On Wednesday mornings my company, McGuire Real Estate, has its weekly sales meeting. The new listings on Tuesday’s broker’s tour are discussed, mixed in with news on sales prices across town and other real estate-related topics. As we have moved through spring, agents sit in the meetings with looks of amazement on their faces as prices continue to go up at a shocking rate. I suspect this is the reaction of agents across town.
Aldo Congi, vice-president of sales at our company, heads up the sales meetings. In May, rolling his eyes and holding his head from shock and disbelief, Aldo commented on a recent sale at 3735 Cesar Chavez, between Dolores and Guerrero on the edge of Noe Valley. The property, a three-bedroom, one-bath condo with one parking space, was listed on the MLS as having 1,313 square feet. This block is a very busy section of Cesar Chavez that feeds onto both U.S. Highway 101 and Interstate 280. If you don’t know the location, take a moment to look on a map. Before you read further, guess at the sale price. I never would have guessed the correct amount. The condo’s asking price was $995,000. It sold for $1,313,000, at exactly $1,000 a square foot. Wow! Wow! And Wow again! It looks like the buyer had a sense of humor, and the seller laughed all the way to the bank.
A sale price of 25 percent or more over asking price is almost common today in many neighborhoods. It is important to note here that properties are regularly priced 25 percent under their market value.
Yes, the Mission and Noe Valley are hot, but this is a busy location that is more than a few blocks from one of the corporate shuttles that create the golden eggs of San Francisco real estate. This sale made it more clear than ever that buyers are desperate to find homes in San Francisco, and they are willing to make hard choices to close a deal.
About this time I received an e-mail from a friend who read my May column in the Marina Times. My friend wrote, “I read your column and find it very informative, but a little depressing (if I was out there looking to buy). Think you need to do something to make prospective buyers feel they’d still have a chance.” I wrote back and told her, “Believe it or not I try to help buyers by providing information to help make the tough decisions necessary to buy a home.” The reality today is that the decisions buyers must make are not just “tough,” they are “really, really, really tough.”
Today the most important thing for buyers and sellers to know is that the federal government’s Consumer Financial Protection Bureau has come up with new mortgage disclosure forms that will affect every residential sale involving a loan, beginning August 2015. Federal law now requires an additional three-day delivery period and a three-day review period of the closing disclosures and loan estimates. Also, if there are changes, this will trigger another three-day review period.
The days of closing escrow on residential property in 15 or even 21 days are over when there is a mortgage involved. Closing escrow in 30 days or to be safe 45 days will become the rule after Aug. 1, 2015, if there is a loan. It is important for buyers who will be buying a home with a mortgage to check with their lender and their real estate agent now to find out exactly how this new law will affect them. One thing is certain: To avoid last-minute changes, buyer walk-throughs and review of all documents should be done well in advance of close of escrow. It is important to do everything possible to avoid delays.
Cash buyers have gained another edge up in the bidding process as a result of this new federal law. This is not good news for buyers in a city where escrows with cash sales close in as little as three days. Still, it is information everyone needs to know.
A possible work-around for some lucky buyers is to make a cash offer, close escrow, and then do an immediate refinance taking back the cash. Cash might come from a short-term loan from a retirement fund, family, or anywhere else where short-term money might be available. It is absolutely necessary to check with your lender to find out if it has a program to address this situation. If not, check with me and I will provide lenders who can help. In any case, it is also important that you follow IRS rules on short-term loans. Be sure to check with your accountant or tax attorney and your title company to make sure the correct loan documents are completed.
Here I would caution sellers to think twice before jumping on a cash offer just because it is cash. It is important for sellers to think closely about the terms of each offer received. Banks are still in the business of loaning money, and buyers are still just as eager to buy homes. Plus, the bulk of offers today come with a mortgage as part of the deal. Remember the bank’s money is good, too!
To end on a positive note, here are the words of one of my clients in response to a suggestion I made to look at a home in Mission Terrace near the freeway. “We are willing to compromise on things like yard size, number of bedrooms, bathrooms, ancient kitchens, etc., but not on air quality.” It is important to know your priorities. This will speed up the process of buying a home.
Also keep in mind the time honored real estate mantra: Location, location, location. Think positive: Remember that if you buy a smaller home it will cost less to maintain.