Saturday, June 23, 2007

KRON 4 Reports on the Complexity of the Bay Area Real Real Estate Market

Maureen Kelly of San Francisco's KRON4 News came across my recent post regarding demand in the luxury real estate market. Intrigued, she did some additional research, and shortly thereafter, did this segment on the evening news, which gives great case-in-point examples of a demand-driven real estate market.



Thank you for persmission to embed the video, Maureen.

Wednesday, June 13, 2007

A Question From a Reader - Fractional TIC Financing

A lot of readers come to my blog looking for information about TICs (Tenancy-in-Commons). One reader asks:

Q: I am a Mortgage Broker from Los Angeles and [I have] a client who asked me about purchasing an individual unit in a building that is being converted into a TIC property... having never heard of a residential TIC property, I did my research today and found your name on an article about Sterling Bank & Trust and their entrĂ©e into the individual lending on TIC properties. The property in question is in Santa Monica, CA where Coop’s and condo conversions are the norm and where apparently there are only 2 of these TIC properties either being built or in the process of conversion too – My question can you forward me any additional info on TIC’s and do you have a contact at Sterling that I might call and get loan info from?

A: Thanks for your inquiry. First off, there are 2 ways to purchase a TIC. One is in the traditional TIC way, is in which all buyers purchase a percentage interest in the property that adds up to the total of the purchase price TOGETHER. This is the most common way. So, if there are 4 units, each buyer is purchasing a percentage of the whole building, and each is doled out a “unit” which represents his or her percentage, all on one loan together. This is risky, as if one person defaults on his or her portion, all of the others have still have to pay the entire come up with the entire mortgage. The second risk in TIC ownership is that local and state changes in legislation can be put into place which directly affect ownership rights (in San Francisco, for example, TICs groups can enter into a city lottery to convert to condominiums, but the city can change the rules and upset the balance at any time). Also, no one owns a unit separately – so they don’t have the same rights as condominium owners do (which is why the impact of legislative changes makes this a rather volatile sector of real estate).

Individual TIC financing, (known as fractional TIC financing) is a relatively new financing tool that was born from the above noted risks in attempt to minimize the volatility of owning property as a TIC. A few banks, such as Sterling, have come up with a way to allow TIC purchasers to each have SEPARATE loans for each unit, which act much like loans for condominiums. Since the risk is higher for the bank, because it cannot leverage the entire building in case of a default, these loans tend to be at a higher interest rate, need better credit scores to obtain, and ultimately require a high down payment (20-25%), which historically has created a barrier for some people in purchasing units in this fashion. Additionally, fractional TICs must be in place for every unit in the building; your buyer cannot just decide that she, outside of everyone else, will have her own, individual financing, while everyone else is on a loan for the remainder of the building.

I just last week received a notice from Sterling Bank & Trust that announced they can now offer fractional TIC financing which would only require 10% down, which may make fractional financing a more viable route to affordable housing. The phone number listed on the announcement is (415)970-9889. If you would like to learn more information about TICs, Attorney Andy Sirkin has a great
website that addresses the most frequently asked questions. Good luck!

Are you ready to buy or sell your home? Contact me today.
Amy Blakeley, REALTOR®
McGuire Real Estate
http://www.amyblakeley.com/
ablakeley at mcguire.com



Friday, June 08, 2007

San Francisco Sets New Record in Luxury Home Sales

The lack of housing inventory across all price ranges in San Francisco continues to fuel a real estate market that contradicts national and state trends.While condominum and home sales are slightly below last year for the month of May (239 in 2007, 273 in 2006*), San Francisco has set a new record in its luxury home sector.

May 2007 recorded the highest home sales in the $2,000,000 and up range for a one-month period in San Francisco history, remarked
Aldo Congi, Vice President and Manager of McGuire Downtown, this past Wednesday. With an unprecedented 36 single family home sales at a price of $2,000,000 or more, the month of May beat out the previous record of 29 homes set in the same price range in 2000.

The hot market for luxury real estate is expected to continue if inventory levels remain low and the Bay Area economy maintains its current course.

*statistical data provided by McGuire Real Estate via BrokerMetrics®.



Have more questions about San Francisco luxury real estate? Ready to buy or sell your home? Contact me today.

Amy Blakeley
Realtor®
McGuire Real Estate
www.amyblakeley.com
ablakeley at mcguire.com




SB-464 Ellis Act Legislation Stalled

The state proposed changes to California's Ellis Act, SB-464, failed to pass the State Senate. From Beyond Chron:

"Senate Bill 464, the bill to reform the Ellis Act by limiting its scope to landlords who have owned the property for a certain number of years and sponsored by Assembly member Mark Leno and State Senator Sheila Kuehl, has failed to garner the 21 votes needed to pass. The bill appeared to come within a single vote of passage, only to have San Jose's Elaine Alquist switch to a "no," killing any chances for passage this year. The bill was not brought up for a formal vote, but instead becomes a "2-Year Bill" eligible to be voted on again in January. Beyond Chron will provide a full report on the efforts to win Senate passage next week."

No word on if the retroactive effective date of the legislation, currently proposed as March 27, 2007, will remain the same as the bill comes back to the table next year.

Have questions about the real estate market? Ready to buy or sell your home?
Contact me today.

Amy Blakeley
Realtor ®
McGuire Real Estate
www.amyblakeley.com
abakeley at mcguire.com