Archive for August, 2010
What’s the point of all the hassle?
Maybe I should back up a bit before going forward and explain why anyone would want to go through the expensive and time-consuming process of condo conversion. There are a few reasons, but really, the bottom line is money.
A 2 bedroom/1 bathroom condo is worth roughly 10-20% more than the same TIC (Tenancy In Common) unit. It’s easier and cheaper to finance and there are a heck of a lot more buyers out there willing to purchase a condo versus a TIC (quick def of TIC: ownership whereby any number of individuals own a percentage of the building, with the right to occupy a certain unit. Sometimes all owners are on the same loan; however it’s common now in San Francisco to get “fractionalized” financing, where the lender loans on the ownership percentage so that everyone has their own loan).
Also there are more buyers out there willing and able to buy a condo than a multi-unit building, hence three condos are more valuable than one 3-unit building.
There are other considerations in wanting to condo convert, but pretty much it all comes down to money in the end. And since our homes are usually our largest asset, it only makes sense to want to maximize the value.
In addition to allowing only 200 units to be converted to condos a year, the city has a number of other restrictions and rules regarding conversion. I won’t go into all of those here, but a couple of good resources are: http://www.andysirkin.com/HTMLArticle.cfm?Article=2 and http://www.g3mh.com/articles.htm
So with that understanding in mind, we’ll continue next time with the process.
In the past week or two, there have been hundreds of sky-is-falling articles in every major media outlet about how home sales drastically slumped in July when compared with June and May, or as compared to July of last year, both nationally and in the Bay Area. And that this indicates that terrible times have returned to the real estate market.
But with statistics, context is everything, and these articles show a fundamental lack of understanding of current market context and, specifically, what’s going on in San Francisco. For more information and market statistics, go to: http://tiny.cc/0hjw6
My husband Greg and I own a 3-unit building. A year and a half ago, we won the condo conversion lottery after entering only twice. Yes, to those of you who know, it was a miracle. To those of you outside the wonderful world of San Francisco condo conversion, SF allows 200 units a year (2-6 unit buildings) to be converted into condominiums. I think the year we won, some 1700+ applications (not units, mind you) were entered.
So the odds are lousy. It’s safe to expect to be in the lottery some 10-15 years before winning. We fully expected to dutifully fill out our application and send in our fee each year and forget about it until the next year for many years to come. Instead, we received a letter from an attorney congratulating us on winning the lottery and inviting us a condo conversion workshop they were hosting. Interestingly, the attorney’s letter arrived a day earlier than the city’s official notice.
While of course, thrilled to win after only two years, it’s thrown us into the crazed world of city regulations, legal requirements and construction work. It’s a path we’re still on, and I hope by detailing some of the highlights – and lowlights – of our experience, I can help others who are considering entering or in the process themselves.
And if you have condo conversion stories to share, I’d love to hear them. Please email me or write a comment.