Charlotte’s San Francisco Real Estate Blog

Do You Need A Real Estate Agent if You Are A Buyer?

I had an interesting conversation today with a gentleman looking at property at an Open House I held. Based on that conversation, I decided it might be useful to explain what Real Estate Agents do for buyers and why it’s probably a good idea to work with one.

It’s a great question, frankly. I’m embarrassed to say that I bought three properties from listing agents back before I knew better. My then Significant Other argued that the Listing Agent would be “working for the deal,” and “have a lot more reason to negotiate because he/she stood to earn twice the commission.” My boyfriend had graduated Phi Beta Kappa from an Ivy League University and I figured he was right.

Unfortunately, he wasn’t. Legally, Listing Agents have a fiduciary responsibility to the owner of the property. Legally they must disclose all information to the buyer that could adversely affect the value of the property, and agents representing both buyer and seller must do so, but there are certain things they don’t have to do. Like recommending a Home Inspection Agent or Pest Control Company with a reputation for digging up problems. Two different Pest Control companies could render two opinions that differ significantly both in accuracy and in the estimated cost to repair. Not doing a thorough home inspection alone could cost you anywhere from a few hundred to a hundred thousand dollars if someone misses something big. I’ve experienced home inspectors missing big things and it is not a pleasant experience.

Other services that Buyer’s Agents provide include negotiating with seller’s agents, whom they often know. Then there is putting together the real estate offer. This is an art, not just filling out a contract. It really does help to be familiar with the contracts, to have been trained on them, and to have put them together more than once.  Some companies train their agents in how to put together the best offers, which surprisingly are not always the offers with the highest price. Things like finding out that the Sellers need to stay in the home for an extra month and that is crucial to them and how to put that into a contract so you can get them out when that month is up.

A good agent manages the multiple inspections you should have done. A good agent manages the mortgage process, checking on the bankers/brokers to ensure that the loan will fund on time without excess fees which are often negotiable. They manage the myriad forms that the State and City require to be signed off and in a file. A good agent manages the escrow process, which involves ordering various reports and a lot of communication between seller’s agent, the bank, the inspection companies, and you. If you are a normal, insanely busy working person, having an agent handle and manage a smooth transaction is a huge benefit and may well keep you sane during what can be a very stressful process.

A good agent saves you time by previewing properties that fit your criteria and showing you the winners, saving you money by having a thorough knowledge of the market and what things should cost. They should work hard to find out as much as possible about how negotiable sellers are. A good agent is a full time professional who can offer you the benefit of their market knowledge. Lastly, since the seller pays their commission, why wouldn’t you?

Facing Up To Financial Fears and Find Out Where You Stand:

I like Suze Orman. The reason I like Suze Orman is because she understands about how screwed up we are about money and is on a mission to get us to be less emotional about money.  She knows that we confuse money with love, power, and self-worth. It is none of these things. It is a tool, pure and simple. It’s a no doubt useful tool, one that’s better to have than not to have, but it is no more and no less.

The fear we have about money leads people to look at houses in a serious way (by which I mean measuring for where the piano will go, deciding where to put the home office, and debating the school systems) without having talked to a mortgage broker or banker. I think about it like this: I love buying clothes. It would kill me to walk into a store loaded with beautiful clothes that I could not try on because I did not know my size. Wouldn’t you want to know your dress size before going to the greatest store in the world?

Take an hour to talk to a banker and find out what your buying power is before you started looking at houses? So what if your credit isn’t great? Find that out. Start to fix it. I understand window shopping. It’s fun and there’s nothing wrong with it. I’m not talking about those folks. I’m talking about people who sound like they really want to move soon, and are getting their hearts wrapped around properties they may not be anywhere close to being able to afford. I hate to see people get disappointed.

Six Month Emergency Fund:

Take care of yourself, people. Do this. Save some money. Have an emergency fund. Know your monthly expenses. A lovely woman asked me what would happen if a condo she was thinking of buying ever needed a major repair. She wanted to know if the Builder would cover it, even if it was five or ten years from today. Well, a good real estate lawyer can give you the specifics on what is and what is not covered and for how long in a Condo, but I felt like this was a person who expected to be protected from any kind of repair at any time yet wanted to be a property owner. That is not realistic. I’ve generally used the rule of thumb that I can afford half of whatever a banker tells me I can, and I do have a six month emergency fund on top of that. Expect disasters, prepare for them, have a plan and chances are good you’ll never have one.

Timing the Real Estate Market

It’s true that prices have come down significantly since September of this year. I’m not trying to minimize that, but no one can time the Real Estate market. They can’t do it in the stock market either, so it probably comes down to your risk tolerance. Consider this: if you want to buy a property to live in, you are most likely planning on living in it for a minimum of two to four years, yes? And you need a place to live, right? Well, if you buy it and live in it for two years, and then sell it, and let’s say you make nothing. Not a cent. You bought it for $500,000 and you sell it for $500,000. You are out the commissions, closing costs, and possibly transfer taxes, etc., which frankly is not cool. But had you not bought you would have been paying rent. If you paid an average of $2200 a month in rent, you would have spent $52,800 in rent in two years. Instead, with the “you bought for $500,000 and sold two years later for $500,000; you are probably out somewhere around $25,000 in selling costs, but you saved quite a bit on your income taxes over the two years. All in all, you’re still ahead of where you would have been had you rented, plus you got to live in a property you owned.

Certainly, there are people who bought homes within the last two years and have seen their prices plummet due to foreclosures in their building and the general price erosion we’ve all had to deal with. There are people who’ve lost their homes because they lost their jobs. I feel really badly for those folks. It is horrible. But if you haven’t lost your job and can pay your mortgage, the fact that your market value today is down 15% to 20% is not that bad, because it is going to recover in time. This is San Francisco. Still only 7 square miles and not enough housing.

For a helpful summary of year-over-year pricing in San Francisco, broken out by Single Family Homes and Condos, and by District, go to this site:

http://rereport.com/sf/main.html

San Francisco Home Sales Drop in November

Sales of single-family, re-sale homes dropped 21.9% compared to last November. Year-to-date, home sales are down 6.8%.

The median price for single-family, re-sale homes fell 1.2% from October, and it was down 18.1% year-over-year. The average price rose 8.2% from October, but was off 18.7% compared to last November.

Loft/condo sales plummeted 58.5% from October, and were off 64.8% compared to November 2007. The 81 loft/condo sales recorded in November were the lowest number of sales since we’ve been keeping track: January 2000. Year-to-date, loft/condo sales are off 26%.

The median price for loft/condos in San Francisco fell 4.5% from October, and was down 6.7% year-over-year. The average price for condos dropped 2.4% from October.  The average price was down 10.4% year-over-year.

I’ve been looking for a 25 year trend information for the San Francisco Market but have not found it thus far. I’ll post it when I find it.

Other Useful Agent Stuff You Should Know:

If this is too elementary, than apologies offered, but I’ve had very intelligent people ask me about this and realized there’s a lot of confusion out there. Real Estate agents, whether we work for Zephyr, or Coldwell Banker, or any other agency, are not employees. We are independent business people. We do not get paid a cent unless someone engages us to represent them in the purchase or sale of a home. Two agents who both “work” for Zephyr are actually two independent business people who can negotiate with one another in exactly the same way we would negotiate with an agent from another Real Estate Company. Thus, if I hold an Open House for another Zephyr Agent, I am not the listing agent; I am an agent who is trying to meet unrepresented buyers who may need representation. If I work with you, my fiduciary, legal, and ethical duty is to protect and serve your financial interests first and foremost. I absolutely can present your offer to another Zephyr agent. The same holds true for any two agents working for the same company representing buyer and seller in a transaction.

What is happening out there?  My view on the San Francisco Real Estate Market? Buying Opportunity. Now may be the biggest buying opportunity since the earthquake. People are paralyzed with fear that there is no bottom, as people always are during a downturn. Oddly they would prefer to wait until they have to slug it out with 10 or more other offers to feel good about their “win.”  There is no shortage of beautiful, newly remodeled properties in neighorhoods like Pacific Heights, The Irving, Anza Vista, Cole Valley, Bernal Heights, Glen Park, Noe Valley, and so on. While not all of them can be rented, many can, presenting an historic opportunity for investors. For example, at 2010 Eddy St, there is a condo offered for $330,000. It has a beautiful marble fireplace, easy street parking, has high ceilings, views, and features a private garden entrance.

Mortgage Math: $330,000- 20% down = $264,000. Financing of 6% = $1,560 per month mortgage, plus approximately $250 taxes and insurance, for a total monthly nut of $1,810.

Let’s guess you rent it for $2,000/month. Say I’m wrong, and you only get $1800/month; you’ve still covered you’re mortgage. This property was one of many I’ve seen lately falling into this category.

FIRST TIME HOMEBUYERS OPPORTUNITY: are you are aware of San Francisco’s First Time Homebuyer Program, and the California Closing Costs Assistance Programs? Attached is a link to the program, please check it out. I can summarize for the short on time amongst you: Individuals earning less than $79,000K and Households earning combined incomes of less than $150,000 K are eligible for the Downpayment Assistance Program. The program applies for First Time Homebuyers, and is available for the purchase of Condos or Single Family Residences. You must come up with 2.5% of the purchase price as a downpayment. The City will loan you up to 30% of the purchase price of the real estate, on which you don’t make payments until you sell the property. At time of sale, you must repay the loan and the City gets 20% of any increase in value in your property. The City, in effect, becomes your Silent Partner. Then there is a program called CHDAP (which is fun to say) that provides assistance with your closing costs, up to $5000. So, let’s do the math on this type of a transaction, using the same Eddy St. Condo mentioned previously. As a disclaimer, you must meet with one of the City sanctioned mortgage professionals administering this program.  I’m not a lawyer, a mortgage broker, or a tax specialist, so get your own bleeping advice if you want to make sure it’s bullet proof. OK; disclaimer’s disclaimed, let’s go:

Mortgage Math on First Time Homebuyers Program:  $330,000 - 2.5% = $330,000 - $8,250 = $321,750 $321,750 financed at 5.5% = Approximately $1620/month plus taxes and insurance of approximately $350/month = $1970/month. How does that compare to your rent, and could you come up with $8250 downpayment?

For complete information, please see:

 http://www.sfgov.org/site/moh_page.asp?id=48041

http://www.calhfa.ca.gov/homebuyer/programs/chdap.htm

PARENTS OF COLLEGE KIDS IN SF?

WHY DON’T YOU BUY THEM A PLACE for the four year duration, make them Property Managers (How’s that for a free education in Economics and Business?) and sell it in four years, or rent it out to the next crop of kids? Just a thought, with Dorm fees being in the multiple thousands per month.So, long and short of it, I’m a Realtor, and I am a Real Estate Investor. I have been an Investor with a job for the last 12 years; now I’m an Investor who really would like to help other people get in on the game. I currently am renovating a duplex in Bernal Heights. Previously I have renovated and been landlord of a three-family brownstone in Brooklyn, renovated a single family home in Los Angeles, and renovated condos in Chicago and Manhattan. (OK, so I like moving!) I am still Bullish on Real Estate in San Francisco, if you will follow the Simple Rules I’ve followed for picking neighborhoods. Call me if you’d like to talk about this or anything else Real Estate-y. I will gladly talk to you about your renovations, look at your place and give you my opinion of how much to spend and where to stop; any of the above. San Francisco has weathered the Real Estate Storm better than any other area in the country. Down the road I think we will all be wishing we’d bought something now. To contact me: Please email me at charlotteerwin@zephyrsf.com

Happy Holidays!

Charlotte Erwin