Thursday, November 09, 2006

The Pros and Cons of Fractional TIC Financing

There are a lot of factors to consider when purchasing or selling a Tenancy in Common (TIC). How many units are in the building, whether or not there have been evictions on the property, and how long the current TIC partners have been in place, all determine how long it will take for the property to convert to condominiums. Another dynamic that is becoming more important for both buyers and sellers in this niche, is whether to consider traditional TIC financing or fractional TIC financing.

TICs in general are a more risky purchase than condominiums, in more than just their financial scenario (in which, all unit owners have a single, combined mortgage for the entire property). They are also subject to changes in legislation that, at any point in time, could offer a negative blow or downturning trend to this niche of the market (or uplifting trend, let's not forget). So, is it better to purchase a fractional (or individual) TIC over the traditional TIC? Let’s look at the possible pros and cons.

A fractional TIC loan is a recently new development in home financing. The product allows for portions of an entire building to be individually financed rather than financed by a group of all participating purchasing parties. One benefit of fractional loans is that each owner is only financially tied to the percentage of the building which he or she is purchasing. Therefore, if a residing neighbor is unable to pay his mortgage, the remaining owners are unaffected.

Another benefit of fractional TIC financing is that it deems the condominium conversion process unnecessary for existing multi-unit properties. The fractional TIC gives owners the financial independence that has been associated with condominiums, so there is no real need to wait for condominium conversion, a process which can take anywhere from 2 to 10 years depending on the scenario of the building. Additionally, the legislative changes that focus on restricting TIC conversions have little significance, since no condominium conversion is taking place.

Finally, each fractional owner is also then free to utilize his or her unit as an income property. Since the owner-occupier requirement usually mandated to TICs wanting condo conversion is no longer an issue, the purchased unit can be used as a rental instead of a primary residence.

There are a couple of negatives in the fractional loan scenario. First of all, and most important: they are not as affordable as traditional TIC financing tools. Fractional loans are more risky for banks, since the bank now only has pieces of notes on a building, rather than a note for an entire building. This means that the bank cannot foreclose on the entire building if one individual owner is defaulting on his or her loan. So banks require a) higher down payments (usually not less than 20%), b) higher credit scores from borrowers, c) and more points on the loans to eliminate risk. Additionally, the bank financing the loans may have restrictions on assumability on this type of loan, or higher pre-payment penalties than traditional financing tools.

If the property is on the market for the first time and is being offered with fractional TIC financing, although the listing price for each unit may appear affordable to buyers, often times the down payment requirements associated with fractional TICs are not. By offering units with fractional TIC financing, a seller is limiting his buyer pool to only those that can afford a 20% down payment and a higher than average interest rate. This ultimately may lengthen the amount of time it takes to sell all of the units.

If the property is already being operated as a traditional TIC and would prefer to individualize the loans, everyone in the building must know about, understand the concept of, and agree to re-finance into fractional loans. In the event everyone agrees, each individual will probably have to be re-approved, and there is a chance that for some reason one party may not. There goes the plan. If everyone does get approved, the rates on fractional loans are higher (as are down payment requirements or ltv ratios), so most likely there will be some adjustment to the amount of equity the building still holds.

Fractional loans are a fantastic product, but it's not all roses. If you are thinking of purchasing a TIC that offers individual TIC financing, make sure you have discussed the finite details of the loan with the mortgage broker offering the loan. Current Bay Area banks offering fractional loan scenarios are:
Sterling Bank
Circle Bank
Bank of Marin

Have questions about buying or selling real estate? Ready to sell or buy your home? Contact me today for honest, experienced answers.

Amy Blakeley
ablakeley at
(415)296-2173 Direct

Wednesday, August 16, 2006

Did You Hear That? It's The Sound of a Renter's Nightmare

Yesterday felt very reminiscent of 1997. Recently, I met with a client over drinks, and she mentioned that she didn't understand how the housing rental market tightens up and slows down.

When more people can afford to purchase homes, there is less demand for housing rentals, so prices adjust accordingly. Conversely, when money becomes expensive to borrow, meaning interest rates on borrowed money (home loans) increase, fewer can afford to purchase homes and the rental market maintains a steady pace due to continued demand.

The rental housing market in San Francisco is reaching a point of high demand. Interest rates on loans are holding steady at the moment, but rates are still higher than they have been in the last two years. In addition, buyers looking at the lower end of the housing market are facing future uncertainty with some of the risky loans , such as interest only loans or 3 to 5 year adjustable loans, which allow them to enter the housing market. Many such buyers are staying put in their rental housing.

So begins the Renter's Nightmare. On Monday I posted a 1 bedroom apartment for rent, with an open house to show it yesterday. There was a line at the main entry when I opened the door, I received 11 applications in 1 hour, and enough hints of possible bribing and personal stories from strangers to hold me until the next vacancy. Which most likely, will probably be a long way off.

For the entry level home buyers that are still ready to buy, there is good news. Inventory on the lower end of the market has increased significantly in the last quarter, offering new opportunities by way of pricing rather than risky loan tactics. Additionally, rates for fixed loans are holding steady at nearly the same rates as adjustable loan rates. Because the market has slowed, sellers can be less picky about what type of financing is chosen by the purchaser, which means that a no money down or 5% down offer could still seal the deal.

Have more questions about buying or selling real estate? Ready to buy or sell a home? Contact me today for honest, experienced answers.

Amy Blakeley
(415)296-2173 Direct
ablakeley at

Wednesday, August 09, 2006

Remodeling in a Transitional Market

The San Francisco real estate market has ebbed from Real Hot to Real Weird, with some great properties sitting and others receiving 5 offers the evening of the first Sunday open house, such as 137 Beulah. That being said, investors as well as home owners looking to improve homes and come out on top when they re-sell, need to take caution in their upgrading ideas. Realtor® Magazine has the following helpful tips:

Daily Real Estate News July 31, 2006
Remodeling: Home Owners' Seven Deadly Sins

Remodeling isn’t always a good idea, says Holly Slaughter, brand manager and
consumer-experience expert for

Here are what she calls the seven deadly home-improvement sins to consider before committing to projects that may work against you and lessen your resale value.
• Over expanding. Outdoing all the homes on the block is never a good idea because it makes the house more expensive than the others and therefore harder to sell.
• Making your home into something it’s not. Changing the style or the architecture is usually a big mistake.
• Changing the purpose of a room. Keep kitchens as kitchen and baths as baths. They were built that way for a reason.
• Under budgeting. People routinely under budget 20 or 30 percent fewer dollars and underestimate even more in guessing the time the job will take.
• Doing the job yourself. Unless you have first-rate skills, hire somebody who does.
• If it’s not broke, don’t fix it. Don’t waste money on renovations that won’t pay off. Buyers won’t necessarily pay for what makes a seller happy. Siding, windows, kitchens and bathrooms are the home improvement winners, according to Remodeling magazine.
• Neglecting regular upkeep. They may seem boring, but cleaning the gutters, keeping the house painted and trimming the shrubs are the most valuable home improvements.

Source: Marketwatch, Amy Hoak (07/30/2006)

Ready to buy or sell a home? Have questions about the current San Francisco real estate market? Contact me today for honest, experienced answers.
Amy Blakeley, Realtor
McGuire Real Estate
ablakeley at

Thursday, May 25, 2006

Thinking Inside the Box: Creative California Design

There are indications that the California housing market is cooling. The fact still remains, however, that people looking to buy single family homes in high demand areas will be spending a million dollars, and often settling for something south of the imagined "dream home."

This reality can often lead to creative thinking, and in Redondo Beach, California, creative thinking is taking place inside the box: a 3,000 square foot house built entirely of recycled shipping containers. A similar project is taking place in Victoria, British Columbia; according to my currency converter, the house in Southern California is being built for approximately $135 per square foot. Add on the cost of the designer and then subtract all the benefits of sturdy, environmentally friendly housing, and you've got yourself a bargain. Unfortunately San Francisco is a little short on vacant lots.

This video newscast is provided by Sellsius, an award winning and successfully overachieving real estate blog that encompasses all things real estate, including news, design, marketing methods and web search enhancement.

Have more questions about real estate? Ready to buy or sell your home? Contact me today for honest, experienced answers.
Amy Blakeley
McGuire Real Estate
ablakeley at

Monday, May 01, 2006


1318-1320 Masonic - A Quintessential Haight-Ashbury Craftsman

Entire building offered at $2,099,000
~ OR ~
1318 Masonic offered at $1,340,000 ~ 1320 Masonic offered at $859,000

Sirkin TIC Agreement Available

A stunning 2-unit Craftsman home nestled between Haight Ashbury and Ashbury Heights, offering house-like space and tranquility in the heart of the City. Move-in ready and vacant at close of escrow!

Constructed in 1908, both units have period details and wood-burning fireplaces. The shared deck in the rear is a perfect retreat. An undeveloped basement provides the opportunity for extra storage or the development of a four-car garage.

Set in the historic Haight-Ashbury, 1318-1320 Masonic is bordered by Buena Vista Park, Haight Street, Cole Valley, and Golden Gate Park. The neighborhood offers a balanced blend of elegance and flair which is derived from the area’s colorful past.

To see additional photos, please visit my website.

Open House Sunday, May 28th 2-4PM.

For more information on this property or to schedule a viewing appointment, contact me today!

Amy Blakeley
McGuire Real Estate
(415)296-2173 Direct
ablakeley at

Wednesday, March 01, 2006

More SF Housing, But Will it be Affordable?

The San Francisco Planning Commission approved plans for the Rincon Hill development South of Market. The Rincon Towers will have over 600 condo units, which are expected to sell in the $1 Million range.

It's great that San Francisco is getting more housing. There are many additional SOMA developments planned over the next 8 years, which will bring an excess of 1,800 condominium units to the market. Regardless of that fact that a certain percentage of units are required to be designated as Affordable Housing, it will be interesting to see the pace and stages of release on these upcoming condominium units. Bringing the units to market several at a time will create a more balanced market, meaning, supply and demand will be in line, which will drive prices down. So the question is: when it's all said and done, will the new condos really go for $1 million each? If so, that will leave many San Franciscans still out of reach for home ownership.

It's hard to tell. Both buyers and sellers have control over which way a real estate market moves, depending on the unity of each group. The suppressed market that was seen in the last few months of 2005 is a perfect example: educated buyers collectively decided they would not pay what they considered an unsubstantiated amount for properties in a time when interest rates were rising and loan options appeared to be more risky. Meanwhile, sellers stuck to their guns on getting an equal or better price for their homes than their neighbors did at the height of the 2005 market, resulting in properties having longer days on market and ultimately not pulling multiple offers.

In contrast, during the "slow period" at the end of 2005, there were a few properties that flew off the market and received multiple offers. Why? Because they were priced at what seemed to be "value" to all many buyers out there. The lesson: Sexy sells. And value is sexy.

See the SF Chronicle article on the Rincon Towers here.

Have questions about the San Francisco real estate market? Ready to buy or sell a home? Contact me today for honest, experienced answers.
Amy Blakeley
McGuire Real Estate
ablakeley at

Monday, February 20, 2006

Chron's Sunday Article: Housing Market Cooling?

This Sunday, the San Francisco Chronicle printed an in-depth article on the current state of the market. As I continue to feel strongly that looking at Bay Area statistics instead of San Francisco-specific statistics causes a lot of panic in San Francisco sellers, this article at least acknowledges that San Francisco should not necessarily be evaluated in a general basket with other counties.

View the article here.

Want to know your home's value in today's market? Contact me for a free comparative analysis.
Amy Blakeley
McGuire Real Estate
ablakeley at

Thursday, February 16, 2006

More: Sterling Bank Individual TIC Financing

Sterling Bank has just released three individual TIC financing products for 2-4 unit buildings in California.

The loans, a 1/1, 3/1 and 5/1 ARM on 30 year Amortization, are availble for both purchases and refinancing. The eligibility requirements for these loans are strict, including a minimum Total Debt ratio no greater than 40%, full documentation of income and assets, and a minimum credit score of 680, among many other requirements. However, these products, which are geared toward sellers of multiple-unit buildings as well as toward solidified groups of buyers, will add a much needed sense of security to those buyers who can afford them.

If you are considering selling a 2-4 unit building and would like more information on these products, feel free to contact me.

Amy Blakeley
McGuire Real Estate
ablakeley at

Wednesday, February 15, 2006

Sterling Bank Launches Individual TIC Financing Option

Sterling Bank & Trust quietly launched an individual TIC financing option on Monday, February 13th. Sterling Bank is the third bank in the Bay Area (the others are Circle Bank and Bank of Marin) to offer individual TIC financing, and option for TIC buyers which helps eliminate some of the risk involved in purchasing property as Tenants in Common.

I was called by my Sterling "insider" just this afternoon, and will have more information to post tomorrow.

The individual TIC loan options offered by Circle Bank and Bank of Marin were met with overwhelming enthousiasm, despite the higher down payment and interest rate requirements. Sterling Bank is entering the market with their product with impeccable timing.

Have more questions about trends in the housing market? Ready to sell or buy a home? Contact me today for honest, experienced answers. Amy Blakeley, Realtor®
ablakeley at
(415) 296-2173 Direct

Wednesday, February 08, 2006

SF Downtown Parking Limitation Ordinance Passes

The San Francisco Board of Supervisors passed a the parking ordinance bill yesterday in a 7-2 vote. The ordinance will limit downtown street parking where new residential development takes place, and force developers to reduce the number parking spaces at newly constructed residential buildings to 3 spots for every four units. It is unclear at this time whether the mayor will veto the ordinance.

See the San Francisco Chronicle article here.

Have more questions about trends in the housing market? Ready to sell or buy a home? Contact me today for honest, experienced answers. Amy Blakeley, Realtor®
ablakeley at
(415) 296-2173 Direct

Tuesday, January 31, 2006

From SF Association of Realtors: Supervisors Approve Daly’s Conversion Legislation, but...

The following news update comes from the San Francisco Association of Realtors.

Supervisors Approve Daly’s Conversion Legislation, but...

The Board of Supervisors has approved legislation proposed by Supervisor Chris Daly amending Subdivision Code Section 1332 to require Planning Commission hearings to address General Plan consistency for all condominium conversion applications subject to the condominium conversion lottery. Mayor Gavin Newsom has indicated that he plans to veto the proposed legislation. Since four supervisors (the number required to sustain a mayoral veto) have indicated that they will support the mayor’s veto, the proposed legislation would seem to be doomed.

Earlier, Supervisor Daly had proposed a moratorium on all condominium conversions but the proposal failed to gain much political traction. His most recent proposal is widely regarded as an attempt to accomplish indirectly what he was unable to accomplish directly. Support for that point of view is provided by the following two General Plan “priority policies” that the Planning Commission could always use to reject conversion applications:

  • That existing housing and neighborhood character be conserved and protected in order to preserve the cultural and economic diversity of our neighborhoods; and

  • That the City’s supply of affordable housing be preserved and enhanced.

The Association opposed Supervisor Daly’s latest condominium conversion proposal and requested Mayor Newsom to veto the legislation for the following reasons:

  • There is no evidence that the current process is not working; and

  • The Planning Commission will be forced to disapprove all condominium conversion applications because of the city’s priority policies, resulting in a de facto moratorium.

Monday, January 30, 2006

Two Great Online Sites for Finding Homes in San Francisco

The problem homebuyers have with using the San Francisco MLS is that it its search format is cumbersome. Additionally, unless the MLS is accessed via a realty website that requires logging on, the searches aren't saved. And what's a District anyway? And why doesn't it match my neighborhood's political District? Overall, the MLS isn't very intuitive nor very user-friendly.

There are two great websites out there now that can take away the frustration and facilitate your coordination of a Sunday open house tours (of course, so can your Realtor). Basically, these websites sort every piece of data stored on the Multiple Listing Service and offer a simple search format. Unless you prefer the ritual of getting up Sunday morning to get a cup of coffee at the local cafe while combing the Sunday classifieds, you may want to take advantage of these sites: is a simple search site that will map out all of the upcoming publicized open houses. The properties matching your criteria are listed in a color-coded menu that matches the location colors in the map. By clicking either on the map or the detail menu, an information box will pop-up and provide the address of the property and a photo if available. By clicking on the "more info" link, you can see further details about the property.

Trulia Real Estate Search is a categorized list of current properties. Property details are clumped into neighborhoods, price ranges, number of bedrooms, and so on. This is ideal for someone who is deadset on a location, square footage, or a particular price point, because it eliminates having to scroll through what you don't want to find what you do want.

Have more questions regarding San Francisco real estate? Contact me today for honest, experienced answers.
Amy Blakeley, Realtor
(415)296-2173 Direct

Nationwide Foreclosures Increased in 2005

From Realtor© Online Magazine:

National Foreclosures Up in 2005(January 24, 2006) --
The U.S. residential foreclosure inventory saw gains in each quarter of 2005, according to a new report from RealtyTrac.
Between the first three months and the last three, the number of new foreclosures ramped up 25 percent—with a total of 846,982 homes entering some stage of the process last year. However, RealtyTrac CEO James J. Saccacio stresses that, although seemingly high, the number of properties entering foreclosure actually represents fewer than 1 percent of all American households.

The report identifies Florida as the state with the highest foreclosure rate. Its 121,843 reported foreclosures accounted for more than 14 percent of the nationwide total for 2005, according to RealtyTrac. Florida was followed in foreclosure activity, respectively, by Colorado, Utah, and Texas. Other states with foreclosure rates ranking among the 10 highest in the country included Indiana and Ohio. Among the states reporting the highest number of new foreclosures, meanwhile, were California, Illinois, New York, and Michigan.

"Over the past few years, we've seen historically low mortgage rates, consistently escalating home prices, and steady, strong employment," Saccacio notes. "This has translated into relatively low levels of foreclosure properties, particularly bank-owned properties. With interest rates rising and an apparent slowing of property valuations in most markets, we'll be watching closely to see if there's a material effect on the number of foreclosures in 2006."
Source: Inman News Features (01/23/06)

Tuesday, January 24, 2006

Mayor Newsom Vetoes Disclosure Bill

Mayor Gavin Newsom vetoed one of the two bills that would impact the real estate market this past Friday. The bill, which would force sellers to advise of evictions of tenants with protected status, was approved by the Board of Supervisors last week. Read the SF Chronicle article here.

Word is in the air that Mayor Newsom will aslo veto the second bill, a bill which proposes all TIC conversions be approved by the Planning Commission, a lenghty process currently focused on properties with 5 or more units.

Wednesday, January 11, 2006

SF TIC Conversion In Danger

If you own a TIC in San Francisco, it's time for you to get vocal with your Board of Supervisors. Supervisor Chris Daly has proposed two bills that will dramatically increase the difficulty of condo conversion for all TIC owners, even those who currently can bypass the Condominium Lottery.

This Chronicle article outlines the two Condo bills, which have both received initial approval from the Board of Supervisors. One bill would subject all TIC owners who want to convert to condominiums to a review and approval of the Planning Commission. Currently only buildings with five or more units must undergo this process. The second bill, designed to slow the conversion of multi-unit rental housing into TICs, would make property sellers disclose information about prior tenant evictions.

Granted, this is the type of scenario we Realtors try to explain to TIC buyers when talking about the larger degree of risk than other types of property ownership. If these bills pass, people who have purchased TICs with a certain expectation of how long it will take to convert to a condominium may see a dramatic change. How the outcome of these bills will impact the TIC and condominium markets remains to be seen.

Regardless, TIC owners who do not want want to see dramatic (negative) change in the conversion process, would best protect themselves by becoming incredibly vocal with their respective District Supervisors. Below is a contact list for District Supervisors.

District 1 Jake McGoldrick 554-7410
District 2 Michela Alioto-Pier 554-7752
District 3 Aaron Peskin 554-7450
District 4 Fiona Ma 554-7460
District 5 Ross Mirkarimi 554-7630
District 6 Chris Daly 554-7970
District 7 Sean Elsbernd 554-6516
District 8 Bevan Dufty 554-6968
District 9 Tom Ammiano 554-5144
District 10 Sophie Maxwell 554-7670
District 11 Gerardo Sandoval 554-6975

Tuesday, January 03, 2006

THE BUZZ, 2005 THE WHISPERS, 2006 - SF Chronicle

This article from Jan 1 San Francisco Chronicle nicely sums up the 2005 real estate market, but doesn't really venture to predict what 2006 will look like.

Over the last quarter of 2005, there was an obvious shift in Buyer attitude. Fewer houses received multiple offers, and it was clear that with the slow increase in interest rates and the mad race for housing over the past few years, buyers stopped jumping to own just anything, but were truly searching for value. Sellers, on the other hand, were slow to accept and acquiesce to the cooling of the market, which led to some properties remaining on the market for a record number of days.

In 2006 we can continue to see Buyers holding back as inventory remains stagnant. Once the current inventory of properties begins to wane and the Spring housing market begins renewed, activity will most likely become more robust.

Have more questions regarding San Francisco real estate? Contact me today for honest, experienced answers.
Amy Blakeley, Realtor
(415)296-2173 Direct