A quick read through shows it is put on by the AIA of San Francisco and has a lot to offer.  While programs were offered at a discount to AIA members, the general is welcome.

Events that seemed most interesting to me were:

“Working with an Architect,” which allows people to drop by (at no charge) to discuss their home remodel ideas on September 17 and 18 at the event headquarters at 2211 Alameda Street;

“(Re)discover the New Bay Bridge,” which is a guided boat tour of the newly emerging east span of the Bay Bridge; and.

“Then and Now – Pier 70,” which is a walking tour of an historic San Francisco pier.

I encourage you to take a look at:  http://www.aiasf.org/archandcity

Most residents of Tokyo are considered middle-class. Forgetting for the moment the rest of Asia, what would happen if they were able to expand from their small apartments to American-style single-family homes?

To go from 1,000 square feet (93 square meters) to 2,000 square feet would mean to double the materials for construction, double the energy to heat or cool and double the amount of things – furnishings, appliances and electronics – to fill the space. To move further out into the countryside and find space for expansion would destroy agricultural land and in turn create the need for new infrastructure – roads, power lines, telecommunications – that would have to extend to feed this parasitic habitat.

Spacing ourselves out and filling in the space with things in the American manner is terribly costly to society and to the environment. For society, it tells us that happiness coincides with super-affluence, with the act of consumption rather than the art of living.”

- Paolo Soleri, the Italian architect and urban theorist quoted in new Perspectives Quarterly (Los Angeles).

I clipped this from the newspaper about 10 years ago. I keep it on a bulletin board in my office and read it every few months. While I’d rather concentrate on how amazing urban living is and it’s benefits rather than ragging on suburbia, he makes some good points. I do feel like many of us are all finally starting to catch on her in the US and I’m excited about what this is going to mean for cities – and my City in particular.

If you are in the position to upgrade your home or investment property, it can be a great choice to sell a lower value property at a loss and obtain a more valuable property.  This is called trading up in a down market and it makes sense because x% off a lower price is less than x% off a bigger price.  But for those who are faced with the need to simply exit the market entirely due to job change, job loss, divorce, a mortgage they can’t pay or neighbors they can’t live with, the market being down does not have the same silver lining.

If you have the cash to bring in, the process is the same as a straight-forward, normal sale, albeit more painful.  In some cases, you can even write the loss off your taxes.  If you don’t have the cash, though, you will need lender approval and a good explanation of hardship to get the short payoff approved by the lender.  The forgiven debt is considered potentially taxable income by the state and federal governments.  The good news is that under the Mortgage Debt Relief Act of 2007, the Feds are not collecting taxes on mortgage debt forgiven in 2007 through 2012 up to $2 million for a couple filing jointly and that under the Conformity Act of 2010, California is doing the same for debt forgiven up to $500,000, with partial tax relief up to $800,000 of debt forgiven.  Especially with San Francisco’s fairly low value declines, these exclusions will protect most people needing to sell their homes short in our market.

In approving a short sale, the lender can either forgive the debts or reserve the right to recover the monies at a later time.  The lender’s decision-making on this will be driven by the level of hardship the borrower is experiencing and whether the loans were recourse or non-recourse at the time of borrowing.  Loans used for original purchase are generally non-recourse, meaning that the property itself is the only security for them.  Many other loans, especially those that were called “home equity lines of credit,” obtained through refinancing may have recourse to the borrower personally.  This has not been a factor in the short sales I have done since 2007, and SB931 passed in August 2010 has converted all 1st mortgages in California to non-recourse even if they were the result of a refinance, but it does sometimes come up.  It’s important in this case for the borrower/seller to be very clear on whether the debt is being forgiven entirely or not and to get legal advice regarding this issue before finalizing a short sale.

The first steps are in deciding whether to list your home for sale as a short sale are to 1) talk to your Realtor about whether your value really is short based on recent comparable sales, 2) talk to your legal and tax advisors about all the potential consequences; and 3) determine if you have a hardship likely to be approved by the lender.  Examples of acceptable hardships are reduced income, increased expenses, relocation, marital difficulties, death and combinations thereof.  People who just don’t want to pay the mortgage because their house is “underwater,” may not make the grade.  If you have a home you can live in and you can afford the payments, you are not a good candidate for a short sale even if your home’s value is lower than the mortgage balance.

Once you have decided to sell your home short, it pays to list with a Realtor who is experienced in them and has a good track record of closing their short sales.  I recommend to my clients that they market the home as if it were a regular sale in terms of presentation and quality of marketing and that they do a full marketing period so that they can show the bank they really tried to maximize the value.  I have found that this works and also results in having a buyer in contract motivated enough to follow the process all the way through.  This is no small issue as it is taking a minimum of 90 days and as long as eight or nine months for some short sales to close.

I tell my clients that they can either pay with money or aggravation and time.  Many people – especially buyers – think they want to pay with aggravation and time, but about half way through they’re no longer sure!  No matter how good your Realtor, getting a short sale closed is rarely hassle free.  There can be stressful negotiations with the banks right up to the end about the terms and who is going to pay exactly what, but success can be achieved through the careful blending of patience, tenacity and information.

Even though it’s been reported that in San Francisco specifically and the bay area in general that prices are leveling off, the disposition of so called “toxic assets,” will go on for some time to come.  I’m not going to attempt in a 600 word article to tell you how to buy a distressed property, but I think that starting with some terminology would probably help most of us to do what many like to do best – talk about real estate.

Let’s start with a “foreclosure.”  I hear people talking about buying a “foreclosure,” all the time.  There are three ways to do this:  Trustee’s sale, public auction and buying an “REO” through the regular sales process.

Trustee’s Sale:  To get into defining these types of sales, it’s necessary to step back a bit and talk about the process of foreclosure.  In California, we use a form of securing debt called a “Promissory Note” and “Deed of Trust.”  The word “Mortgage” is slang we use to describe the other two things.  Mortgages are a legal instrument not used in California so I’m not going to get into how it’s different.  The Promissory Note defines the terms of the loan and the Deed of Trust is recorded at the county courthouse in favor of the lender (or “Trustee”) against the property.  When someone has failed to make a number of payments, the Trustee can then record what’s called a “Notice of Default,” which starts a 180 day clock ticking for a Trustee’s sale.  Trustee’s sales are publically noticed and anyone can technically buy the property.  At this sale, the Trustee auctions off the property, for cash.  Sometimes individual investors buy the property but often the Trustee ends up buying it themselves at which point it becomes an “REO.”

Buying property at a Trustee’s sale is a tricky business and should not be attempted by anyone who is not a professional investor.  The biggest problem is that there is no protection assuring the buyer that they are the real owner of the property.  Understanding exactly what this means and learning to do the research to protect oneself is a full time job.  They are also only sold for cash, which is another huge obstacle to most people.  Which takes us to the next type of Foreclosure, the “REO.”

REO is an acronym that stands for “Real Estate Owned,” and these properties are usually owned by an institution that would prefer not to own them.  Most REO properties are sold just under market value and are listed by Realtors for sale through the regular Multiple Listing Service.  When you see property listed for sale as a “REO,” then, you know it’s owned by an institution and that it has been foreclosed.

When an REO property has failed to sell through the regular sales process, it may be auctioned off by one of several large organizations, such as REDC.  You can see their listings at www.auction.com.  Properties sold at these auctions are sold with Title Insurance, which protects the buyer against other claims against the property and ensures that at the end of the process the buyer is really owns the property.  Many properties sold at these auctions can also be financed.

Now for the concept of being “underwater.”  This means that the property is worth less than the total of the debt owed.  As has been widely reported, people who are underwater on their homes are not as motivated to keep paying the mortgage as those who have equity in them.  Makes sense.  A person who is underwater may try to get their lender to modify the terms of the mortgage by reducing the amount owed, reducing the interest rate, or both.  Another remedy available to people who are underwater is a “Short Sale.”

Short Sales are listed by Realtors and advertised in the Multiple Listing Service.  They are listed this way when the amount of expected sale falls “short” of the amount of debt on the property.  After an offer is received, which in effect proves the value of the property, an application is made to the lender(s) to request that they, essentially, forgive the short fall.  This request may be countered, granted or denied.  Getting a decision can take as long as three, six or even nine months; sometimes a lot less – you just never know.  The effects on the person selling the property are not generally as dire as when the property is foreclosed, and this is the main reason people attempt to do it.  In some cases, the debt is simply forgiven, and in others, the person selling may be asked to sign a promissory note for the difference.  Anyone attempting a short sale should seek the advice of a real estate attorney before making any decisions.  Because of the complexity and uncertainty involved in the process, these properties mostly sell below market value and can be a good deal for buyers who are willing to wait it out.

The above is a really general overview.  These can be exciting times if you’re in a position to buy and really hard ones if you are on the other end of one of these situations.  In either case, contacting a Realtor is a great place to start figuring it all out.

Many of San Francisco’s neighborhoods were built in the boom times of the 1920s and 1940s and identifying the style of the homes has often been difficult for me.  With James’s rules of thumb regarding tell-tale characteristics and years built, I can now tell my deco from my Streamline Moderne and my Spanish Eclectic from Mediterranean Revival.  It’s really worth a look.

See also, James’s summary of Victorian & Edwardian Residential Architectural Styles in San Francisco, which contains information I use every single day.

To find out more about James Dixon and his work on Residential and Commercial projects, see his Website.

And to see my favorite project of James’s, click here.  CAN YOU GUESS WHERE THIS IS?  First five people to email me the address get Peets cards!

Yesterday, reading the SF Gate, I came across an article listing 20 of Sunset Magazine’s best backyard projects from their archives.  My other favorites were the built in patio scrabble game and the swing for two.

In these challenging times, it’s a great idea to look around and see what you can do yourself to make your home a nicer place to be.  Sometimes all it takes is a small improvement to make a previously uninviting corner of your city yard feel like home.

If you believe your home may be eligible for a reduction in property taxes based upon a decline in value, there are two ways you might proceed: an Informal Review by the Assessor’s office and/or a Formal Appeal with Assessment Appeals Board. The Formal Appeal, in particular, can be a complicated and time consuming process. Generally speaking (it all depends on the neighborhood and other details of your purchase), homes purchased 2005 through mid-2008 have the best cases for a property tax reduction. Declines from Peak Value (whenever that occurred) typically run in the 15% to 25% range. If your appeal is successful, the reduction in assessed value only applies to the 7/1/10 – 6/30/11 tax year. A decline-in-market appeal is only good for 1 year, the year for which it is filed. The Assessor’s “valuation date” is January 1, 2010 and any sales comparables submitted must have closed before March 31, 2010.

Informal Review

The SF Assessor’s Office has announced that they will now accept “Requests for Informal Review of Assessed Value” for tax year 2010/2011. Such requests must be filed by March 31, 2010 and apply only to single-family dwellings, residential condominiums, townhouses, live-work lofts and cooperative units. Last year 3,432 requests for informal review resulted in 1,683 reductions of assessed values for SF properties in tax year 2009/2010.

One can email the Assessor’s office with questions (Assessor@SFGOV.ORG), as well as call or visit the Assessor’s office to speak with the appraisers that are on duty (415-554-5596). And the SF Assessor’s website offers information regarding Decline-in-Value Informal Reviews: http://www.sfgov.org/site/assessor_index.asp?id=115404 

FAQs as Posted by the SF Assessor’s Office

Q1: I BELIEVE THE MARKET VALUE OF MY PROPERTY IS LESS THAN MY CURRENT ASSESSED VALUE. HOW DO I PROTEST MY VALUE?

First, check your current assessed value at http://gispubweb.sfgov.org/website/sfparcel/index.htm. Second, if the assessed value is higher than the market value, you have the following options:

1. REQUEST AN INFORMAL REVIEW (single family dwellings, residential condominiums, townhouses, live-work lofts and cooperative units only) – From January 4, 2010 to March 31, 2010, the Assessor will accept requests to review the market value of your property. Your request must be in writing by completing an application or submitting your request online with supporting evidence of your opinion of value. If you were granted a reduction for the year 2009-2010, we will automatically review your assessment for the year 2010-2011 to determine whether a reduction is still warranted, Send your request to: Assessor-Recorder, ATTN: Prop. 8, 1 Dr. Carlton B. Goodlett Place, City Hall – Room 190, San Francisco, CA 94102. Mail-in requests for an informal review must be U.S. postmarked by the March 31, 2010 deadline. By Fax: (415) 554-7915 or E-mail: InformalReviewRP@sfgov.org. Be sure to keep a copy for your records.

2. FILE AN ASSESSMENT APPEAL (All property types) – From July 2, 2010 to September 15, 2010 you may file an Application for Changed Assessment with the Assessment Appeals Board (AAB), an independent body established to hear and resolve valuation disputes between the Assessor and taxpayer. A $30.00 filing fee due at the time of application and the AAB will schedule a hearing for you at a later date. Applications may be obtained by contacting the Assessment Appeals Board – Clerk of the Board at 1 Dr. Carlton B. Goodlett Place, City Hall – Room 405, San Francisco, CA 94102, by phone: (415) 554-6778 or directly from their website: www.sfgov.org/AAB.

Q2: CAN I, AS THE OWNER OF A SINGLE FAMILY DWELLING, DO BOTH PROCEDURES?

Yes. If upon the receipt of your annual Notice of Assessed Value, which will be mailed at the end of July 2010, you disagree with the assessed value, you .can file an assessment appeal with the Assessment Appeals Board. Please see instructions above.

Q3: WHAT DOES MARKET VALUE MEAN?

Market value is the price a property would sell for when the property is put up for sale in a competitive and open market.

Q4: WHAT IF MY CURRENT ASSESSED VALUE IS BELOW MARKET VALUE?

The Assessor is required to enroll the lesser of your factored base year value (assessment) or the market value. For example, if the market value (what you could sell your house for) of your property as of January 1, 2010 is $500,000 and your assessed value is $200,000 the Assessor would enroll the $200,000 as your taxable value. You would not qualify for a lowered assessment.

Q5: WHAT TAX YEAR AM I APPEALING?

The assessed value being appealed will cover the fiscal year from July 1, 2010 to June 30, 2011.

Q6: WHAT TYPE OF INFORMATION WILL I NEED TO PROVIDE TO SUPPORT MY CLAIM?

You will need to submit sales information and/or an appraisal performed by a licensed real estate appraiser to support your claim. The sales information or appraisal’s date of valuation should be near the January 1, 2010 lien date but no later than March 31, 2010.

Q7: IF THE ASSESSOR OR THE ASSESSMENT APPEALS BOARD AGREES TO REDUCE MY VALUE, WILL THE NEW ASSESSMENT BE PERMANENT?

No. The reduction is temporary and only applies to the tax year being appealed. Once a reduction is made, the assessor is required by law to annually reappraise the property until its fair market value exceeds the factored base year value.

Q8: WHY ARE TENANCY-IN-COMMON (TICs) UNITS EXCLUDED?

Unlike residential condominiums and cooperative units, TICs do not have separate parcel numbers. A review of a single TIC unit is more complex. TIC owners can appeal their taxes by filing an Application for Changed Assessment with the Assessment Appeals Board beginning July 2, 2010 thru September 15, 2010.

Q9: WHEN WILL I BE NOTIFIED OF THE RESULTS OF MY INFORMAL REVIEW REQUEST?

Homeowners will be notified of the results of their informal review in the annual Notice of Assessed Value which will be mailed at the end of July 2010.

Making a Formal Appeal

The next open formal appeal filing period for San Francisco will be July 2, 2010 to September 15, 2010 — to appeal the 2010/2011 assessed value of your property. A formal appeal can be made for multi-unit and commercial properties, as well as for houses, condos & cooperative units.
It is possible to attend assessment appeals board hearings for other people to see how they work. They are open to the public. These 3 online resources offer important details regarding the filing of a formal appeal:

1. SF Assessment Appeals Board: http://www.sfgov.org/site/assessment_index.asp

2. Publication 30: “Residential Property Assessment Appeals”: http://boe.ca.gov/proptaxes/pdf/pub30.pdf

3. Informational Videos on Property Tax Appeals: http://sanfrancisco.granicus.com/MediaPlayer.php?publish_id=458

Warning on Scams

There are a number of property-tax-appeal service companies, who have been sending out their solicitations on stationery that suggests a government agency affiliation. SF Assessor-Recorder Phil Ting has stated the following:

“We’ve received reports from dozens of taxpayers who have received a letter from companies offering to facilitate the property tax reassessment for $179 [or more]. This is unnecessary and deceptive. Taxpayers can fill out a simple, one-page application for a review of their property in my office, free of charge… There is no need to pay for this service.”
All information is from sources deemed reliable but subject to error and omission, and not warranted. Interested parties should contact the appropriate government agency to confirm all pertinent guidelines and procedures.

Loans insured by the Federal Housing Administration (or “FHA loans”) are just about the only loans available to buyers with less than 10% down.  FHA loans may be used to purchase both single family homes and condominiums, provided the condominium project is approved by HUD for this type of financing.

An FHA Spot Approval is key for buyers because it means the buyer has lots of inventory to choose from. As of February 1, HUD is eliminating Spot Approvals, meaning an entire building must be approved by HUD directly or by a lender directly. Because of fraud liability and risk issues, most lenders are not approving whole buildings and deferring to the HUD-direct approval method.

Now, you are probably wondering – how does this affect me?

Good news first:  FHA loans top out at $729k, so if the property you are buying or selling is priced above about $800k, this will not affect you at all.  If you are a buyer with more than 10% down, this might be good for you as competition from FHA buyers will be virtually eliminated.

And now the bad news:  If you are a buyer with less than 10% down, planning to use an FHA insured loan, this means that you will have less inventory to choose from OR a very long waiting period in escrow that might make an offer from you less attractive than one without the waiting period.  For example, in all of San Francisco, there are only 27 FHA-approved condo projects currently approved! **

Just a bit more (bad news):  If you are a seller, the buyer pool will be constrained to those with more than 10% down who don’t need to use the FHA program OR you will need to cooperate in a long approval process for your building to qualify for the loan.  I would not advise trying to qualify in advance of accepting an offer as the process is time consuming.  However, I would advise that you and your agent take a really critical look at whoever’s handling the loan for the buyer as all mortgage professionals are not created equal.  If you are interested in taking a look at the criteria for becoming FHA approved, just let me know!

**Why are there so few, you ask?  Well, one reason is that prior to last year, FHA loans were not available above $417k, so most buildings just didn’t bother.  Now, with the higher loan limit of $729k, FHA loans are a relevant part of our market.  If you have good credit and at least 3.5% down, you may be able to buy a home using this program.  If you are interested in finding out more – just ask, of course!

For the SF Metro Area (i.e. greater Bay Area, NOT just SF), C-S reported gains of .6% March to April, and 1.4% April to May. Year over year, C-S reported an overall metro area decline of 26.1%. Read the full article here.

From my own experience, I can happily say that things are picking up. Home of the Week 1617 Fulton went into escrow after just 5 days or so on the market with a pre-emptive offer. My listing at 640 Judah got three offers after just a short time on the market, and buyers who I am working with now are regularly competing in a field of 3 or more offers. To be clear, these deals are all well under the $1MM mark, and activity is definitely being driven by the availability of financing available at very low rates. Homes that are not eligible for these low rates – most TICs and homes requiring a loan over $729k are not moving nearly as briskly (if at all -oh so gorgeous Home of the Week 116 Sugarloaf has been on the market over a year and has been reduced from $7.5MM to a mere $4.5MM).

The below charts show that there has been a substantial increase in sales volume, and about a 20% decrease in homes selling under asking price. Volume for the two weeks ended July 15 was 172% of what it was for the period ended March 18 of this year. It is too soon to tell if the decrease in homes selling under asking price (and the commensurate increase in those selling over) means that prices are climbing. However, my recent market experiences tell me that there has been a shift toward underpricing homes to attract attention (and multiple offers) in the “affordable” sectors of the market.

Well, it’s changes like these that keep things exciting and I am really happy to be participating in these busy times due to the support I get from all of you. Thanks, as always for your referrals and for letting me be your go-to person for your real estate needs.

(All data is from San Francisco MLS)