Home Buying in Mission Bay>Question Details

Mike, Renter in San Francisco, CA

What are your thoughts on buying a majority of the building units are BMRs?

Asked by Mike, San Francisco, CA Wed Apr 9, 2008

I'm not qualified for a BMR unit. However, I am considering to buy a 1 bedroom unit at market rate. I want to know what are your thoughts on buying a unit in a majority bmr units. How marketable do you think that unit will be? Do you think it will affect the resale value? Not to mention, 7th street is one way street. It's confusing to find the building. Not sure if that will affect the value of the property. HOA is rather reasonable compared to most soma beach area. Does it mean it will affect the maintenance of the building? Furthermore, the location is right next to the caltrains, garbage trucks, and gravel company. Do you think it has potential to grow in the future? They are building a bike trail behind 888 7th.

Also, the unit doesn't come with a refrigerator, washer/dryer, and hardwood floor. You have to spend money for the upgrades. Is it worth buying compared to symphony towers that come with everything(except washer/dryer) and in a developed neighborhood? Thanks in advance.

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7
Emerald’s answer
As a BMR buyer at 888, I can say the noise is not bad - the walls and window are to specifications much higher than many place. The way that the developer treats people, however, is very "BMR" - there is a boiler that feeds hot water to all units. It has gone down twice. There are security issues and small problems that become big ones because the developer is non-responsive to buyers, treating the place more like a public-housing complex then a condominium.
0 votes Thank Flag Link Sun Jul 6, 2008
Look at the Soma Grand. I don't think it's because of the BMR units that they feel they can be inflexible. If they have agressive price points and are new on the market they could be seeing a good absorbtion rate and not feel the need to go more than 10K in credits.
Be aware that most new developments don't lower prices. It is very difficult to justify to the people that have pre-bought. They will talk about upgrades but they want the sale price to reflect the value others have paid. They only discount price as a last option.
Web Reference: http://www.jedlane.com
0 votes Thank Flag Link Wed Apr 16, 2008
Jed Lane; Fog…, Real Estate Pro in San Francisco, CA
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Hey there Mike! They are offering 10K in credits for you to use in any way. That's fairly good. They cannot reduce their pricing and I can tell you the reason: If they drastically reduce the price of the unit you want to buy, they actually reduce the value of all the other market-rate properties in the building. After all, other buyers have come to buy before you and they bought at the list price. If the developer begins to accept offers below his list prices, that will erode value to those who are already in the building. Also, if YOU buy into the building, how would you feel about the developer allowing his pricing to be eroded reducing the value of your home?

So what is there to do? If you're NOT working with an agent for yourself, then you may not have the best advocate for buying into a unit and getting more than the 10K concessions the developer is offering you. If you've only worked with the developer, and negotiated only with their agents, they have no interest in offering you more concessions - they are in league with the developer after all.

I can only surmise that you are supposing the developer is not dealing with you because you think there are too many BMR units there. That is not correct. This is tactic for all developers. They are not beholding to reducing their list prices. They are, however, listening to you if you have reasonable requests for reducing costs associated with the transaction, loan and escrow fees.
0 votes Thank Flag Link Wed Apr 16, 2008
Thank you all for your great answers.

At this time, developers at 888 are not willing to lower their selling price. They claimed they just open 2 weeks ago. Current incentive they are offering only 10K credits. They are not opened for any price negotiation. Developers are pretty rigid and firmed. They didn't even make any counter-offer. I think it's because this building is a BMR building. They are in no rush to sell them -since I'm looking at the non-bmr units, they have already been subsidized for the 60-70% BMR units.

I'm going to wait on my purchase. They are many condos coming up in the next couple of months. I heard more condos will be available on Van Ness Ave and market/mission streets. These are more developed neighborhood compared to 888 7th street.
0 votes Thank Flag Link Wed Apr 16, 2008
Dear Michael,

Buying at 888 7th is a great idea if you are looking for some good prices or a BRM unit...but not a good idea because of its location (lots of noise as you know), Also I would look elsewhere if I could afford to because I feel with 3/4 of the complex BMR units, this building will be "considered a BMR building." This stopped several of my clients from even wanting to look there.

Normally BMR units do NOT affect the sale as Jed says. Chris is correct in that those units should not be used as comps for pricing your unit when you go to sell....Unfortunately, many agents will not realize those are BMR units because they do not take the time to read or actually see the comps they are using for CMAs for their Buyers when decisions are made for making purchases. That is sad but true. I really think the noise factor with the gravel trucks, trains, garbage trucks etc. is the real negative and that, too, has stopped my buyers from even going there to look.

Not knowing where you stand financially, I would also suggest Symphony Towers as you are thinking of doing. Go for a rear unit so you do not have the noise of Van Ness Avenue. Look at Arterra too. What about SOMAGrand? There Arterra is also making deals.....in fact 90% of the Developers are making deals.

Therefore, ask for credits for the appliances and flooring. Maybe a year or two of dues as well. Most new constructions comes without fridges, washers & dryers and hardwood floors.....but you can negotiate for them. Builders also want you to pay Transfer Taxes.... negotiate for that too..... You will not get all but you will get some and that will help you as you can finance upgrades and/ or add to the credits for your non-recurring closing costs.

Please sure to take a realtor with you to negotiate for your side! Or be firm when you are negotiating with the Reps of the Developer. If you have more questions, please contact me.

Good luck!

Sally
0 votes Thank Flag Link Sun Apr 13, 2008
Michael,
All of Chris's advice is great. I'd add a few things. A basic aspect of real estate value is that variations in location will affect property resale. The way it's taught is if you get a good deal on a property that is on a busy street don't expect that to change for the next buyer.
No to your specific location, the train definately isn't going to move unless they underground it. SF Gravel might but might not. The rest of that area is blooming wonderfully. The furniture stores and resturants. Proximity to Mission Bay and all that is happening there. Great biking area too.
The BMR situation has been asked on this forum many times. All data shows that the mere existance of BMR units in an area or in a building doesn't affect resale.
Web Reference: http://www.jedlane.com
0 votes Thank Flag Link Wed Apr 9, 2008
Jed Lane; Fog…, Real Estate Pro in San Francisco, CA
MVP'08
Contact
Michael, buying at 888 7th Street probably won't affect your future resale too much. Since BMRs are not considered market value, they don't (and shouldn't be) consider as comparable sales. They are set aside. A lot of questions are posed to real estate agents about the future of a property. The unfortunate thing is that we've got as much connection into the future state of things as you might. Here is what we know: in the past the area around 888 7th has been WORSE. Presently it is BETTER than it has been. There are other development projects that are close by. There might be a "halo effect" with it's proximity to the Ball Park, China Basin and lower Potrero Hill and SOMA. The development is within walking or mass transiting most of the business district of SF and the Peninsula.

One of the main things you should consider for yourself is if this property is an opportunity for you to own NOW. Are you going to increase your wages/pay in the next 5 years? Most people experience raises or bonus payments. Will you be staying in this property for about 5 years or more? Most properties perform well for their owners in equity over time. Would you be willing to upgrade your units baths and kitchens over the next 5 years? (this helps increase value).

As for getting the appliances, you should see if you can get concessions from the developer for those items (and you can usually get some sort of concession from them if you're working with YOUR OWN agent - the developer's agents have little interest or direction to give concessions away unless there is an agent on the other side).

Good luck, hope this helps.
0 votes Thank Flag Link Wed Apr 9, 2008
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