Is Earthquake Insurance available in a condominium?

Is earthquake insurance the right thing for you?

The anniversary of the Loma Prieta Earthquake is coming up this Saturday, May 17th, 2015.  It’s a time of heightened awareness regarding earthquakes and usually pushes people to consider earthquake insurance and whether it makes sense for them.  Getting it for your home is a pretty easy thing to do, but what if you want it for your condo?  That’s the dilema for many condo owners.  Most (in San Francisco at least) home owners associations do not have earthquake insurance covering the condo common areas and buildings because it’s expensive, which would reflect itself in higher monthly home owners association fees.

I have had clients in the past who, at least initially, refused to look at condo buildings that did not have earthquake insurance-unfortunately, that limits the pool of available buildings.  In the end, you can 1) accept the buildings there are with earthquake insurance; 2) not buy a condo; 3) buy in a newer construction building up to current code and hope for the best; or 4) get over it and take a chance.  The following article was written in May of 2010, but it’s timeless in it’s message-I’ve had this same conversation with clients since I got into real estate in the mid-90’s.

Condo owners on shaky ground-San Francisco Chronicle

OceanView Village Property Values

Third Quarter 2015 Real Estate Update for OceanView Terrace; one of the last deals in San Francisco

427491-24_0 Luckily for residents of OceanView Village, there simply aren’t many places out there that offer the price range and accessibility that it enjoys. Contrast that with instances of no offers on properties citywide at the end of the second quarter, that has lingered throughout the third quarter-further complicated by an infusion of properties on the market after Labor Day. For those properties that received no offers, it seemed to be one of several things: an issue that was difficult to resolve; it was priced too aggressively; or buyers had choices of multiple properties.  At OceanView Village:

  • At the close of the third quarter of 2015, we had one active, four pending and nine sold. Of the nine, all sold over their asking price. Compare that to the second quarter, which had five sales; four of them over asking.
  • Overbids ranged from $3,000 to $60,000. The amount of overbids has come down since the second quarter; I think in large part because of higher list prices.
  • Across the board, values remained constant between the second and third quarter.
  • Appreciation from the same time last year seems to be between 16 and 20 percent.
  • If you should decide to sell, be sure to establish your list price by looking strategically at comparable sales and trends in the marketplace and taking geographical competition into consideration-in this case Daly City and South San Francisco. Once we start seeing price reductions and withdrawn properties commonly in the marketplace, historically, that has been the start of a market change.

Eric Castongia, Broker Associate at Zephyr Real Estate (BRE Lic. No. 01188380) provided the information in this article. The content of this article is an interpretation of data from the San Francisco Multiple Listing Service and Eric’s observations in the marketplace; he is available to discuss your situation or any questions you may have. He can be reached by e-mail at Eric@SFHotBuy.com, or via mobile phone at (415)307-1700.

The last bargain in San Francisco

Oceanview Terrace is not well-known, but it could be.

A client and friend hired me to sell his condo at Oceanview Terrace.  A nice two bedroom with a patio and a courtyard view.  We got it ready for sale, and it really came out really nicely.  As part of that process, I also got to know and love the development.  427491-1_0

The development is convenient (a few blocks from BART), well-maintained and affordable.  It really was a bargain at the bottom of the housing market, while the development was going through construction defect litigation-requiring cash buyers.  That was the perfect time to snap up units if you could swing it.  Now that the litigation is settled and the association is making their repairs, financing is available and people are less worried about when and if repairs will get made. That has raised prices, as has the current supply and demand problem.

Like any larger development (this one has 370 units), there is always going to be turn over. Generally speaking, that lowers sales prices because there is almost always competition.  More first time buyers in the marketplace needing access to public transportation has taken care of that competition problem.  Nearly everything that has come up in that complex over the last few years has been snapped up, over asking with multiple offers.

To give you a flavor, 2014 ended with a total of 23 condos being sold.  The price of two bedroom units we427491-24_0nt from $475,000 in March, to the last sale in December at $575,000!  1 Bedrooms ranged from $370,000 in March to $481,000 in December.

The average price for all units sold in 2013 compared to 2014 increased 21.8%!

Prices have remained very strong in 2015.  And since it’s one of the last nice, affordable developments in SF, I see that being a selling point for a long time to come.

Factors affecting an investment property’s value

Investment Property Value Considerations

Property values will be determined taking the following variables in mind:

  1. Vacant Buildings.
  2. One unit currently owner occupied or vacant
  3. One or more units to be recovered for owner occupancy and/or extended family occupancy.
  4. Completely tenant occupied to remain that way (leased, month to month,  or protected rentals).
  5. Evictions already performed on the building creating a ‘tainted unit’.
  6. Ellis Act evictions on the premises.

In establishing marketing strategy, there are several options:

  1. Approach the tenant/tenants as buyers.
  2. If the tenant plans to move at any point in the future, be flexible with them on expected time lines, offer to help them with moving expenses, or wait until the unit becomes vacant.
  3. Wait to market the building until the tenant, or tenants vacate.
  4. Sell the building now at a value consistent with its income.
  5. Consult an attorney to explore your options.

Consider talking to an attorney who specialized in real estate law; particularly landlord-tenant law.  The City and County of San Francisco has implemented varied legislation over the years; sometimes in contradiction to each other.  Have a firm understanding of the impact of your tenancy on how you may market your building and in how you can use it after you own it.  If you need any resources for local attorneys, please don’t hesitate to reach out to me.

Moving checklist

The prospect of moving can be overwhelming, but it doesn’t have to be if you take it one bite at a time.  Please use the following checklist to help you guide you in your move preparations.

Recommendation:
Start preparing for your move just as soon as you can.  Collecting records, arranging your finances, and notifying your loved ones takes time.  Also, changing your address on your subscriptions often takes several weeks.

Before You Leave Your Current Address-Address Change

  • Give Post Office forwarding address.
  • Charge Accounts.
  • Subscriptions (notice requires several weeks).
  • Contact OneSwitch at (866)262-2816-all magazine subscriptions can be changed to your new address at no cost.
  • Friends and relatives.
  • Owners Manuals for items left in the house
  • Warranties for any items relating to the property
  • A list of area service providers, gardener, housekeeper, dry-cleaner
  • Garage door openers and keys
  • Code to alarm system and contact number of alarm company

Bank

  • Arrange credit references.
  • Cancel any automatic payment or direct deposit arrangements as appropriate
  • Transfer funds, arrange check-cashing in new city.

Insurance

  • Notify company of new location for coverage: Life, Health, Fire & Auto.

Utility Companies

  • Gas, electric, water, telephone, cable TV, garbage.
  • Get refunds on any deposits made.
  • Laundry, newspapers, changeover of services

Medical, Dental, Prescription Histories

  • Ask doctor and dentist for referrals; transfer needed prescriptions, eyeglasses, x-rays.
  • Obtain birth records, medical records, etc.

Pets

  • Ask about regulations for licenses, vaccinations, tags, etc.
  • Plan for transporting pets: they are poor traveling companions if unhappy.
  • Consult your veterinarian about moving your pet
  • Obtain your pets medical records

Packing Tips

  • Sort and get rid of things you no longer need-have a garage sale, donate to charity, or recycle.
  • Pack like items together
  • Decide what you will move yourself, and what you will have moved.
  • Don’t’ over-pack boxes
  • Put heavy items in smaller boxes so they are easier to lift.
  • Wrap fragile items separately and pad bottoms and sides of box.
  • Label boxes on multiple sides so they are easy to identify even if stacked.
  • Label where boxes are going so that they can be put right in the area they are intended.
  • Keep all moving documents and important papers together for easy and quick reference.
  • Back up your computer before packing.
  • Inspect furniture and boxes for damage as soon as they arrive.

Don’t Forget To:

  • Empty freezer; plan use of foods.
  • Defrost freezer and clean refrigerator. Place baking soda inside to dispel odors.
  • Have appliances serviced for moving.
  • Clean rugs & clothing before moving; have them moving wrapped.
  • Check with your Moving Counselor; insurance coverage, packing and unpacking labor, arrival day, various shipping papers, method and time of expected payment.
  • Obtain all personal records from lawyers, accountants, doctors
  • Check on deductible moving expenses if any
  • Arrange for storage if necessary
  • Have car checked and serviced for the trip
  • Plan for special care needs of infants and/or pets.
  • Carry enough cash or traveler’s checks to cover cost of moving services and expenses until you make banking connections in your new city.
  • Carry jewelry and documents yourself—or use registered mail.
  • Carry traveler’s checks for quick, available funds.
  • Let a close friend or relative know the route and schedule you will travel, including overnight stops; use him/her as message headquarters.
  • Let movers know how to stay in touch with you
  • Double check closets, drawers, shelves, etc., to be sure they are empty.
  • Assemble first-day items-soap, toilet paper, pencils, pager, toiletries, bath towels, utility knife, scissors, trash bags, etc..
  • Pack a day or two worth of extra clothing in case of delay
  • Leave all old keys needed by new tenant or owner with Realtor or your local contact.
  • Obtain certified check or cashier’s check necessary for closing real estate transaction.

At Your New Address:

  • Check on service of telephone, gas, electricity, water and garbage.
  • Check pilot light on stove, hot water heater and furnace.
  • Have appliances checked.
  • Have locks changed
  • Ask mail carrier for mail he/she may be holding for your arrival.
  • Have new address recorded on driver’s license.
  • Visit city offices and register for voting.
  • Register car within five days after arrival in state or a penalty may have to be paid when getting new license plates.
  • Obtain inspection sticker and transfer motor club membership.
  • Apply for state driver’s license.
  • Register children in school.
  • Arrange for medical services: doctor, dentist, veterinarian, etc.
  • Relax for a moment, you deserve it!

Packing tips and before you leave your current address-property you are leaving  inspired by Realtor online Magazine by permission of the NAR copyright 2003 all rights reserved

Starting/Stopping Utilities

Pacific Gas & Electric

(800)743-5000

www.PGE.com
AT&T (phone)

(800)288-2020

www.ATT.com

 

Comcast Cable

(800)945-2288

www.Comcast.com

 

Sunset Scavenger

(415)330-1300

www.SunsetScavenger.com

Bulky Item Pick-up

(415)330-1300

Hazardous Waste Pick-up

(415)330-1405

www.SFHazWaste.com

 

San Francisco Water Dept.

(415)923-2400

www.SFWater.org

 

Dept. of Motor Vehicles

(415)557-1179

www.dmv.ca.gov

 

Stop Junk Mail

(877)786-7927

www.StopJunkMail.org

 

Daily Newspapers
San Francisco Chronicle

(415) 777-1111

www.sfchron.com

San Francisco Examiner

(415) 826-1100

www.sfexaminer.com

How are closing costs split between buyer and seller

Closing costs are the moneys necessary to pay off all expenses incurred by buyer and seller on a property.  This will include an accounting of all funds spent and received in the transaction for both the buyer and seller.  Following is a partial list for items generally paid for by either buyer or seller in San Francisco.

Buyers:

  • Escrow fees
  • Title insurance
  • Loan fees, including points
  • Appraisal fee
  • One year’s hazard insurance premium (if not a condominium)
  • Deed recording fees
  • Notary fees
  • Prorated property taxes split between buyer and seller
  • Pre-paid interest to your lender
  • Prorated homeowners dues is you are purchasing a condominium.

Sellers:

  • Transfer tax
  • Real Estate agent commissions
  • Loans and loan fees (to close out existing loans)
  • Prorated property taxes split between buyer and seller
  • A portion of the taxable gain if above allowed limits
  • Prorated rents and security deposits if an income property
  • Deed and recording fees

The estimate of closing costs is generated when both the agents in the transaction, provided to the escrow officer that reflect the terms and conditions of the purchase contract.  The escrow officer will then compare the two sets of instructions and, if they match, the escrow holder will execute these instructions, disbursing funds and recording the deed which marks your ownership of the property.

What do you mean when you hold title to a property?

The way you own a property is called vesting, or holding title

 

The form of ownership chosen in your purchase, known as the vesting (holding title), will determine who may sign various documents and future rights of the individuals in the transaction; it can have an effect on one person buying as well as multiple people. You may have already heard some of the terms, joint tenancy, community property, tenants in common, sole ownership, or held in trust.

These rights associated with each type of vesting involve such matters as: real property taxes, income taxes, inheritance and gift taxes, transferability of title, exposure to creditor’s claims and significant probate implications in the event of death.

Before you can close escrow (or get loan documents), you must have selected a method of ownership.  Please get started on that process as soon as you begin the search for property.  Living trusts for instance, can take months to set up, so your preparation is important.

I urge you to speak with your attorney and/or tax advisor as soon as possible for vesting questions.  Your advisor may make recommendations which require partnership agreements, trust documents, wills, or other such documents.  Since these decisions and the accompanying documents may take time to be generated, I urge you to start this process immediately so that they may be accomplished prior to close of escrow.

How do I make a purchase offer on a property?

The real estate purchase contract, also known as a purchase offer, or offer, is meant to be binding and spells out in detail your obligations and responsibilities. Some key points are:

Purchase Price

  • The purchase price should be looked at as part of the strategy for negotiation.
  • Are there multiple offers?
  • Is it priced low?
  • Is it priced high?
  • How long has it been on the market?
  • What have other similar homes sold for?
  • What is the condition of the property?
  • Is it unusual in the marketplace (i.e. is this a one-of-a-kind property)?

Ratification / in contract / in escrow
These are the terms used to convey that you are in the process of purchasing a property.  It means that buyer and seller have agreed to price and terms and are moving toward transferring ownership of the property.

Deposit / Good faith deposit / Earnest Money Deposit
A good faith deposit is most often a personal check made payable to a title/escrow company, which accompanies your offer; an offer must have ‘consideration’ to be valid.  The check is deposited after you get into contract and is applied toward your down payment and closing costs.  You will generally make three deposits to escrow prior to closing.

Inspections
Your offer should be made contingent upon your obtaining, reviewing and approving thorough and professional inspection reports so as to be satisfied with the properties condition.  These may include reports by inspectors such as licensed pest control and general contractors, underground storage tank specialists, and additional reports by structural engineers, roofers, sewer inspectors, and chimney sweeps if applicable.

Disclosures
Most sellers of residential properties and involved agents are required by law to disclose any information, which may materially affect the value of your property.  A few exceptions to this requirement are probates and foreclosures.

Loan Contingency
If you are obtaining a loan to finance the purchase of your property, you will most likely need time to obtain a loan from a lender at terms acceptable to you.

Close of Escrow and Physical Possession
Close of Escrow (COE) and physical possession of the property are negotiable and may not occur on the same day.  A typical COE is scheduled for 30 to 60 days after the contract is accepted.  If the property is tenant occupied, or if the sellers request to rent back the property after the COE, your possession of the property would occur after your ownership begins.

Liquidated Damages, Mediation, and Arbitration of Disputes
These three sections of the purchase contract address what happens if the buyer and seller get into a dispute and have difficulty coming to agreement.  You should review these paragraphs prior to writing a purchase offer.  If you are unclear as to what they mean, or how they may impact you, please consult with a real estate attorney to better understand these clauses.

How to get started with financing

Getting started with financing

Property purchases usually include some kind of institutional (bank or savings and loan) financing.  There are many types of financing to consider depending on your long-term financial goals.

Mortgage brokers are popular because they have relationships with multiple lenders.  Mortgage brokers will search for the best loan programs with several lenders, and provide options for you, saving you time and energy.

Direct lenders (such as Wells Fargo or Bank of America) may be the right fit for you if you already have a relationship with a lending institution or credit union, or if the specifics of your situation call for it.  Direct lenders will usually have fewer programs available to them than a mortgage broker, so you’ll be doing your own due diligence to make sure you have the program right for you.

On-line mortgage brokers are available, but I have found that often times these brokerages are not local, nor familiar with our real estate market.

My recommendation will always be to work with a local broker or direct lender that you can meet in person.  If you need a few referrals, let me know.

Brokers and lenders will look at various financial information to get the best snap shot they can of your financial picture.  This will help them establish you as a credit risk and how much of a risk (the amount they will loan you) they will take.  They will look at such things as:

  • income, including documentation about additional income such as alimony, child support, or pension
  • assets
  • debt
  • late payments
  • bankruptcies or foreclosures
  • your work situation, length of employment, and job changes
  • two years tax returns
  • bank statements
  • source of your down payment (will this be your own money, proceeds from a stock or retirement account sale, or a gift from family)
  • reserves and retirement plans
  • credit report and FICO score

Types of Financing

Adjustable Rate Mortgage (ARM)-have a mortgage interest rate that changes over the life of the loan, usually tied to an index and can adjust as often as once a month or as little as once a year.  The type of loan carries more risk to the borrower, as the interest can go up frequently over the life of the loan.

3, 5, 7, or 10-year fixed rate loans-have a fixed interest rate for a period of time usually three, five, seven or ten years, then turn into an ARM which adjusts once a year.  Once the loan changes to an ARM the payments fluctuate and the loan is amortized-meaning set to pay off for the remaining duration of the loan.  This type of mortgage gives borrowers a steady payment for a period of time, usually with an interest rate lower than a 30 year fixed rate mortgage.  This is a good option for borrowers who plan to sell or refinance their home within 5-8 years who want some stability in their payments.  Some of these loans also offer an interest only option, meaning that no principal is paid on the loan for a period of time.

Fixed Rate Mortgage-has a fixed mortgage payment for the loan’s entire duration-usually 30 years.  A portion of the mortgage payment goes to interest and the other to principal (the amount borrowed).  Payment to principal is smaller in the earlier years, and increases over time.

Loan Limits

You’ll hear the term ‘loan limits’ as you talk more and more about financing. There are three types of loan limits: conforming, super-conforming and jumbo.  This is important, because the government buys loans in the secondary market, which puts more money back into lenders’ pockets to lend out even more money.  The government has limits on the size loans they will buy, so they will only buy conforming and super-conforming loans.  The loans that fall outside these categories are jumbo loans.

The conforming loan limit is a permanent limit (subject to change by the government) and the super-conforming limit is temporary, based on median income in a region.  Interest rate pricing for the conforming loan limit is generally the lowest of the three.

Jumbo loans are financed through private investors, and not eligible to be purchased in the secondary market.  When financing tightens, it’s generally in this category, as there may be fewer investors willing to risk their money to people borrowing money at this level.  Pricing for this financing is generally higher than it is with conforming.

http://www.fanniemae.com/aboutfm/loanlimits.jhtml

Questions to Ask Your Lender or Mortgage Broker

  1. What loan programs and options are available to me?
  2. Will my loan be Conforming, Super-conforming, or Jumbo?
  3. What type of loan is available to me?  Adjustable, Fixed, or a hybrid?
  4. What loan program would be best for my situation?
  5. So I qualify for any special programs such as Below Market Rate Units, Mortgage Credit Certificate Programs, Mayor’s Office of Housing Programs, or FHA programs?
  6. Will private mortgage insurance be required in my loan?  How much will it cost?
  7. How long is the approval process?
  8. What information is necessary to get my approval?
  9. What documents are necessary from me to approve my loan?
  10. How much will be closing costs be?  What will they include?
  11. How much are your fees, and who pays them?
  12. How much is a loan lock, and how long is it good for?
  13. If rates go down during the escrow period, will I be able lower my rate?
  14. How long will it take to close my loan?
  15. Is there are prepayment penalty on my loan?
    1. Why?
    2. How long?
    3. How much will the penalty cost if I pay my loan off early?
  16. Who will service my loan?

Finding the right financing for you does not have one answer; there are many different options which may work for your situation.  The above is broad in scope, and may not cover your specific situation; please consult a mortgage broker and/or accountant to help you in your financing goals.