The Guide to Buying a Home in SF

SF Property

You’ve decided the time has come to buy a place to live. Renting- that ability to have a place to live without substantial capital investment or responsibility- has lost its luster. You feel the need to have a place of your own. Maybe you just want a backyard to grow lettuces and raise chickens. Perhaps you have an urge to gut-renovate and live the “This Old House” life. Or you just feel more secure emotionally in a place that’s yours (and commonly, The Bank, your invisible roommate) Be aware this overview is very San Francisco-centric.

Here are some things you need to consider:

The Business End of Buy vs Rent Issue

A topic of heated debate for the past four years for various reasons- the rate of return on investments, mortgage interest rates, the skyrocketing/plummeting values of houses, the availability of rental properties- fueled by the emotional issues of home ownership. Since we’re not financial advisors, we can only recommend that you do as much financial soul-searching as possible, and a good place to start is with an interactive rent vs buy calculator. It gives you an opportunity for worst-case scenarios like your new house losing value on a yearly basis. Set your emotions aside and figure out how much you’re willing to commit to on a monthly basis without bringing on panic attacks in the middle of the night- ten years from now. Basically, what kind of hamster cage are you willing to run in? You may well decide you can afford to lose a few bucks annually in exchange for the pleasure a new place will bring you.

Definitions: House/Condo/Coop/TIC?

House – it’s a house, right? In most cases, although what looks like a house may actually be a TIC or condominium in some urban settings. Generally, an individual or family dwelling, often under the acronym of SFR or Single Family Residence. From the days when “family” was only thought to have one meaning. Townhouses, while a common-enough phenomenon of condominium or rental properties across (mostly suburban) America, rarely occur in San Francisco. Additionally, San Francisco real estate dialect tends to refer to a dwelling unit by its ownership characteristics ie condo or TIC, rather than unit, apartment, with the exception of flat. “Flats” here are generally dwelling units of one full floor each, stacked in narrow Victorian or Edwardian buildings with two or three floors total, each with separate entries and stairways; a “flat block” is not a “block of flats” in the British sense. It just means the street’s not at a 45-degree angle.

Condo – short for condominium- is a dwelling unit where your ownership extends to the walls of the unit plus any deeded areas ie parking, outdoor space, storage, plus a share in the common areas, and commonly part of an association with bylaws, officers and annual reports. HOAs are the acronym (Homeowners Association) for (usually) monthly dues made to the association for maintenance, insurance, repairs, and other common expenses. Taxes are paid by the individual owners, and owners can be individuals, corporations, or trusts, and there are no restrictions on financing, and although a condominium board can exercise its right of first refusal in case of a sale, that rarely happens. Condominium associations can be as small as two units or hundreds. Other than rentals, they are most common form of residential property in San Francisco.

Co-op – or coop, chickens notwithstanding- short for cooperative- is a dwelling unit not owned by the purchaser. When you buy a co-op, you’re buying shares in a corporation, which in turn entitles you to a proprietary lease for the unit or apartment you occupy. There are common charges, often referred to as “maintenance” that cover the same expenses as in a condominium and taxes are paid by the individual owners, plus the expected bylaws, officers and annual reports. And there’s also the scary ritual of “board approval” which apparently is not as bad as it sounds. Co-ops are covered by anti-discrimination clauses of California’s Davis-Sterling Act. All potential shareholders must be approved based on the same criteria as the current ones and the board has to give a reason for its refusal, unlike other cities (New York and Chicago, we’re looking at you). In San Francisco, however, co-ops tend to be as old-school and expensive as their occupants and very neatly get to the financial point- their bylaws don’t permit financing. Which means, bluntly, that if you want to buy one of those grand full-floor apartments in 2500 Steiner Street, you’ll be writing a check for something north of $5,000,000.

TIC – short for tenants-in-common- falls somewhere between condos and co-ops. A form of common ownership that one realtor claimed dates back to ancient Rome, for our purposes TICs sprang back to life around 2000AD as a way to circumvent San Francisco’s painfully difficult process to convert existing multiple dwellings from rentals to condominiums, a mechanism intended to preserve rental units. You don’t own shares and you don’t own your unit, but you and your fellow tenants are just that- fellow tenants. And in many cases, share the risk along with divvying up other expenses, including taxes. TICs can become condominiums by winning the annual condo lottery and fully bringing their building up to code. The only exception, bypassing the lottery, is that two unmarried, unattached or unrelated parties can buy and reside in a two-unit building and convert it to a condominium.

Now you have a great start for buying a home in San Francisco!

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