| The Dangers of Dual Agency | July 1st, 2008 |
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The most common legal arrangement in the business of buying and selling real estate is for a listing agent from one company to represent the seller and a buyer’s agent from another company to represent the buyer. The advantage to this scenario is that each party their own representative acting in their best interests. Dual agency, when a Realtor represents the buyer and seller, creates relationships with clients and customers that aren’t that clear-cut. A Realtor who chooses to become a dual agent can no longer advocate on behalf of either party because each client has opposite goals. She is also unable to disclose some types of information from each party, like how much the buyer is prepared to pay and how low the seller is willing to go. And she is also not allowed to offer specific negotiation strategies to either party. A different kind of dual agency is created when two agents from the same company represent the two parties. This happens with a fair degree of regularity at Paragon because we have so many productive sales people. Some buyers and sellers get confused when Paragon represents both sides. They worry that our company will place its own interests above theirs. It helps them to understand that as independent contractors we individually represent only the interests of our client — and that their is no personal economic incentive for us to do a deal “in-house.’ Sometimes we list a property for sale and have a buyer ask us to represent them in the transaction. Their hope is that by having us represent both parties we will be able to either reduce the selling price or a cut our commissions. My practice has always been to reject requests for dual agency. I’m not comfortable representing both parties because it limits my ability to advocate for either side. And even the appearance of not acting in my seller’s best interests is not worth the extra money to jeopardize my relationship with them. This tactic is also unfair to other agents with buyers interested in the property who won’t have the advantage of a level playing field when competing with other offers. If I do meet a buyer who wants to make an offer on my listing and they need representation, I refer them to another agent in my office. If there are multiple offers on the home, I ask that they are all submitted at the same time so I can be sure not to give my associate an unfair advantage. Again, this is to assure all parties involved that no one is getting inside knowledge on what price and terms to offer. The best agents build their reputations one deal at a time. While I always guarantee my clients the best representation possible, I’ve also always make sure to treat all parties fairly on every sale I handle. |
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| Build it and They Will Come– Upscale Restaurants Get Ready to Feed Rincon Hill’s Future Masses | June 30th, 2008 |
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With at least half-a-dozen skyscraper condominiums either completed or under construction in and around Rincon Hill, and thousands of new residents will be swarming into the area within the next two years. Among the towers changing our skyline– The Infinity at Beale and Folsom; One Rincon at the top of 1st Street; The Millennium at Fremont and Mission; SF Blu at Hawthorne and Folsom and 45 Lansing, just off 1st Street. Figuring out where the Rincon Hill neighborhood begins and ends is challenging. If you include all these buildings , it runs from Beale to Second and Mission to the Embarcadero. I think of the neighborhood’s heart as Lansing Street, a little horse alley that runs West off 1st Street between Folsom and Harrison. This pocket of primarily residential buildings, both old and new pushes right up to the crest of the hill, with City views on one side and water views on the other. To cater to these new well-heeled folks, upscale restaurants are moving into the neighborhood. Star chefs like Michael Mina and Nancy Oakes are ready to build out new eateries at The Infinity and The Millennium. And Pat Kuleto has already invested $100 million in his two new restaurants, Waterbar and Epic Roadhouse around the corner on the Embarcadero. Other new restaurants already open are Anchor and Hope, a 70-seat “seafood shack” on Minna, owned by Threefold, the same partners who started Town Hall; and Local Kitchen and Wine Bar, run by Ola Fendert of Oola in SOMA. These upscale eateries fit neatly into residential developers’ plans. There’s a cache about having star chefs running restaurants in their buildings. San Franciscans who have never gone East of 5th on Mission, or southward from the Financial District will start to get familiar with the area and begin to consider it part of the City’s fabric. They also turn Rincon Hill into a destination location and give it a sense of identity. The only downside to this exciting new neighborhood is how expensive it is. With only a handful of units built as affordable housing, there is an economic homogenity to the neighborhood that may flatten its character. On the flip side, developers in the neighborhood had to pay hefty fees to the City ($25 a square foot) so that affordable housing with suitable infrastructure could be built elsewhere. |
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| More Renters - Fewer Homeowners | June 27th, 2008 |
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The percentage of American households headed by homeowners experienced its most significant decline in two decades at the end of the first quarter of 2008, according to the U.S. Census Bureau. Only 67.9 percent of households were headed by homeowners, down from a record 69.1 percent achieved in 2005. Renter households increased from 30.9 percent to 32.2 percent, erasing gains achieved in recent years. The jump in renter households was not unexpected: it simply happened far faster than anticipated. The Joint Center for Housing at Harvard University projected the number of renters would increase by 1.8 million between 2005 and 2015. Instead, the housing market decline and subsequent dramatic rise in foreclosures pushed 1.5 million additional households into rental housing between 2005 and 2007 alone. Not surprisingly, rents have increased by about 11 percent and vacancy rates have fallen in many urban markets over the same period. |
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| Will Suburbs Be The New Slums? | June 27th, 2008 |
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This past March, The Atlantic Monthly noted the decline of the suburbs. In Overbuilt communities like Elk Grove, south of Sacramento, scores of homeowner have either abandoned their homes or rented them out to sketchy tenants. Other ’burbs nationwide are noted as communities with rising crime rates and places up to one in four homes stands empty. This fleeing of the ‘burbs is usually attributed to the subprime-mortgage crisis with its wave of foreclosures– which certainly is speeding up the phenomenon . But there have also been long-term structural changes in the way many Americans want to live and work. CEOs for Cities, a government-business coalition, said higher gasoline prices will push new housing developments closer to the urban core and cause further decline in outlying communities. The U.S. Dept. of Transportation reported that American drivers reduced the number of miles they drove in March by 4.3 percent over the same month a year ago. And Coldwell Banker says 81 percent of the agents it surveyed said their clients increasingly are looking to urban housing as a way to cut commuting costs. Deeper studies covering long-term socio-economic trends also point to suburban decline. In 2006, using recent consumer research, housing supply data, and population growth rates, The Metropolitan Institute at Virginia Tech modeled future demand for various types of housing. The forecast is a likely surplus of 22 million large-lot homes (houses built on a sixth of an acre or more) by 2025—that’s roughly 40 percent of the large-lot homes in existence today. In the meantime, over the last 20 years, the appeal of urban living has slowly taken hold in popular culture. Seinfeld—followed by Friends, then Sex and the City—began advertising the city’s renewed urban allure to Gen-Xers and Millennials. Conversely, when Hollywood wants to portray soullessness, despair, or moral decay, it often looks to the suburbs—as The Sopranos and Desperate Housewives attest—for inspiration. |
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| Affluent Baby Boomers Tighten Their Belts | June 27th, 2008 |
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The economic downturn is causing some Baby Boomers to downsize or postpone retirement, but they still are in no hurry to pay off their mortgages, according to the annual “Affluent Boomers at 60″ survey from Oakland-based Bell Investment Advisors. Historically, most seniors paid off their mortgage before retiring. Not so today. More than 55 percent of those surveyed who currently hold a mortgage don’t intend to pay off their loan until their 70s, if then. That could change if the economy worsens or the slowdown is prolonged. One in four Baby boomers already are changing their retirement plans and 40 percent are “downsizing” their lifestyles. More than one quarter (28 percent) have lost a job in recent months or know someone over age 60 who has. As a result, 22 percent say they are cutting down on charitable contributions, 21 percent are changing vacation plans, 18 percent are reducing the amount they are saving, and 11 percent are postponing retirement entirely. Sixty-nine percent say the economy is causing them to change to a more conservative investment strategy. The survey included equal numbers of men and women born in 1948, all of whom reported investable assets of $1 million or more. |
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| The Country’s Best Sellers Markets | June 25th, 2008 |
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Forbes also checked the change in sales rate over the last year to measure tightening or loosening of the market. And they factored in a measure of price stability to prevent the list from being a rundown of upstart markets. San Francisco ranked second on Forbes list. Like all of the best-performing markets we have barriers to over building, which keeps inventory relatively tight. Our obstacles to creating new housing stock are wide-ranging, from NIMBY politics to our geography– surrounded by water on three sides, there’s little land to build on. Forbes also cited our strong ‘in-migration’ (who invents these terms?) stemming from local economic strength. The bio-tech and health development in Mission Bay promises to bring in enough people to fill all the new condos and apartments in that corner of the City. In-migration is also a factor in the strong Raleigh, NC housing market, which came in No. 1 on the list. Moderate growth and disciplined building over the last five years prevented the Raleigh market from developing a significant glut. A strong local economy has also helped contribute to the city’s healthy 1.6% vacancy rate. A strong economy and ‘in-migration’ also helped Austin rank high as a seller’s market. A 1.5% vacancy rate, like Austin’s, is where the national average stood during the most recent housing boom. In other words, that low a vacancy rate indicates a housing market at close to full capacity. Some cities that might have made the list didn’t because of a lack of data. Seattle for example has the lowest vacancy rate in the country, a strong economy and a limited supply of land to build on. But because some hard data was lacking however, Forbes was unable to include Seattle in the study. |
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Recently Forbes Magazine attempted to judge which cities had the best Sellers Markets. Their main measurement was ‘days of inventory,’ which is a simple supply vs. demand analysis of housing stock: At the current rate of sales, how long would it take to sell off the inventory whether single family homes or condos? If that measure comes back high, houses sit on the market longer. If it is low, the market is tightening. This is good news for the seller.| San Francisco’s 10 Commandments | June 24th, 2008 |
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The following rules for living in SF come to us courtesy of Richard Ault, who posted them on MetBlog San Francisco. 1. Thou shalt always vote on principal and not political party 2. Thou shall move your family to the suburbs when your children are of school age 3. Thou shalt always have an earthquake preparedness kit in your home 4. Thou shalt drive a hybrid car 5. Thou shalt always yield to a bike if driving, and a ped if driving/biking 6. Thou shalt 7. Thou shall hate the Dodgers like the devil himself/herself. Unless of course you are a satanist. Then thou shall hate the Dodgers like god himself/herself 8. Thou shalt be tolerant, to the point of absurdity 9. Thou shalt pickup after your pooch, homeless denizen, drunk buddy defecates 10. Thou shalt keep your winter clothes out of storage all summer long Commandment 2 is a sad fact of life. Sadly I’m not up to speed on Commandment 3 (need to work on that). I began to obey Commandment 4 six months ago when I bought a Nissan Altima Hybrid. I tried the Prius, but (forgive me Prius devotees) it was like driving a tin can. My husband is a strict adherent to Commandment 7. This makes up for my indifference towards it. Please feel free to add/edit in comments |
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| 9 Things You May Not Know Cece Blase, the Buzz Blogger | June 19th, 2008 |
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Here are nine totally inconsequential pieces of information about me– I know it should be 10. When I think of one more I’ll add it. 1. I was born on the 4th of July. This is not as advantageous as it may seem. 2. I grew up in Portola Valley and got a pony for my 8th birthday. I hated the pony. The pony hated me. 3. I sing cabaret and have done sets at Martuni’s in San Francisco and the Sheraton Hotel in Bangkok. I am always accompanied by Dorian Sarris of Americorp Funding on the piano. 3. I was active in community theater during high school and college. My best known roles were Aunt Eller in “Oklahoma”, Lucy in “You’re A Good Man Charlie Brown” and Marty in “Grease.” 4. I spent a year in Paris when I was in college and speak relatively fluent French. My alma mater is Bennington College in Vermont. 5. I sang in the choir at Glide Memorial Church in the early 90s. My star turn with them was the Annie Lennox/Al Green version of ”Put a Little Love in Your Heart– ” 6. I raised a girl I met at Glide named Maia. Maia now has a daughter, Aviva. If you ever call me “grandma” I will throw you out of my car. 6a. “Aviva” is a palindrome. I think that’s cool. 7. Without glasses or contacts I have the vision of a mole. 8. My friends think my husband is stunningly handsome. And they aren’t just being nice. Of course I agree with them. 9. I love home design but hate home renovation– and only do it when necessary. Instead, I like to spend my money on travel, fine dining and lavish gifts for friends. |
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| What’s Up With 140 New Montgomery? Inquiring Minds Want To Know. . . | June 19th, 2008 |
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Developer Wilson Meany Sullivan had previously planned on including a hotel component in the project, replicating the Four Season, Ritz Carlton and St. Regis projects. My suspicion is that they saw the tremendous success The Millennium is having and chose to simplify matters by switching over to a straight luxury condonminium project using the Millennium model. Like the Millennium, 140 New Montgomery will offer high-touch service, comparable to what you get in a four-star hotel– except you don’t have to share with hotel guests. A common term of art for these kinds of projects is “lifestyle residences,” i.e. you aren’t just buying a home– you are buying a lifestyle. Wilson Meany Sullivan is shrewd to choose go for bigger, fewer units instead of many smaller ones. Common wisdom has always been to pack as many units into a floor plate as possible to generate the highest return (i.e. two one bedrooms will sell for more money than one two-bedroom). However, over the past few years, the growing demographic of high-end home buyers has enabled builders to charge more per square foot for bigger units than smaller ones. These builders also enjoy the advantage of building fewer units, which drives down costs and makes for a shorter build-out period. Some interior views of the current building’s lobby and historic displays are available on a phone company employee’s personal blog. |
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The historic Art Deco Pacific Telephone and Telegraph Company builoding at140 NewMontomery is slated (for now) to be converted to 135 extra-large residential units. The 26-story building will house an 8500 square foot restaurant and the existing garage accessible fromNatoma Street, which will accommodate 70 valet-parked cars (hooray! parking for everyone!).| Another Angle on the Rental Market - “Urban Vacation Rental” | June 6th, 2008 |
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The only thing that’s stopped me is how labor-intensive such an investment is. You’re essentially running a hotel room and I’m a real estate investor– not an inn keeper. I’ve been waiting a long time for a San Francisco new outlet to pick up on the story of investors leasing out vacation rentals in San Francisco. I know a number of landlords who have been doing it for years, so I’m happy to see super-sharp Carol Lloyd of the SF Chronicle take the time to report on it. Here’s her story, dated May 23, 2008. The Urban Vacation Rental Offers Potential Profit and Control “Charming garden apartment” in the Castro for $3,500 a month. Three-bedroom flat in Ashbury Heights — $7,000 a month. “Large one-bedroom apartment” with Golden Gate views — $6,000 a month. “Beautiful New Edwardian Victorian” in the Castro — $16,000 a month. Say what? These are the kind of rental listings that make you question your eyesight. But even if you blink and read again, the improbable numbers remain the same. It’s true, some basement flats are going for the price of three-bedroom, two-bath single family homes in the same neighborhood. And some three-bedroom, two-bath single family homes in modest neighborhoods are renting for the price of mansions in Pacific Heights. And here’s the kicker. They are actually good deals in relation to comparable accommodations. Welcome to one of the city’s little-noticed but booming surreal estate markets: the urban vacation home. San Francisco has been a mecca for tourists and business travelers for more than a century, and to meet the demand a vital hospitality industry has sprung up. Scores of high-end hotels and corporate apartments, hostels and bed and breakfasts all compete to attract the city’s yearly 16 million visitors and get a portion of the over $7 billion they spend. But in the past few years, with the rise of the Internet’s free market enterprise, the city has seen another sort of accommodation crop up: the individually owned vacation property. “There’s a huge demand,” says Justin Halloran, vice president for HomeAway, a company that owns VRBO.com (Vacation Rentals By Owner), VacationRentals.com and its namesake HomeAway.com, along with a number of other domestic and international vacation home Web sites. “The areas where we see the most demand are urban areas like San Francisco, New York and Las Vegas, where hotel prices are high and there’s a relative lack of supply,” said Halloran. Indeed, such vacation Web sites have traditionally attracted listings from second homeowners in traditional resort areas such as Lake Tahoe — currently on VRBO.com there are 695 listings for the California side of Tahoe, while there are only 200 in San Francisco. But according to Halloran, that seems to be changing with both the supply and the demand for San Francisco vacation rentals increasing rapidly. In the past 90 days, HomeAway.com’s San Francisco properties were up 41 percent and inquiries for those properties had increased 80 percent compared to the same quarter a year ago. Indeed, according to a quick and dirty survey of a dozen Web sites which list San Francisco vacation homes, more than 700 houses, flats or apartments in San Francisco are being primarily rented as temporary crash pads. That doesn’t count those properties that exclusively use Craigslist.org as their sales portal. For visitors this is great news — especially as hotel rates escalate through the roof. Renting an individual apartment or house can mean a lot more space and luxury for a fraction of the price. “We found that, priced per square foot, hotels were 50 percent more expensive than vacation homes listed on our sites,” Halloran said. The availability of these temporary rentals allows visitors to come to the city and stay in residential neighborhoods that don’t have tourist accommodations. They also attract families with children who don’t want to eat every meal in a hotel. “Our biggest customers are married women between the ages of 35 and 55 with two-ish children, who are planning a vacation for their families,” said Halloran. Although there have always been a handful of individually managed residential apartments available for vacation or short-term rental — I recall finding one for my parents a decade ago through the Noe Valley Voice — and there have always been property managers or corporate apartment agencies that offer short term housing to business travelers, the advent of by-owner vacation home Web sites has allowed a new accommodation category to blossom. According to Henry Harteveldt, a travel industry analyst, vacation homes make up a growing sector of travel accommodations, with more travelers renting vacation homes every year. But looking at the listings for San Francisco’s VRBO, another thing becomes clear. It’s also a boon for property owners who want to maximize their earning power and avoid the complications of rent control. For the property owner, running a one-unit hotel definitely has its ups and downs. Although rents have skyrocketed in the past two years, they haven’t nearly caught up with real estate prices. Even with a 20 percent down payment, the mortgage payments on $1 million home will run more than $5,000 a month for a 30-year fixed-rate loan. But can you rent out that $1 million house for $5,000? Not likely. So, for recent buyers who find themselves in a tight spot or who plan on being away from their primary residence for a portion of the year, the vacation market offers higher risks but (as they say in the biz) higher upside potential. Many of these homes can fetch as much weekly on the vacation market as monthly on the regular rental market. But even if the rates are higher than long-term rentals, so are the costs, the labor and the risks. First of all, the homes are turn-key and need to be maintained at a high standard. If an espresso maker or television breaks the homeowner will probably end up replacing it. Secondly, the homeowner pays for all the utilities, Internet connection, cable and gardening maintenance — costs that may rise or fall steeply depending on the guests’ vacation habits. There is also the unpredictable workload of booking guests, managing their complaints or requests, and managing a cleaning crew after each booking, along with the bureaucracy of small business taxes. Most importantly, homes that don’t rent enough weeks out of the year can quickly trigger a financial nightmare. Still for some homeowners, the potential earning power coupled with retaining control of one’s property far outweigh the risks — especially if the home is located in a destination neighborhood in San Francisco. One homeowner I know who bought a house with an extra rental property near North Beach claims to have discovered a proverbial gold mine in his basement flat. When previous tenants moved out, he turned the place into a vacation home. The upshot is that he’s renting out the flat almost year-round and earning double what he might otherwise earn with a long-term tenant. Plus, he still has the place available for visiting friends and family. In this land of Surreal Estate, where access to property often determines our destiny, the vacation home option is more than a micro business, it’s a strategy for retaining control of property. |
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I’ve long been fascinated with the idea of owning a condo in San Francisco and renting it as a short-term vacation rental. It’s a great way to get a real cash-on-cash return for condo and apartment investments. It would also allow me a way to retain control of my property if its subject to rent control.
