Wednesday, June 2, 2010

Real estate games

Matt and I are ready to buy a house / home / casa / abode / whatever.  We're ready to get a place to call ours and fill with memories.  The thing is, buying real estate is a lot easier said than done - especially in San Francisco.  Our budget is tiny, and as you can guess, San Francisco isn't that cheap.  We're not ready to flee the city yet, though - I know I can't live in the burbs yet, I could maybe do a beach town or farm town but I don't think the tech market is really taking off in either of those types of places (and my new company is still in the wireframe mode).

Over the past two months we've had quite a real estate roller coaster.  First, the TV show "First Time Home Buyers" was considering us for the show but the timing never quite worked out (which is fine as I still hate makeup and I don't think showing my sweatpants self on weekends would be that awesome).

We've been working with a rad agent who has really been showing us the ropes in real estate.  Because of our low budget, but our desire to live in a good neighborhood where we can make money down the line, we're looking at:
  • Up and coming areas - Bernal Heights, Inner Richmond, Sunset / Cole Valley border
  • TICs (tenancy in common) - this is basically where people buy into a building and share the building but own their unit; in San Francisco, TICs are worth ~20% less than condos.  Historically TICs were very risky because all owners go in on the same loan and if one defaults, the whole building is ... in a sticky spot.  Now, TIC owners can get separate loans, but there are still risks such as the unit being harder to sell (based on a handful of reasons).  Condos are worth more than TICs because of how the ownership and loans work.  In a 2-unit building, after 1-year living in the unit, the owners can apply and convert to a condo.  In 3-6 unit buildings, the owners can enter a condo lottery (in San Francisco I hear it's about 8 years to be able to convert - eesh!).
  • Condos 
  • REOs / short sales - these are typically bank owned properties where the owners defaulted or foreclosed, or owner owned where they want to sell before they foreclose; these start off looking cheap but can quickly climb in price as there are a handful of investors who buy for cash then flip the unit for a lot more.  With the way bidding works it's tough to combat these guys (e.g. they'll come in with a cash offer and no contingencies (they're OK with mold if there's mold, they'll deal with structural stuff if that's an issue, etc.)).  
We put a bid on an REO a month ago and still haven't heard back - I'm certain we won't get it.  We also looked at a place in Bernal and decided not to put a bid because it was way too much of a fixer - it was listed at $560k, a week after stepping away from it, we learned it sold for over $800k - what?!!!

Here's the latest place we looked at: Lawton and 10th (not at all where we thought we'd consider - it's in the Sunset).  The higlihgts:
  • Near the park
  • Walking distance to restaurants, cafes, etc.
  • Good school district (the only one in the city that's good)
  • Safe
We were literally going to put an offer in TODAY, but learned someone else already did and they offered over.

Back to the searching board ... more to come.  Bummer.

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