Eager Seller

The price on the remaining flats in this 5-unit Sacramento Street TIC have been significantly reduced. Pros: lovely location, a reasonable fractional loan rate of 6.95% and recent renovation. Cons: Interiors lack charm, no on-site parking. Any interested buyers should hard bargain on price and/or other concessions, like, for example, a payback at closing for two (or more) years of leased parking fees.

Time to Rethink the City's Housing Policy

This Examiner op ed, written by a member of Plan C, outlines why the Board of Supervisors need to change their attitude toward tenancies in common and the condo lottery. An excerpt:

What policy goal is served by limiting condo conversions? It’s not to stop evictions — because it’s now virtually impossible to evict a building’s tenants and still qualify for condo conversion. Is it to “preserve San Francisco’s rental stock”? Even if you agree that this is a worthy goal, limiting condo conversions isn’t having that effect — building owners are converting rental units to TICs at ever-increasing levels despite the fact that condo conversion opportunities get slimmer each year.

The answer is that in this new era of easily available TICs and recently enacted eviction protections, there is no longer any good reason to limit condo conversions in San Francisco. Doing so only hurts new homeowners, and helps no one. San Francisco’s elected officials should take a bold new step and implement a much-needed housing reform: the abolition of limits on condo conversion.

By the way, every TIC owner in the City should join Plan C. Membership is free.

Communication Mechanisms

My group is holding a house meeting tomorrow evening. Nothing extraordinary to be discussed, just the usual quarterly get together to review finances, financing and building maintenance needs.

Getting a group of people together with a common interest in a property would appear to be relatively easy. In fact, it took my group a few years before we came up with the device best suited for checking everyone's availability and confirming plans to attend.

That device is a simple piece of paper. On the paper is a grid with each of our names listed top to bottom in the first column, and calendar dates heading a series of subsequent columns going left to right. This paper gets posted in our common area near the front door. Each of us puts a check across from our names on all the dates listed when we can make a meeting. When there is a column where all the Xs line up that is our meeting date.

This posted form easily achieves what phone calls, emails, a Yahoo group and a few other things never seemed to manage effectively. It gets each of us to pause on the way in or out of the building, think about our calendars and inform each partner about everyone else's schedule, all in one step. Pedestrian, perhaps. But as they say, sometimes it's the little things.

Pick of the Week

I'm not sure I would, lower or no lower, associate this address with the words Pac Heights, but 2640 Post Street looks like a lovely building and there is only one unit left. (Unfortunately it is the one with leased, and not garage, parking.) On the plus side this is a top floor unit with good light, historic charm and a recent renovation that includes new heating and electrical systems. It looks like this unit also has a little nook for a day bed, mini-library or mini-office space which is a big plus when you are organizing your life in 850 square feet. I would urge prospective buyers to use the offsite parking and one remaining unit as leverage when negotiating a purchase price. If the buyer is eager to close on the entire building, you might walk away with a sweet deal.

Back to Politicking

When fractional loans were first announced I thought TIC owners would be able to forgo the extraordinary hassle of pushing for pro-TIC legislation in a pro-tenant city. I was hopeful the private sector would be able to effectively address the negative aspects of TIC financing like sharing default risk with fellow owners and limited liquidity for those of us who want to sell or pay down our notes. Mortgage brokers and real estate agents enthusiastically predicted that after a year so many banks would be in the game we would have lots of financing options and fantastic rates driven low by competition.

I was wrong.

The rates for fractional loans are onerous. Individuals with stellar credit are being asked to pay a premium for their mortgages. They are being penalized as if they had a trail of deadbeat activity that put them in a high risk category. What kind of residential buyer is today being asked to pay 7.25% interest and higher on a home loan?

Look at these headlines from this week's business news. "30-Year Rates Drop to Low for 2007." (The Washington Post.) "US Mortgage Rates Tumble a Second Week." (Houston Chronicle.) "Slowing Economy Drags Down Mortgage Rates." (CNN Money.) 30-year, fixed-rate mortgages averaged 6.18 percent this week. Many banks have rates as low as 5.75 percent.

But if you are a TIC owner you wouldn't know it.

TIC owners are being asked to pay 1.5% more (or an even bigger spread in some cases) for their money. On a $300,000 interest only loan, a condo owner with a 5.75 percent rate is paying the bank $1437.50 per month. On the same loan, a TIC owner with a 7.25 percent rate is paying $1812.50 per month. The TIC owner is paying $375 more a month. Over five years the TIC owner will have paid $22,500 more. And so on. I don't know about you, but I can think of better things to do with $375 every month than give it to a bank.

There are only two ways forward. One is to wait and hope that the banks will engage in some earnest competition and fulfill the promise of fractional financing. The second is to return to the fray, and start contacting our City supervisors about enacting pro-TIC legislation that will allow more of us to condo convert.

Here is my proposal. I want the City to up the number of units that get selected in next year's condo lottery to 500. Write to your City supervisor and tell him or her that you want the same thing.