with the Listing agent for an update on the bank's approval process, and how many, if any, offers they have received. If there's an approved price (unlikely since it usually takes 90 days) you know what you have to offer to win it. If there are 3 other offers at that price, you know that if you over-bid that (which is still likely to be under the actual market value) you're most likely to be the winning bidder.

But chances are you'll get an update from the listing agent that they are still waiting on the bank, and that the only offers they got so far are ridiculously low. So low that the bank would rather foreclose than work it out. With that, I recommend calling every one to two weeks (more if the updates are positive, less if there is clearly no progress with the banks).

So - buy a short sale if you don't need to move and have a very long time line... or if it's been on the market around 90 days (and you'll still probably have 60 days before you can get into the home). Don't buy if time is of the essence.

By the way, if you want to buy a Short Sale in San Francisco, use the "Homes via Email" button on the left, use the form to select your basic home criteria - and then write into the "comments" area that you "only want short sale listings". Short sales will be included in a general search, but if you only want short sales in San Francisco, just write that in. Keep in mind, this is a San Francisco only service. Bank owned "REO" properties are also a searchable feature in the San Francisco MLS. Again, they will be emailed to you in any regular search, but if you only want to see REO properties, use the comment section. And obviously if you want both Short Sales and REO's write that too.

If you liked this article you may also be interested in:
REO search on the San Francisco MLS
Short Sales in San Francisco
First Time Home Buyer - where do I start?