NEED TO KNOW 

No Question Left Unasked 

Whether you’re a first-time buyer, a seasoned pro, a serial seller, developer, investment buyer, it’s useful to brush up on changes to the real estate industry at large but especially in the ever-changing and dynamic San Francisco marketplace, which can vary by neighborhood, street and time of day!

There is no more a foolish question than an unasked one. 

You’re going to have questions when it comes to real estate. After all, property purchases and sales are among the largest decisions most people will make. There are a myriad of considerations that require attention, knowledge and education, which is why you’ll hire someone like us to assist you. Our team benefits from my legal and reporting background. After all, law school is basically a place where they teach us to research, weigh the facts and craft a persuasive argument that we can argue in the counter too. Combine Jonathan’s abilities to relate with folks under stress while remaining calm, cool and collected and you can see why so many folks want to work with us — even going to the lengths of firing their previous agents to do so!

Why We Love and Hate Square Footage But Use It Anyway 

Square footage is the basic (and very limited) means to communicate a sense of value. A lot of people only use it because its the lowest common denominator that’s unsophisticated as much as it is variable. There are so many different acceptable ways of measuring that the number can vary as much as 20% and still be considered within the margin of error. (Variations are common between tax records, condo maps, architect plans and appraisers) The metric is only a crude way to describe vastly different settings. Architects, designers and us realtors may communicate in those terms too but we must remind ourselves and you that that a far better measurement of a property is its floor plan and layout. An even better way is to describe what type of light a home gets, how the rooms and spaces interconnect and relate to each other as well as how people will relate to the space. In sum, it is far more difficult to communicate such potentially subjective concepts as well as ones that should instead on senses of place sequence, arrival and entry, logical use, interior views, finishes, potential; it’s a far more integrated approach that is difficult to encapsulate in a few words much less in numbers.

Question: Why Should I Own When I Can Rent?

To answer this question let me pose another one to you: what are the chances that you will recover any of the rent you pay to landlord? Absurd question, right? But that riddle betrays the answer, as there is likely no chance whatsoever that you will see any of the money that you pay for rent come back to your pocket —okay, your last month’s rent or deposit. Apart from those amounts, however, it’s unlikely you’ll see any money back. On the flip side, home ownership does give you at least a fighting chance to recover or at least break even for money put in and money taken out.

Just how important is it that I get pre–approved for a mortgage?

It’s essential to have this ready to go so when we find the property for you, we can go right away. Like right away. Why? Well you want to be taken seriously, you will want to be able to act right away as chances are that if you don’t get this hassle-some process out of the way early on that the fantasy property will appear causing everyone to rush around cobbling a weaker offer than if you had everything lined up early on. 

Can I get different home financing pre-approvals from different lenders?  What’s the harm in that to my credit score? 

It depends.  Different credit reporting agencies use different models where some allow you to pull repeated reports with one lender without impact. Other models allow for multiple but focused like–inquires at different lenders over a 14–day period.  While others allow this type of loan ‘shopping’ so long as one loan closes within 30 days of the initial inquiry.

My clients have found that working with a mortgage broker allows for just one inquiry (also, consider that it’s a broker’s job to shop the best loan for your situation).

Will the Real Noe Valley Please Stand Up?

Question: Hi, are homes around Dolores/29th St really still part of Noe? I know that’s where the official boundaries for Noe end, but to me, the heart of Noe is really Noe/24th St and I wonder if I should pay more (OK, in often cases, a LOT more!) to buy right in the heart of Noe which seems sure to appreciate VS the outer edges of Noe which are less developed?

In my book you’re right. 29th Street feels a bit more like the twilight zone Noe Valley or, as I call it, bizarro Noe Valley. It’s quieter, more mellow and residential than the bustle of 24th Street. But it’s still considered Noe Valley. What gives? While the power to draw boundaries rests with the mapmakers and how many sub directs they want to create, what’s more important, is the point you hit on: perception. Perception is ultimately based on what you feel is right. Yes, I said feel.

Despite trying to apply logic and statistical models to quantify real estate prices, real estate is inherently irrational and more emotional than we’d like to admit sometimes. After all, a market price is only as good as what someone is willing to pay for it. And if having the moniker of being in the ‘real’ Noe Valley is important enough to pay a premium for it, then so be it. It’s worth it to someone to pay more. And in this case, it so happens that this is a common perception. Therefore, it’ll be likely that someone else will equally pay a premium to be closer to the corridor perceived to be Noe Valley than to the one defined by the maps. As long as this perception holds up, resale potential remains strong.

But name cachet should be only one consideration among many that I think you should weigh in your decision making.

I always ask my clients to identify what’s really important to them. Determining what really matters at the end of the day will guide you in deciding what you’ll pay more to possess. So it may be moniker, location, square footage, ability to remodel, if there’s a yard, how far a property is from transit, what type of light a home gets, etc. After you determine the importance of each to the best extent you can, then you’ll start to have your answer of whether being nearer to 29th Street is more important to you than being nearer to 24th.

Is it really all about timing?

There are still plenty of old school agents and clients in San Francisco.  Why does this matter?  Well, unlike agents who are plugged in 24/7 many of these agents tend to bring their listings on only at certain times of the year based on the calendar if they have their way.  These times coincide with the Super Bowl (no, really), the 4th of July, Labor Day and Christmas. The idea that people have other things to do on Sundays until they don’t. Knowing when and how to debut is our job and profession and is something we will collaborate with you and your needs.   

Hows does the mortgage interest deduction work?

One of the touted benefits of owning a home is, in fact, certain tax benefits you may get by virtue of home ownership. The benefits come in the form of allowed deductions. Yes, it will require you to itemize your tax return, but too many people (4 million+ by some estimates fail to take advantage of deductions they are otherwise entitled to take on their main and, yes, second home, which can cost them thousands of dollars needlessly.  

While the main deduction you’ll hear most about is the mortgage interest deduction, there are others too.

What and How:

If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on a mortgage, you will receive IRS Form 1098 or a similar statement. 

The deduction isn’t dollar for dollar — how much you can deduct depends such factors on when a home-based loan was issued, the borrowed amount, your tax bracket and how you use the monies if it’s not just to purchase your house.

And home mortgage interest is any interest you pay on a loan whereby the house itself serves as secured collateral to protect the interests of the lender. The loan itself may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan only if your mortgage is a secured debt.

Let’s assume you earn $300,000 and paid $10K in mortgage interest. Assume you’re in the 36% tax bracket, then you would get to deduct $3600. You may have to pay the alternative minimum tax too, in which case your deduction goes down to $2800.

Mortgage insurance premiums paid in connection with your qualified home after 2006 may be treated as deductible mortgage interest.

Your home mortgage interest deduction is limited to the interest on the part of your home mortgage debt that is not more than your qualified loan limit, which is generally under $1M for joint filers.

This deduction also works for:

Property taxes are generally deductible.  In certain cases and to varying degrees, home improvements may be deductible for personal residences and for most investment properties. HOA dues are recurring expenses for investment properties as is depreciation.  For example, you can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy. The 24-month period can start any time on or after the day construction begins.

Prepaid interest and ‘points’ (also called loan origination fees, maximum loan charges, loan discount, or discount points) if paid in advance may be eligible deduction but you may be required to spread prepaid interest over the tax years to which it would have been otherwise paid.

Late payment charge on mortgage payment may be an eligible deduction as would any early mortgage prepayment penalty. If you pay off your home mortgage early, you may have to pay a penalty. You may able to deduct that penalty as home mortgage interest.

Depending on your adjusted gross income listed on Form 1040, line 38, the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. Interest on amounts over the home equity debt limit generally is generally treated as personal interest and is not deductible, but if the proceeds of the loan were used for investment, business, or other deductible purposes, the interest may also be deductible.

The date you take out your mortgage is the day the loan proceeds are disbursed. This is generally the closing date. Ordinarily you cannot deduct home improvements to your own home like you could with investment properties.

But if you use a mortgage as as line of credit to buy, build, or improve your home — so long as the loan is secured by the qualified home, these costs may be treated as home acquisition debt, even if you do not actually use the proceeds to buy, build, or substantially improve the home.  The cost of building or substantially improving a qualified home includes the costs to acquire real property and building materials, fees for architects and design plans, and required building permits may be dedcutible. These costs fall under the definition of a Home Acquisition Debt.

Loans secured by your home but taken out for other reasons is home equity debt, but the deductible maximum for these types of non home-related loans is $100,000 for joint filers ($50,000 for single filers).

Adapted from IRS Publication 936, 2011. Consult your tax professional as the above cannot be relied upon as tax advice; rather, it is merely illustrative.