what are the disadvantages of buying a below market condo?

Asked by Trish, San Francisco, CA Sat Dec 1, 2012

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Sally Rosenman’s answer
Sally Rosenm…, Agent, San Francisco, CA
Sat Dec 1, 2012
Hi Trish,

The biggest disadvantage is resale. No matter what the San Francisco real estate market is doing, a Seller selling a BMR unit may only raise the price a certain percentage over the original asking price. I do not have all the current limits so I suggest you go to http://www.sfgov.org. The is the Mayor's official website and you go check out Mayor's Office of Housing for all the rules and regulations.

Good luck,

Sally
Web Reference:  http://www.sallyrosenman.com
2 votes
Rob Regan, Agent, San Francisco, CA
Sun Dec 2, 2012
When BMR's are a good deal is when market rate condos are far more expensive. That was not the case the last couple of years because market rate prices had dropped a lot in the BMR intensive areas like SOMA. But this year market rate prices are way up and BMR's are starting to look more attractive again. So first, you don't want to buy a BMR when you can buy a market-rate condo for almost the same price since the market-rate one is likely to appreciate in value as they have this year. You do want to consider a BMR when they have a big price advantage, but then you're competing with tons of other BMR buyers. And sine you are forced to write pretty much the exact same offer as everyone else, the "winner" is chosen via lottery. That can be a serious hassle since statistically you might have to find 30 BMR condos that you like before you "win" one. Maybe you get lucky and win in one of your first offers, or maybe you spend a couple of years house hunting and writing offers. Not fun.
Web Reference:  http://www.SF-MLS-Search.com
1 vote
Oggi Kashi, Agent, San Francisco, CA
Sat Dec 1, 2012
In addition to the advice you have already received (income limitations when purchasing and resale price restrictions when selling), BMR's can not be used as income property. They must be owner occupied.

Oggi Kashi - 415.690.3792 direct
Broker Associate, Paragon Real Estate Group CA DRE 01844627
All data from sources deemed reliable but subject to errors and omissions, and not warranted.
Web Reference:  http://www.oggikashi.com
1 vote
Ellie Kravets, Agent, San Francisco, CA
Sat Dec 1, 2012
Hi Trish,
The price is restricted by the City when you resell your unit. Price increase is not guaranteed, but prices do tend to go up over the long run according to the change in local incomes. Owners retain the profit they make on their units if that money is not dedicated to repaying a down payment assistance loan from the City. Also, the number of people are restricted (1 person cannot buy 2 bed BMR unit).
Please let me know if you need my help to purchase BMR unit.

Sincerely,

Ellie Kravets
Zephyr Real Estate
415.948.1601
Ellie.SFHomes@yahoo.com
1 vote
Jeremy Rusht…, Agent, San Francisco, CA
Mon Mar 16, 2015
If you don't see your self staying in the unit for a long time, you may want to consider saving longer for a market rate unit. You won't have the opportunity to earn much when you sell. They are great if you plan to stay long term. Think of it as a shelter from the rental market.
0 votes
Kawain Payne, Agent, Seal Beach, CA
Tue Feb 26, 2013
If the property is being sold below market, it may be in below market condition.

A seller, selling below market is one who is most likely not willing/able to do any repairs.

If you have the funds to make repairs/improvements buying below market is a great idea.

If you are using FHA financing there could be an issue getting the loan funded, if the unit's condition does not meet their strict funding conditions.

Now ,priceing below market sometimes is a stadegy for getting a bidding war going...sometimes homes priced under market ultimately sale at market of pretty close to market.

Kawain Payne, Realtor
0 votes
Cindy Davis, Agent, San Diego, CA
Sat Dec 1, 2012
Hard to tell from this whether you are talking about a 'good deal' or whether the complex is in fact devalued. If the complex value has deteriorated relatively to the surrounding complexes, there are typically reasons for that.

Chief among these reasons are:

1) Litigation
2) Low Owner Occupancy Ratio
3) low HOA Reserves

I would suggest that you proceed slowly and thoroughly and carefully evaluate the hoa situation.

Good luck.
0 votes
Sally Rosenm…, Agent, San Francisco, CA
Sat Dec 1, 2012
I meant over the original purchase price.....

:0)
0 votes
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