“Signs, signs, everywhere there’s signs…”

So, what are the signs we should look for to help us forecast San Francisco real estate?

I’m gonna “KISS” 2008 good-bye with 4 “Keep It Simple, Stupid” topics to keep an eye on.

The 4 Pillars of 2009 San Francisco Real Estate Forecasting

1. Foreclosures, Short Sales, Bank-Owned Properties (REOs): Loan modification programs
2. Ease of Credit: Jumbo Loan Options and Availability
3. Interest Rates
4. General climate: What’s the “feeling” on the street, at your local cafe, at the table next to you at Beretta?

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( The following is a reprint of the annual holiday letter I wrote for my clients, friends and real estate associates. A few of you suggested that I publish it on the blog so at the risk of going a little personal, here goes! I hope you find it helpful as we move forward into a healthy, happy and prosperous 2009…. )

Dear SFHotlist reader and San Francisco real estate devotee,

Every year, I write a holiday letter. And, as is my way, it is usually geared more towards the New Year and its hope of renewal, growth and change than any particular religious holiday.

This year, the letter is difficult to write, and I have procrastinated for weeks. After such a tumultuous & challenging 2008, what can I say that will be sincere, forthright, and dare I say even helpful?

Maybe I should begin with an honest assessment? My job is tougher. I work harder yet earn less money. The transactions are more complex. The sellers, buyers, agents, lenders, and everyone else are stressed.

In 2 escrows, the lender closed shop days before the closing. The competition is fierce. Desperate agents on the edge of leaving real estate are willing to do anything for a listing and are often scared to tell their sellers the truth, thus clogging up the market with overpriced properties.

(This is bad for all of us and will slow our market’s recovery. Check my blog for more info.)

I have lost money in my retirement and savings account. The value of my house is less than what I paid for it two ½ years ago. (Of course, as a SF Realtor I must point out that my stocks lost WAY more value than my house.)

Sound familiar? I know I am not alone. Most of us have faced similar challenges this year. Who has been immune to the economic meltdown? It has been broad, swift and in many ways, unimaginable in its breadth & depth even to the smartest of experts.

Yet, I remain both optimistic and grateful.  It will get better. The economy will recover. The real estate market will turnaround and prices will head back up.

(No, it probably won’t be the rabid growth of the 2000s but in San Francisco, we will see consistent appreciation, and real estate will prove, yet again, to be a wise investment.)

Buyers and sellers will get used to our more balanced playing field and work together towards mutually beneficial results.

In the face of all of these challenges, I had a very good year in real estate. (Toot, toot! Yours truly is a Zephyr “Top Producer” once more. By hook or by crook, I tell ya!)

I have helped folks successfully achieve their goals and navigated them through today’s choppy waters.

To name a few, I’ve helped first time buyers who see their golden opportunity, past clients ready to benefit from a property “trade-up”,  investors who know that it is the right time to buy & hold, sellers who have owned their homes for 5+ years and are ready to move on with a very healthy profit and families who need to sell a loved one’s home.

Some of you may be wondering what to do. Is it time to “trade-up”? Is it time to invest in real estate? It is time to “down-size”? Is it time to talk to your lender about loan modification because your situation has changed?

My pledge is to consult with you to come up with the best plan of action for you.

I will negotiate fiercely on your behalf, and oversee the transactional details so your money, time and energy are used efficiently to achieve your goals. Real estate is my profession, and I am in it for the long-haul.

Most of my clients find me through your word of mouth, and I am extremely grateful.

Please know that I continue to improve, educate, and grow. I bring my “A-game” and that game gets better every year so I can always be the best possible real estate consultant for you and for all those you introduce to me.

As 2008 draws to a close, let us dream of a fantastic 2009 full of health, recovery, happiness and prosperity for all. Happy holidays and yes, happy new year!

Your real estate consultant for life,
Danielle

P.S. I’d love to hear from you! Do you have questions about your situation or just want to know what’s really going on? I am here to help in any and every way I can. Talk to you soon!

Ripped from the headlines or rather the Trulia Question and Answer section, the question is:

Can a home buyer negotiate with the seller during the escrow process?

YES!

All aspects of a real estate transaction are a negotiation. However, what type of negotiation you’ll enter into and how successful you’ll be totally depends on both the details of your particular purchase and the attitude/competency you, your agent, the seller and the listing agent have towards the negotiating process.

Check out this flow chart describing the process for a typical real estate purchase, whether a Bernal Heights single family home or a Inner Mission condo.

In San Francisco, where many good real estate agents abound, the home buyer is likely to receive a “disclosure package” before making the offer to purchase. The “disclosure package” will contain positive and negative information about the property’s condition, location, etc. Many will have a recent “Pest Inspection” and/or “General Home Inspection” from a reliable, local inspection company.

Ask your agent for their opinion of said company… (Note: Yet another reason it is so prudent to work with a local Realtor who works full-time in real estate and does enough business to be up-to-date with inspectors’ reputations, not to mention has fine-tuned negotiating prowess!)

If you receive an extensive and accurate “disclosure package” you may not discover any new, material items during your own inspection period. You may find that you are happy with the property and want to move forward with your purchase. (Note: Even if you receive an inspection report, it is almost always a good idea to have an inspection contingency in your contract and to hire your own inspector for a second opinion.)

But, what if you do discover something during the inspection. What happens then?

If you have an inspection contingency in your purchase contract, you can:

1. Cancel the contract, receive your initial deposit back and begin house-hunting again.
2. Accept the condition of the property, remove your contingency and move forward with the purchase.
3. Negotiate with the seller (through your agent) for repairs and/or credits.

If repairs are mutually agreed upon, typically, they are completed prior to the close of escrow. For your protection, stipulate that you want a “walk through” after completion but before the close. If the repairs require permits (and that’s important to you), make sure that’s in writing too. Basically, you want to be as clear as possible on what you are agreeing to….

If credits are mutually agreed to, typically, you will receive the funds towards your closing costs at the close of escrow. Sometimes, the credits are doled out directly to a local contractor. For example, I recently negotiated for my buyer clients to receive a free roof from the sellers. My buyers chose the roofer and we had the sellers pay him directly at the close. There are rules around credits so check with your mortgage broker to make sure all is kosher with the lender.

If you ask the seller for a credit or a repair, what are her or his choices?

The seller can through her/his agent:

1. Cancel the contract and look for a new buyer.
2. Accept your request (in writing) and move forward with the sale.
3. Counter you with terms that are acceptable to them (and hope you will agree).

In my opinion, a home buyer should enter into escrow with “good faith.” You like the property. Your intention is to buy it. You do your best to make an offer that you find acceptable based on the information available to you (disclosure package, comparable sales, etc). Unless something new and material emerges, you are happy to move forward and make the property your new home. Nothing is perfect. Not your house, not your job, not your marriage and not even a brand-new construction condo!

That said, negotiation plays a crucial role in the real estate process and there are many occasions in which you will want to negotiate for a credit or repair. In today’s market, the home buyer has more power. These days, I am able to get my clients credits or repairs.

The playing field is more level and savvy buyers should take full advantage and get the best deal they can.

The key, however, is not to negotiate for negotiation’s sake. Some folks just want to be confrontational and have a fight. Personally, I think this causes ulcers and ultimately, doesn’t get us what we want out of life. Different strokes for different folks, of course. So, if you want a hot-head, let me know! I’ll send you a list. If you want a tough negotiator who is fair, reasonable and keeps her eye on the bigger picture (i.e. getting you the house you want with the best terms possible and keeping your money, time and sanity safe), I just might be your gal.

Well, I hope that answers the question of whether you can ask for concessions after a home inspection. If you have more questions, let me know. I am ready, willing, and able to answer them!

One last thing, here’s another situation where a home buyer may negotiate while in escrow: the appraisal.

Recently, I helped first time buyers buy a house in San Francisco. They wrote an offer to purchase a house for $650,000 which was accepted. We wrote an appraisal contingency into the contract which said that the property had to appraise at no less than the purchase price.

The appraisal came in at $600,000!!!! Even though there were plenty of “comps” validating $650,000, the lender’s appraisal was zip code wide instead of sub-district. This meant that a much less desirable neighborhood was included as comps for the value. (Think Zillow!)

Ultimately, I was able to negotiate with the sellers and have the purchase price reduced. This, my friends, was the negotiation to end them all. It was a proud moment for me, let me tell you! Kinda like when your Dad tells the story of his winning touch down from 30 years ago…well, that’ll be me on this one. My buyers got a sweet deal. Often times, the calm, friendly yet tough negotiator gets the bird. And, without one hissy fit if you can believe it.

Well, it’s not particularly great news but it’s pretty fair and accurate considering how not so long ago the lovely Chron real estate folks seemed to only like to trash us agents. In the slowdown, have they decided to stop biting the hand that feeds them? Yet, I regress.

I don’t have time right now to pontificate (yes, you are so sad) because I’m on my way to a signing, aka closing appointment. Yes, folks are buying homes in San Francisco. In this case, they’re buying a great single family in Bernal Heights.

It’s a good read and our very own, Bill D. is a featured contributor. Check it out here.

The moral of the story: it’s a great time to buy if 1. you are a first time buyer 2. you’ve owned your home for a few years and are ready to trade-up or 3. you want an investment property to hold.

As for sellers…It’s not the best time to sell but it’s not the worst either. Many people are successfully selling homes in today’s market.  In particular, it’s an okay time IF you’ve owned your home for a few years, are willing to price for today’s market values, and/or selling is the right thing to do for YOUR overall life and financial picture.

Moral #2. No one can time the market perfectly. Do what’s in your best interest for now and for later. We are blessed to live and own real estate in San Francisco. Compare our downturn to outside the City.

Okay, Pollyanna’s off to meet her clients!

Want to estimate property tax on a listing you’re interested in buying?

1.2% of the purchase price is a good, conservative rule of thumb. This is the annual amount but property tax is paid twice a year.

For example, on a $900,000 home, the annual property tax will be about $10,800.

Your lender will estimate this as a monthly payment when computing your PITI.

P= Principal loan payment

I= Loan interest payment

T= Tax payment (figured monthly)

I= Insurance payment (figured monthly)

In an condo, instead of PITI, use PIT-HOA since your HOA condo fee will cover the building’s insurance. You should get your own policy for the interior and your personal belongings…

Want info on SF Property Tax? Visit the City website.

10 Things to Remember When Buying a Home in San Francisco whether it’s a Mission Loft, a Noe Valley Edwardian, a Bernal Heights Victorian Cottage or an Inner Sunset Mid-Century:

1. When buying a home, bite off more than you can chew but not enough to choke. Remember, to get to the penthouse you must first get on the elevator. (Or take the stairs but who wants to do that?)
2. It is not the cost of the home per se; it is the monthly cost to you that matters most.
3. Reasons to buy a home in order of importance:
1. You want to live there.
2. Investment
4. Commit to a home for a minimum of 3 to 5 years.
5. If you can help it, don’t put yourself in a position where you will be forced to sell at any given time.
6. A home will appreciate or depreciate no matter what kind of financing you have on it.
7. Develop a relationship with your Realtor as you would with your doctor, lawyer, accountant, etc. Build trust and rapport so you have someone you can count on to always tell you the truth and represent your best interests. To do this, work only with that agent for your real estate buying and selling. She or he can even recommend agents up to their standards in other parts of the country if you move or buy an investment property elsewhere.
8. Learn as much as you can before you make the offer. Read a book, read this blog (shameless plug), read our Home Buyer’s Guide, sit down with your agent and go over the whole process ahead of time.
9. Spend money on inspections. Let the buyer beware so hire an expert to inspect your new home.
10. Interest rates go up for primarily 2 reasons and both are GOOD for real estate:
1. Healthy economy
2. Inflation

Frequently Asked Question: Why Have Your Own Buyer’s Agent?*

At the risk of overly exciting the bloggers over at Curbed SF with my scintillating content, I’d like to explain the benefits of working with your own agent (Realtor) when you are buying a home in a complex market like San Francisco.

Top 10 Reasons It is Smart to Hire Your Own Agent When Purchasing a Home:

1. It costs you nothing. Your agent works on a contingent basis as opposed to a retainer like a lawyer. Your buyer’s agent will be paid in the form of a commission from the seller’s proceeds upon the close of escrow. You will pay nothing for their help and expertise, and they will only get paid if you find and successfully purchase a home.
2. Even though you do not pay money for their services, you are contractually bound to each other which means your Buyer’s Agent has a fiduciary duty to represent your best interests. Plus, if they are a Realtor (and they most definitely should be!) your agent must adhere to a very strict code of ethics. Your agent will represent your best interest in the purchase of ANY property listed with ANY real estate company or For Sale By Owner.
3. Your San Francisco buyer’s agent will help you determine how much you can afford. Working with your mortgage broker, your agent can give you advice regarding unforeseen costs of ownership and affordability. Just because you are pre-approved for a certain amount does not mean you should be…
4. Your real estate agent will fully explain the buying process to you and prepare you, in advance, for what to expect. They should guide you through the process every step of the way and help keep you informed all of the time.
5. She or he will provide you with statistical and comparable sales information so that you can make an informed choice on the offer price for the home you want. Even though it is pretty easy to find active listings on the Web at sites like Trulia and Zillow, recent, accurate and reliable Sold data remains mostly within the control of MLS members like your agent.
6. Your real estate agent will consult, negotiate and act as your project manager. She or he will negotiate the price and terms of your purchase on your behalf. Your agent becomes your sounding board, your confidante, and sometimes even your therapist during the buying process. You’ll be speaking or emailing with them almost daily during escrow so make sure you like your agent!
7. She or he will walk you through the massive amount of paperwork with clear and accurate explanations.
8. Your Realtor sells property full-time (or at least, they should) so she or he will have access to dependable mortgage brokers, home inspectors, title and escrow companies, home insurance companies, moving companies, etc. They can assist you with the transfer of utilities and be a resource for all sorts of service providers like hardwood floor re-finishers, custom shutter fitters, plumbers, electricians, handymen, painters, gardeners, and so on.
9. She or he will be present during the closing process, keeping you up to date as the loan funds and your names are recorded on the property’s title. Most likely, they’ll attend the closing or signing appointment with you at the escrow company and certainly, be available to review the closing papers for accuracy.
10. A good agent will act as your real estate consultant long after the close of escrow. For example, I often and consistently hear from past clients who need referrals for home repair folks or just want to know what the market is like. Whether or not, they will be selling or buying more real estate, I am there as a resource for them…for life.

Ask about our complementary San Francisco Home Buyer’s Guide: How To Stop Worrying and Love Buying a Home!

* Most agents will act as both Buyer’s and Seller’s Agents depending on their clients’ needs. When I say “Buyer’s Agent,” I am referring to a full-time licensed Realtor who will represent you as your buyer’s agent. They will also work with sellers on other transactions. Personally, I’m not a proponent of “buyers-only” agents b/c their knowledge of both sides of the transaction will be limited.

According the 2009 California Housing Market Forecast from the California Association of Realtors, prices will continue to decline into early 2009 while the number of sales will continue to increase. Of course, we usually have a holiday/winter slowdown.

What does this mean?

On the one hand, prices continue to adjust downward. Most economists foresee the decline to level soon-ish. How’s that for vague?

On the other hand, more homes are selling than was projected.

This signals the beginnings of the turnaround. Buyers, in particular first time buyers, are getting back into the market. Many would-be home buyers are realizing that this is a rare opportunity for them and they don’t want to miss it. Rates are low and prices are down. No one knows how long it will last.

As housing inventory lessens due to increased buyer activity, the market will be able to rebound. It is all about supply and demand, right?

Keep in mind that the following is for all of California. As one of the world’s biggest economies (8th, right?), our real estate market is huge and varies greatly from place to place.

My advice to folks considering buying or selling San Francisco real estate in today’s market:

To the first time buyer: BUY (This is a “once in 10 to 15 years” kind of opportunity. TICs, Condos, Lofts and some single family homes are ON SALE. Rates are great and loan options abound for those with low or high down payment.) Read more here. FHA loan info here.

To the home owner of 1-3 years: HOLD (Stay put and enjoy your home. It will be a great investment in time. Don’t worry! You own your home in one of the World’s most coveted Cities! You are not a renter! You save money in taxes!)

To the homeowner of 3-5 years: HOLD or TRADE-UP (Ask us to help you determine what your current home is worth AND what your next dream home costs with today’s discounts. Depending on the answer, it might be more profitable to move-up. Plus you get the house of your dreams. Benefits of Trading Up in a Down Market HERE.)

To the homeowner of 5+years: TRADE-UP or DOWNSIZE (Long-term gains in San Francisco real estate remain substantial. Take advantage of the discount in the home your really want, whether it’s a easy-living South Beach condo or a trophy house on Liberty Hill.)

From CAR:

C.A.R. FORECAST CALLS FOR PRICES TO LEVEL OUT AND SALES TO RISE IN 2009
Home prices throughout most areas of California will post declines next year, while sales of existing homes will continue to rise in 2009, according to C.A.R.’s “2009 California Housing Market Forecast,” released today during CALIFORNIA REALTOR® EXPO 2008 (www.realtorexpo.org), running through Thursday, Oct. 16 at the Long Beach Convention Center in Long Beach.

“The current uncertainty about the financial system and economy is likely to persist over the next several weeks, and could extend into next year,” said C.A.R. President William E. Brown. “Our forecast assumes that the financial system will begin to show signs of stabilization late in 2008 and into early 2009.”

The median home price in California will decline 6 percent to $358,000 in 2009 compared with a projected median of $381,000 this year, according to the forecast. Sales for 2009 are projected to increase 12.5 percent to 445,000 units, compared with 395,600 units (projected) in 2008.

“Sales in 2008 will be ahead of last year by 12 percent, with a further increase of 12.5 percent expected in 2009,” said C.A.R. Chief Economist Leslie Appleton-Young. “However, the next couple of quarters in late 2008 and early 2009 will be marked by seasonal decreases in activity, with a pickup expected by the second quarter of next year.”

Just 5 of the Reasons Why I wish I was a First Time Buyer Right Now:

1. I’d finally have a **** chance to get my first choice home rather than lose out over and over again in outrageous bidding wars!!

For the first time in many, many moons (most say since 1990-1991), San Francisco real estate is not a crazy seller’s market. The playing field is MUCH more even. In some micro-markets, it is even a buyer’s market.

In general, the market is balanced and for a chronically “low supply / high demand” city like San Francisco, this means the outlook is extremely good for home buyers.

Although this may last well into 2009, it will not last forever. SF has had a strong, expensive real estate market since the Gold Rush and this latest financial debacle is not likely to change this reality.

2. I could actually pay a decent price for my starter home.

Okay, there is no “fire sale” in San Francisco but there are some darn good values right now. Home price appreciation has stagnated and in many cases, home values are down (think lofts, TICs, some condos, and single family homes).

Over the long-term, even 5 years or more, San Francisco real estate prices remain way up. Remember, real estate is a long-term investment… However, in the short-term, prices are down or flat. This means a home buyer can expect to pay 2005/2006 prices for many properties.

THIS IS A RARE, ONCE IN A DECADE OR MORE HOME BUYING OPPORTUNITY.

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