SF Saga: Back in My Arms Again, But Do We Want It? (pt 4)

This is the fourth of a six-part series on my San Francisco Real Estate Saga, a months-long period involving countless house tours, sleepless nights, gut-wrenching decisions, and a total of three separate moves. The goal is to give people a sense of what’s involved with buying real estate, no matter the location or price. In the first, second, and third installments, we heard how we moved to San Francisco, found a condo we loved, then lost it to another buyer. In this installment, the condo comes back into our lives. But is that a good thing?

Are you on the edge of your seats to see what happened next? I know I sure was. It was a very dramatic holiday season, searching for a home, becoming disillusioned, finding a place we loved, and then losing it.

In the last installment of our saga, we’d made an offer on a downtown condo. The seller had counter-offered, and we’d accepted. But we lost the place to an all-cash buyer.

A week later, I was driving my mom to a meeting, and my phone buzzed. All I saw was that I’d received an email from our realtor with the subject line: “It’s back!”

The condo had an industrial feel to it, which we liked. The seller certainly knew his market--look at the NYC taxi artwork in the kitchen.

I didn’t want to cause any accidents, so I tossed my phone to my mom and demanded, Read!

Apparently, the other buyers had promised an all-cash transaction, but what they didn’t mention was that they were planning to get a Home Equity Line of Credit (HELOC) on their primary residence in order to purchase this pied-a-terre condo in the city. They clearly hadn’t gotten the memo that it was no longer 2006. We were in the winter of 2010 when extreme leverage was no longer an option. The buyers wanted to have their cake (owning their primary residence), and eat it too (buy another place on top of that). The bank said no.

The seller’s agent wanted to know if we were still interested. Oh yes, we sure were! We figured we’d try to get more concessions from the seller, since he was probably in a jam with this deal falling through.

Remember, we’d agreed to a purchase price $5,000 below the asking price, with total credits of $9,000. We revised our offer, asking for another $3,000 in credits.

Our new offer:

• $435,00 purchase price
• Seller pays transfer tax ($3,000)
• Seller pays 6 months of HOA ($6,000)
• New addition: Seller pays half of closing costs ($3,000)

The seller countered with:

• $435,00 purchase price
• Seller pays transfer tax ($3,000)
• Seller pays 6 months of HOA ($6,000)
• Seller pays a quarter of closing costs ($1,500)

Nice! In the week that had passed, we’d managed to squeeze another $1,500 in credits from the seller. Plus, mortgage rates had fallen and we were going to get a rate of 5.0%, which is lower than we’d originally thought.

Here was the final breakdown of our financing options, from our mortgage broker:

Each column shows the impact of different interest rates. The purchase price, loan amount, HOA, taxes, and insurance are consistent across all columns. The difference is in the Interest Rate and Points rows. The lowest going rate was 4.875%. We could further “buy down” the rate by paying points (the first column), or we could get a broker credit by accepting a slightly higher rate. We opted for the latter, going for a 5% interest rate, and $21,150 cash to close.

Right around this time, our realtor dug up an old MLS listing from 2007 for our very unit. Apparently, the developer had tried to “pre-market” the building before doing the conversion, and had originally priced the unit at $755,000. Compared to the $435,000 we were paying now, it looked like either we were getting an incredibly good deal, or at least that the market had changed a lot since its peak in 2007.

With our confidence bolstered and our financing looking good, we accepted the seller’s counter offer and were officially in contract! Break out the champagne!

Only….something wasn’t sitting right with us. The high HOA fees of $500/month had been bothering us. The building has almost no amenities, but because it was a historical building, the city required a really high reserve fund should there be a need for repairs. It sure was an awful lot of money to pay into account that most likely would just sit unused for years.

The location was also starting to bother us. The area had been considered blighted for decades, and we found evidence of rejuvenation efforts dating back to the 1970s. What if this shopping mall development fell through? What if the neighborhood remained a den of crack addicts and homeless people?

We also started to feel some hesitance about San Francisco itself. Were we really ready to commit ourselves financially to this city–a place we enjoyed, but weren’t in love with?

We worried that we were so attracted to this condo because we were eager to move out of my family’s home and start our “own” life. We didn’t want to be making a decision out of desperation.

On top of these doubts, there was the interpersonal dynamics between M and me. I’d been looking at the place as a project, and I was psyched about the rentability of it. But M wasn’t sure that he wanted to be a landlord. He saw all the work I did to rent and maintain my Portland condo, and wasn’t sure this lifestyle was right for him. I was fast learning how complex it is to make real estate decisions when there are two people involved–if it had just been me, only one set of neuroses would be stirring the pot. With us, there were two.

So after some long conversations and calculations, we decided this was not the right place for us. There were too many doubts. Despite what the media told us, this was not our last chance to get a great deal. And even if it were, no deal is good enough to sign your name to a $400,000 loan when you’ve got real doubts.

All this discussion was happening while we were in contract. This is less than ideal, I realize. But because there were multiple people interested in the condo, we knew we needed to get into contract (escrow) quickly, or else we’d lose the place. We’d made sure that nothing we were doing was irreversible, very consciously giving ourselves time to ponder the decision in depth. Once we decided to back out, it was easy to execute the decision. We signed a couple forms, notified the mortgage broker, and that was that. No more condo.

We were relieved at how understanding Tim was. It can’t be easy to watch your $13,000 commission vanish in a heartbeat. But he’s a quality realtor, and he graciously supported our decision.

After this emotional battery, we decided we need to take some of the pressure off. We found a furnished apartment to rent in San Francisco month-to-month so we would feel less pressure to buy immediately. Then we put real estate out of our minds for the rest of December and January.

After a couple months of getting settled in the city and focusing on work, we felt renewed and ready to jump back into the real estate market come Spring. Lo and behold, the market had also rejuvenated, and it didn’t take us long to find something we loved.

Read the full story:

• Part 1: Mad Dash Real Estate Hunt
  
• Part 2: A Diamond in the Rough
• Part 3: Making an Aggressive Offer
• Part 4: Back in My Arms Again, But Do We Want It?
• Part 5: Perfection Discovered