A reader asks:

People I know bought a house in San Francisco recently. and were told they had to have a “tank inspection”. This sounds a little strange to me. Is this a scam or something normal when buying real estate anywhere?

Our reply:

Well, I don’t know about anywhere else, but in San Francisco there was a city ordinance passed about 15-20 years ago that made it the responsibility of homeowners to remove an underground storage tank (used for storing heating oil and gasoline for emergency generators) if they discovered they had one. Not every property in San Francisco had one but many large houses and apartment buildings did.

The reason this is such a big deal is because about 15-20 years ago (you think this is why the city ordinance was passed?) a developer in San Francisco lost his house to the bank. After the bank foreclosed on it, it was discovered that this large, remodeled, view home in Pacific Heights had an underground storage tank which had leaked all the way down the steep hill… costing the bank hundreds of thousands of dollars to clean up!!!

Now lenders usually require that the buyers make the sellers have an inspection before they will lend on properties in San Francisco , and if a tank is found they must have it removed before close of escrow. Quite often if a property has been sold previously a tank inspection will already have been done. So the inspection is an important document to keep in the file for resale. If this document is lost, Golden Gate Tank Removal does the majority of tank inspections and removals and may have a report on file for any given property.

- Janis Stone

A reader asks: Fifty Plus has a feature that lists some things you might consider. Here are a few key points they make:

I am trying to choose an agent to represent me for locating a property to buy in San Francisco. After looking through the Sunday paper, I am finding all sorts of Realtors who claim to be the top agent for their company. How do I choose the right one for me?

Our reply:

Choosing a Realtor is not as hard as you think. The old adage tends to be true; “People do business with people they like.” When buying property in San Francisco, you are lucky. We have some of the top agents in the country doing business right here in the City. Our suggestion is to pick several and interview them before deciding to work with one as different agents have different styles. One may like to use e-mail while others prefer to use the telephone. Another may contact you all times of the day while others may not call you unless they have something to show. You get the idea.

The online magazine,

• Do start by asking family and friends if they can recommend an agent that they have successfully worked with in the past.
• Compile a list of several agents and take time to talk to each before choosing one. You want an agent who listens well and understands your needs.
• Your ideal agent knows the local area well and has resources and contacts to help you in your search. Overall, you want to choose an agent that makes you feel comfortable and can provide all the knowledge and services you need.
• Another way to become familiar with realtors in your area is to check local newspaper and other advertisements. You can, of course, meet a realtor at any open house you visit, especially in areas where you think you might want to live.
• Once you’ve narrowed down your choices to a couple of real estate agents, interview them to find out which one has the best combination of experience and knowledge in the type of home and area that you are interested in. Ask them for references from previous buyers and sellers who have worked with them.
• Keep in mind that the real estate agent will be spending a great deal of time and effort to help you find the right home and will not be paid until the transaction is completed.

The American Homeowners Association has another good article with their top 10 tips.For Sale By Owner for a list of some things to expect from your Realtor. Good luck!

In the end, choose someone who works the way that you do and communicates as much or as little as you prefer. Take a look at our previous article to the

- Mick Orton

Avram Goldman, President and COO of Coldwell Banker, San Francisco Bay Area said in his latest weekly report:

The market always seeks equilibrium after a period of rapid appreciation. Between 2003 and 2005 sellers experienced accelerated appreciation. Many properties increased in value from 30-80%. This kind of appreciation cannot be sustained. There is an old expression sellers are 6 months behind the market and buyers are 6 months ahead of the market. This has been particularly true of the first half of this year. We are seeing that sellers are becoming more in tune with the new reality. It is not 2005 prices. The number of multiple offers has slowed in many areas to a trickle. There are some areas that are exceptions, but those are due to lack of inventory and built up buyer demand. For example the 20 offers on a $699.000 fixer in Palo Alto or the 27 offers on a Parkside fixer in San Francisco. These are not the norm. However what it does show is the market is still active when buyers see true value.

Most buyers today are much more pragmatic than a year ago. In areas were we have seen large run up of inventories there is no sense of urgency. Sellers are beginning to understand this new environment. We have been seeing increased numbers of price reductions. Sellers are becoming more willing to do the work necessary to merchandise their properties. For those sellers that do, they will reap the rewards. For those that don’t, their properties will remain on the market or eventually decide not to sell. Buyers will move once they see the value.

In many market places we are still seeing good open house activity. This is especially true of homes held open for the first time. After the first time, activity lessens. Buyers are on the hunt—looking for that house that has real value in their eyes. When they find it they are moving on it. This is certainly an opportune time for buyers—given the selection of properties and their increase negotiating power.

Here are the numbers for the week of July 10-16: 10 offices showed increased listing inventories, 17steady and 1 decreasing—8 offices reported increased sales activity, 14 steady and 6 decreasing.

- Avram Goldman

* For an e-mail alert when this report is updated, send a note to info@SFResidence.com with “weekly market report” in the subject line.

A reader asks:

I just heard something crazy from a friend of mine. Is there really a push in San Francisco to allow the City to designate certain trees as landmarks, even on private property?

Our reply:

You’re surprised to hear this? Given the nature of San Francisco politics, this is an easy one to believe. It all started when a homeowner wanted to remove a cypress tree on his property. It just so happened that there is a flock of wild parrots in this area of Telegraph Hill that uses the cypress trees to roost. Although the tree is one of many, it became and issue and is now under review to become law. Although it is not clear if the City will participate in the maintenance of these “landmarks”; in the end, the property owner will probably be responsible.

- Mick Orton

Below is part 1 – glossary of real estate terms

Acceleration Clause:
Amortization:

*reprinted courtesy of California Real Estate magazine, September 2005 issue

This gives a lender the right to demand immediate full repayment of a loan if the terms of the loan are not met.

Ad Valorem Tax:

Tax that is based on a property’s assessed value.

Agency Disclosure:

Requires real estate agents who act on behalf of the buyers or sellers to disclose who represents whom in a real estate transaction.

When a loan is repaid in equal payments at consistent intervals over the full term of the loan. This results in the complete payoff of the loan by the end of its term.

APR (Annual Percentage Rate):

This is simply your effective interest rate, calculated by taking your actual interest rate and accounting for allt he loan related closing costs, as expressed over the full term of your loan (i.e. 30 years). It was created to help borrowers better compare interest rates offered by lenders.

Arbitration:

A process in which an impartial third party listens to both sides of a dispute and typically issues a binding decision.

As-Is Condition:

The purchase or sale of a property in its exisitng condition.

Balloon Mortgage:

A home loan, although typically set up on a 30-year repayment schedule, requires the remaining balance-called the baloon payment-be paid in the future at a specific time, typically after the first five or seven years.

Closing Costs:

The various expenses above the cost of the property that buyers and sellers incur in a real estate transaction.

We send out a FREE monthly e-newsletter that gives information about the ever-changing real estate market in San Francisco, changes in interest rates as well as chances to get FREE Giants tickets.

We also publish market statistics on our website as well as a weekly update written by Avram Goldman, President and COO of Coldwell Banker, San Francisco Bay Area.

If you would like to subscribe to the e-newsletter, please e-mail info@sfresidence.com and put subscribe in the subject line.

- Mick Orton

Did you know that the San Francisco MLS provides for potential buyers to receive new listings by e-mail the minute they become available? This is an incredible opportunity to hear about a property FIRST! And it’s FREE! Just send us an e-mail to Sales@SFResidence.com along with the type of property you are interested in buying and we’ll set you up!

You may also visit our website at www.SFResidence.com to do your own MLS property search, read about the various neighborhoods in San Francisco, see our latest features and listings as well as view a history of our sold properties!

- Mick Orton

As announced in one of our earlier articles, the San Francisco Housing Authority is preparing to launch the “Housing Choice Voucher (Section Homeownership Program”.

A list of properties will be made available to purchase outright, or lease with the option to purchase through this program.

They will also introduce a new financial service model called “Pay Rent, Build Credit”. For more information visit their websites at PayRentBuildCredit and PRBCReports.

- Mick Orton

Ellen Florian Kratz, Fortune writer says in a May 8, 2006 article published by CNNMoney:
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A Reader Asks:

Recently I contacted our friend at the title company to see about transferring our properties into entities such as an LLC or a LP to protect our assets. The information I got back from her is shocking. Who is the best person to contact when trying to do these types of transactions?

Our reply:

We know!!! After a wealth planning seminar with a nationally-known CPA, one of our clients came away with a plan to move properties out of their name and into entites; a Limited Liability Company (LLC) for some properties and a Limited Partnership (LP) for others. The managing partner in all cases was a California C Corporation owned by one the business partners.

At the start (and in theory) it sounded slightly complicated, but simple enough to execute. However, when they went to do the transfers, there were a few things that hadn’t been considered:

• To transfer out of state properties, the deed needed to be prepared by an attorney specializing in this area (costing about $250 for the title company to handle it).
• Another issue was that a transfer tax would be due based on the percentage the original owner of the property not owned in the new entity. (Let’s take an example of a $1M property owned by Joe Smith. In the entity, XYZ, LLC, his percentage of ownership in the company is 49%, another individual owns 49% and the C corporation owns 2%. This means transfer tax was due on 51% of the property.)
• The transfer would probably void the title insurance.
• The event could give the lender grounds to call the loan.

Needless to say, they were disappointed since these entities are expensive to set up and maintain. Each one requires:

• registering with the state and preparing legal documents
• separate bookkeeping
• separate bank accounts
• the added burden of IRS reporting and taxation

In short, this is a very complicated and expensive undertaking. Be sure to consult an attorney who specializes in this type of asset protection and see if it is worth the amount of protection you will receive versus the potential cost of not doing it. There are companies that will set up the entities online, but may not be worth the expense if you are not sure what you are doing and set them up wrong!

- Mick Orton and Janis Stone