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.

Read the rest of the article here:
2011 TIC Disputes Brochure

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!

Here’s a list of the changes (to see the new map, click here):

A summary of the changes appears below.

Boundary Changes:

• Dividing line between 7b (Pacific Heights) and 7d (Cow Hollow) jogs south for one block at the west end and changes so that both sides of Green are in 7d (Cow Hollow) between Lyon and Divisadero. The boundary between Divisadero and Van Ness remains the same, keeping both sides of Green in 7b (Pacific Heights).
• 9h (South Beach) expands into portions of 9f (SOMA) and 9d (Mission Bay).
• Dividing line between 6b (Hayes Valley) and 8f (Van Ness/Civic Center) moves from Gough to Franklin. Dividing line between 6c (Lower Pacific Heights) and 8f (Van Ness/Civic Center) moves from Gough to Franklin between Sutter and California.
• Dividing line between District 8a (Downtown) and 8j (Tenderloin) moves from Geary to O’Farrell.
• 5f (Buena Vista Park) expands to include Ashbury Heights, and is renamed Buena Vista/Ashbury Heights, accordingly.
• 5e (Parnassus/Ashbury Heights) changes to include a portion of 5b (Haight Ashbury) which is commonly known as Cole Valley, and is renamed Cole Valley/Parnassus Heights, accordingly.
• 9a (Bernal Heights) expands to include portions of 9c (Inner Mission) south of Cesar Chavez between San Jose and Mission.
• Dividing line between 5c (Noe Valley) and 9c (Inner Mission) moves from Guerrero to San Jose between 24th St to 26th St.
• 5a (Glen Park) expands to include portions of 4s (Sunnyside), 4h (Miraloma Park) and 5c (Noe Valley).

Newly Added Districts, Carved Out of Existing Districts:

• 9G (Yerba Buena), carved out of portions of 9f (SOMA).
• 10M (Candlestick Point), carved out of portions of 10K (Bayview Heights).
• 10N (Little Hollywood), carved out of portions of 10K (Bayview Heights).

Renamed Districts:

• 8b (Financial District) is renamed Financial District/Barbary Coast.
• 9j (Central Waterfront) is renamed Central Waterfront/Dogpatch.
• 5e (Parnassus/Ashbury Heights) is renamed Cole Valley/Parnassus Heights.
• 1d (Lake) is renamed Lake Street (the word “Street” is added).
• 5f (Buena Vista Park) is renamed Buena Vista/Ashbury Heights

I can almost hear you asking, well, what does this mean?  I think it means that the market is stabilizing and sluggishly trying to improve, but that it depends very much on the inventory being offered.  In Glen Park, for example, there were a couple of very large, brand new homes sold that were very dissimilar to the inventory that closed in 2009.  The extreme sale prices for these homes (over 1.6MM) had a dramatic affect (+19%) on the average sale price out of only 11 sales in the first half of 2010.  I would say this is an anecdotal improvement in values.  I would contrast this with the 3.3% improvement in values in Pacific Heights/Cow Hollow based on 27 sales, which I think is a more valid reflection of marketplace recovery.

As always, if you want to check in on the value of your home, I’m happy to work it up for you!

Now for the details (click on image to see larger):