As plugged-in people know (and numerous readers were sure to remind us), San Francisco’s 2010 condominium conversion lottery kicked off this morning.
According to our sources a total of 2,170 units entered the lottery representing 662 properties in total (and versus 2,030 units in 2008). Certified results for the lucky 200 have yet to be posted but should be online by tomorrow morning (if not the end of today).
UPDATE (2/4): Apparently we’ve got conflicting information coming out of the DPW with repect to when the certified lottery results will be online (“DPW is saying 7 days after Feb 3rd“), stay tuned (and plugged-in).
UPDATE: As promised and originally reported, lottery results are now online.
San Francisco’s 2010 Condominium Conversion Lottery Kicks Off [SocketSite]
2010 Condominium Conversion Lottery Results [sfdpw.org]
San Francisco’s 2010 Condominium Conversion Lottery Results [SocketSite]

Comments from Plugged-In Readers

  1. Posted by NewBuyer

    I’m NewBuyer, you might remember me from numerous classic SocketSite threads.
    But today I want to speak towards a more serious matter:
    LIES.
    That’s right. For years, we have been subjected to lies about the state of TIC conversions. There were myths abound that “by the year 2010, the typical wait for condo conversion will be 24 years.”
    This is a lie.
    As the numbers plainly show, the number of applicants this year is about the same as it was two years ago. Roughly 1/10th of applicants will win, just as was the case two years ago. People entering for the first time now will probably wait about 10 years before having a ‘fast-track’ to success.
    Because I am young enough to piss in an unobstructed manner, the notion of waiting 10 years is no big deal to me. My waterworks function just fine now, as they will when I win the lottery in approx. 10 years.
    Or, there’s an outside chance that our equal parts wise and sleazy mayor will somehow allow us to buy our way out. That would be great, but it’s a cherry topping.
    So, for those of you who don’t own TIC’s, there can be only one reason: you are impatient, and were willing to pay 20% more for the exact same home due to your lack of patience.

  2. Posted by A.T.

    Whatever. Still worth the condo premium just to be able to rent it out some day free from the draconian rent control ordinance.

  3. Posted by Dave

    Um…. while many of the entrants in the condo conversion lottery may be buildings owned by multiple owners in a TIC arrangement, it’s really inaccurate to characterize this as 200 “TIC Conversions.” This is 200 units converting from apartment to condominium. My building isn’t a TIC, and this year I lost the lottery (or at least I assume that I did, having not seen the results yet) for the sixth time. Next year I’ll have a good shot at winning, but it won’t be a “TIC conversion.”
    I’m willing to bet that a sizeable percentage of lottery entrants — maybe even a majority, I don’t know — are not buildings which are currently “TICs.”
    [Editor’s Note: Good point and since changed (although we’d be willing to bet it’s the exception rather than the rule).]

  4. Posted by PatrickS

    Enjoy your 7.25% fractional loans over that 10+ year wait there, NewBuyer. All yours.
    The lottery is a vicious, cruel system with no winners (except maybe folks like Chris Daly, who game the system by snagging BMR units, pocket their excess income subsidized by our city, and then buy houses in communities outside of SF which lack these kind of draconian market intervention in rent- and condo-control.)

  5. Posted by NewBuyer

    Dear Dave,
    Please explain the arrangement by which numerous distinct people in your building own and occupy distinct units…
    I’ve always assumed they were all TIC’s, because I know of not other arrangement in which 3 different people in a 6 unit building can each be both a partial-owner and an occupant…
    I am so young, and I have so much to learn!

  6. Posted by NewBuyer

    Patrick,
    My loan is at 6.5%. Is that worse than it could be? Yeah. But that extra $300/month that I pay really comes nowhere close to the extra $150,000 that I would have paid for the identical unit in the identical building next door (that has condo status).
    Doing apples-to-apples comps, my %650,000 TIC unit would have cost about $800,000 if I had bought it in the condo-status building next door.
    Now you tell me that my $300/mo payment and hypothetical subjection to rent control (irrelevent since I plan to live here for years to come), somehow outweigh that $150,000.
    TIC’s are under priced due to outdated mis-information from the days before they were fractionally financed.
    One should absolutely buy a fractional TIC for 20% less price, if they fulfill the following:
    1) Can pay a sizable portion of it in cash.
    2) Plan to live in it for at least 5+ years.
    If those conditions apply, it’s a no-brainer.

  7. Posted by Dave

    NewBuyer: Numerous distinct people in my building don’t own and occupy distinct units. I own the building, and all the units. I occupy one of the units. To convert, assuming I win the silly lottery some day, I just need one of my tenants to express a non-committal interest in possibly buying their unit at an unspecified price.
    Plenty of other folks in similar situations that have nothing to do with TICs.
    For those who ARE contemplating buying a TIC, remember that condo conversion is only a pie-in-the-sky option for buildings with 6 or fewer units. If you’re contemplating a TIC in a 7+ unit building, that building will NEVER be able to condo convert under SF law.

  8. Posted by Anon

    Where did Socketsite get that results will be posted today? DPW is saying 7 days after Feb 3rd?
    [Editor’s Note: Stay tuned, our date (today) came from the DPW as well.]

  9. Posted by wow

    NewBuyer,
    Is your rate fixed or is it the tricky variable rate from Sterling? If it is fixed, where did you find it?

  10. Posted by R

    Dave: Tell me more about the route you are taking.. I had not heard about this.

  11. Posted by bornnraised

    Is it possible to never win the TIC lotto?

  12. Posted by rr

    bornnraised–
    No, it’s not. Up to 100 of the units that have entered the most times automatically convert without the lottery drawing. If there are any more in that most senior pool, they become lottery drawers. However, assuming they enter again the next year, they will be the most senior and will be up for auto conversion again. Eventually, all of the people in your pool will auto convert, including you.
    However, if your most senior owner leaves, then you drop down to the pool of the next most senior owner, so if people keep moving out, you might never auto-qualify.
    NewBuyer– as a TIC owner, it pains me to see you fail to understand why buyers are willing to pay a premium for condos. Two major factors a TIC has that a condo does not: 1. in a TIC you own part of the entire building, and thus are legally liable for the entire building. If someone injures themselves in another unit, you are likely to get sued if they sue, since you’re on the building home owners policy. 2. Your lender and the lenders of the other owners have additional rights they would not have in a condo, such as the unrestricted right to Ellis Act the entire building if a unit enters foreclosure (in order to vacate and repossess a foreclosed, but rented, unit), WITHOUT the consent of the other occupants. If a lender does that, say goodbye to ever condo converting.
    The third major risk is that TICs were a housing bubble product, created because every other type of housing was unaffordable in SF. With prices declining, more people may be able to afford condos, depressing demand and prices. Second, post-bubble lenders may be unwilling to continue to shoulder the risk of a fractionalized loan and stop writing them. That means you’ll be unable to refinance, ever, and, practically speaking, it will be impossible to sell your unit unless someone is willing to pay cash or you are willing to carry the new financing yourself.

  13. Posted by Dave

    @R: An owner-occupied 3 or 4 unit building can convert, after winning the condo lottery, so long as residents representing at least 40% of the building’s units express interest in buying their unit. For a 3- or 4-unit building, that means the owner’s unit plus one other unit must sign the non-binding “i’m interested in buying” document to reach the 40% threshold. A 6-unit building is different; three units must be owner-occupied to convert.
    This isn’t anything new or different, it is how every single building qualifies to convert.
    After conversion, all existing tenants get the option to buy their units (price set by owner) and all tenants get one-year rent-controlled leases. Disabled and elderly tenants get lifetime rent-controlled leases.
    bornnraised: Theoretically, someone could “never” win the condo conversion lottery if the number of entrants kept increasing dramatically each year, but in real life, that’s not going to happen. Once you’ve entered enough years to have risen to the top of the heap, i.e. there are no more entrants left who have been in the lottery longer than you have, then you are certain to win, though it could take more than one year if the number of units in your “class” is greater than 100.
    A good summary of the whole process is here: http://www.andysirkin.com/HTMLArticle.cfm?Article=2

  14. Posted by resp

    offices says results should be online later today with letters to both winners and losers going out tomorrow.

  15. Posted by bornnraised

    Thanks for the info, rr and Dave.

  16. Posted by dr. who

    rr and new buyer – also, don’t forget that conversion typically costs quite a lot of money. Not just the ticket itself and various lawyer and other fees, but frequently numerous small and large upgrades/repairs that the Department of Building Inspection requires. For my TIC it was about 30k just in building upgrades, and from talking to some friends in similar situations that’s not too bad.

  17. Posted by grumpy

    The lawyers and the city collected around $23K from me. You also have to pay the taxes up front for the upcoming tax year. New building so not many “corrections”, but it’s still not an easy process as the inspectors will always find something, and they don’t all agree on what is a violation or needs to be corrected. Also, make sure that your units all pass the NEW water conservation requirements. Some older units may need all new plumbing I would imagine. There are so many forms and regulations, and legwork. The TIC owner has to coordinate all of the surveyors and work with the City on forms and mylars and the PINK form that they can never seem to understand is the original. You’re right Newbuyer, you need patience, but in order to stop you from killing someone.

  18. Posted by rr

    results are now online via the link above.
    [Editor’s Note: As well as here: San Francisco’s 2010 Condominium Conversion Lottery Results. Cheers.]

  19. Posted by Not-a-Liar

    Hey NewBuyer – you may not be going anywhere for 10 years, but what about your co-tenants? If enough of them turn over in that 10-year period you’re back to square one. And a new interpretation of the conversion ordinance by DPW means you start all over with ONE ticket when that happens (they used to allow you to go back to however many you had before the occupant turnover.
    TIC’s have pros and cons, but don’t ever think conversion is a sure thing under any timetable.

  20. Posted by NewBuyer

    OK, thanks for the comments everyone.
    I guess that I should sum things up by saying that every TIC situation can differ, and for some people it makes less sense than others.
    But if the circumstances are right, then it can be a fantastic bargain relative to a condo… especially for those who plan to occupy it for at least five years.

  21. Posted by G

    Why are there 2 unit places in the lottery? Dont they get to bypass it?

  22. Posted by Steve

    I thought all 2 units get to bypass the lotery as well as long as they wait 18 months.. Is this maybe people who own 2 units all by themselves, 1 unit as O/O and the other as a rental?

  23. Posted by dr. who

    2 units cannot bypass the lottery unless they are both owner occupied. they almost always do bypass the lottery though as all a couple has to do is claim one lives in each (but they can’t technically rent one out although I know one that did to a relative).

  24. Posted by Gdog

    I just got though my 2-unit lottery bypass conversion and the experience totally sucked. Absolutely not worth the TIC discount. No way will I do this again. There were two senseless 6 month delays… occasionally I’d get a number to call but they’d never pick up or return voice mails or emails. The condo conversion person at DPW appeared fairly nice, but nobody would give her the time of day either.
    It’s as if all the people working on my application were renters out to punish me for stealing someone’s rent controlled apartment. They owned me, and they knew it. I imagined them cackling with evil laughter every time they looked at my application and after they got off the phone with me.
    To come up with the real cost for buying a TIC, besides all the senseless fees and paying for fake building code violations you have to factor the time it takes to manage the conversion. So, determine an equivalent hourly wage for yourself, multiply that by “countless hours”, and add that to the TIC purchase price and see how that compares to a condo’s price. Then consider that those hours spent dealing with our government are probably the worst hours of your life, unless your life really sucks. In which case you should use your money for therapy instead of real estate.
    The conversion process was far worse than my wildest expectations. It took about 12 months from working on the insane and hellish application to filing the CC&R (“done”, they say). I’m doing the refinance now which is comparatively fun and easy.
    TICs = :^(

  25. Posted by Willow

    Great insight Gdog. The process does sound very tricky. I looked at a TIC for a building located in Oakland and the terms and conditions just seemed far too restrictive to be worth the effort or supposed discount over an equivalent condo. Good luck with the re-fi!

  26. Posted by spencer

    “So, for those of you who don’t own TIC’s, there can be only one reason: you are impatient, and were willing to pay 20% more for the exact same home due to your lack of patience.”
    NewBuyer, you were the one who was impatient. if you would’ve waited 1 -2 yrs to buy, instead of buying in the largest bubble in history, , you could have bought a condo for the 20% off. instead you have to wait 10 yrs to get the 20% back

  27. Posted by The Milkshake of Despair

    Gdog – Your experience reminds me of what it took to resolve a title defect and obtain an easement to “unlock” a landlocked parcel. It required almost 2 years to straighten everything out and “countless hours” to turn the oddball property into something normal. Sort of a legal rather than a physical fixer. You have to figure in your sweat equity even if it is just sweating over regulations and paperwork.
    Interestingly I found the government employees encountered in the process to be very helpful. The process itself was onerous.

  28. Posted by NewBuyer

    Spencer,
    You know very little about the state of property prices in this particular market (Russian Hill, sub-million price).
    I bought my TIC during the second half of 2008, and I have yet to see another unit in Russian Hill for this price that I would even consider buying.
    KEY POINT: IF PEOPLE THINK THAT GOOD 2BR HOMES IN RUSSIAN HILL AND PAC HEIGHTS HEIGHTS FOR UNDER $750K COME ALONG VERY OFTEN, THEY ARE MISTAKEN.
    If my unit has fallen in price, and that is a big ‘if’ believe it or not, then I doubt it has fallen very much.
    Meanwhile, I have garnered about $20,000 in tax benefits, while having built up about $10,000 in equity. Also, the stocks I sold to pay the downpayment were transacted when the Dow was near 12,000…
    Oh, and I am now 2-years deeper in line for the Lottery. It will be another 5-10 years, but I am happy to wait it out.
    Still very happy with my investment. Wouldn’t undo it under any circumstance.

  29. Posted by whenhellfreezsover

    Uhm…not to knock the icing off your cake…but some correction is in order…
    A.T.wrote… “Whatever. Still worth the condo premium just to be able to rent it out some day free from the draconian rent control ordinance.”
    Sorry A.T. But someday is after you sell the unit to a new owner. Even after winning the conversion lottery and going through the process to convert your home into a single family residence (condominium) your unit will remain under the “draconian rent control rules”. Your unit remains frozen in time. It’s the new owner that gets the benefit of being set free from those draconian rent control rules. That is where you benefit and collect a premium for all your hard work and patience. I know it sucks big time and sorry to take the wind out of your sail but this is the price we pay to live in a socialist society like SF.
    Tenants rule the city my friend and the courts go along for the ride. They write the rules you have to live by and that’s the price you pay for being successful.

  30. Posted by A.T.

    “Even after winning the conversion lottery and going through the process to convert your home into a single family residence (condominium) your unit will remain under the ‘draconian rent control rules.'”
    whenhellfreezsover, not sure how you could interpret it otherwise, but that was precisely my point when I wrote that it is worth the condo “premium” when buying a unit to avoid rent control.

  31. Posted by EBGuy

    KEY POINT: IF PEOPLE THINK THAT GOOD 2BR HOMES IN RUSSIAN HILL AND PAC HEIGHTS HEIGHTS FOR UNDER $750K COME ALONG VERY OFTEN, THEY ARE MISTAKEN.
    NewBuyer, Appreciate you coming back to post. Maybe we’ll hear from esther, too (I believe one of her units is a TIC — or maybe she was just looking at them). At any rate, these guys have been flogging this ‘TIC complex’ on Craigslist for over a year. Sold ‘as-is’ so YMMV…
    http://www.1900leavenworth.com/1900_Leavenworth.html
    1908 Leavenworth *price reduced*
    2BR/1BA 1,090 sq ft $474,000 $435/ sq ft

  32. Posted by glenn

    We were chosen 15th on the standby list. Does anyone know if we have a chance in hell of making it onto the conversion list..?

  33. Posted by NewBuyer

    EBGuy,
    I have toured the units at 1900 Leavenworth.
    They do NOT qualify as a “good home”.
    Those units will require almost complete to-the-studs renovations — perhaps as much as $100,000 worth. The common areas also will require complete renovation, though they claim that money is already stashed away for that.
    Finally, threre’s real value to being the final arrival in a building, versus the first to buy their unit. There is much less risk if good neighbors are already there and have proven their ‘financial viability’ for a few years before you get there. Such was my case.
    That’s one reason TIC buildings take a while to move.

  34. Posted by NewBuyer

    Geeze, EBGuy, you seriously proposed a comp for a GROUND FLOOR unit?
    Would YOU live in a Ground Floor unit?
    I would not. And clearly no buyers will either.
    There’s no point in doing comps if they aren’t really comps.
    I paid $620,000 for a 2BR/1BA unit near Polk Street and Francisco. Nice building, great neighbors. I also bought a parking spot with it.
    You mean to tell me that I got ripped off and could get the same thing for $500k today? Yeah right. Not even close.
    Also collected about $40k in tax savings and home equity along the way by buying in late 2008 vs. early 2010.

  35. Posted by Anon

    Polk and Francisco is right by Galileo. Umm no thanks! I rather pay 50 grand more and buy a Condo @ Blu. It’s brand new and a better location.
    But hey glad you’re ok with your purchase…

  36. Posted by all markets un-free

    So tired of all the self-righteous owners on here bashing tenants.
    You are not more successful or harder-working or less dependent on government interference and socialist policies than many, many tenants in this city.
    Condo conversion is government interference. It rewrites property definitions. Do those definitions represent interference, too? Sure, but try holding private property without government support:
    Prop 13, mortgage-interence deductions, federally subsidized cheap credit to float the real-estate market, cap-gains exemptions, $8,000 buyer tax credits, property-tax writeoffs, foreclosure moratoriums, government-backed legal advice for mortgage deadbeats, home-equity deductions, HAMP …………..
    I had to listen to some old bag who owns a three-unit buiding whine about rent control the other day. She’s on Social Security and a public pension from her late husband (who probably died from the sound of her voice) and never worked a day in her life.
    Her tenants and I get to underwrite her marital-based socialism, and we’ll probably never see benefits ourselves because of paying to support her ilk.
    She bought the place in 1985 and whines that rent control was imposed afterward. Except she isn’t still paying the 12.5% interest from that era, because she saw nothing wrong with the Fed’s socialism for mortgage holders, which has provided a 5.5% interest rate (on the backs of savers trying to come up with a down payment so they can take out a responsible mortgage). The Fed’s handout boosted her property value enormously. She will end paying half the interest she was supposed to pay when she bought the place. Based on what I know of the property, her monthly payments have dropped $1,000 since she bought.
    Meanwhile, she is collecting 2005/2007 rents from her tenants and cleaning up. (And they are very nice people.) But she feels so put-upon because she can only jack up the rents a certain amount, while her costs have gone down thanks to government intervention in the marketplace…………….
    Real estate has become a welfare entitlement in this country, because the majority of Americans are “homeowners.” If you’re going to complain about rent control in this city, be prepared to surrender all the state and federal subsidies for property ownership.
    And stop calling yourself successful simply because you “own” property. Too many mortgage deadbeats have made that notion laughable. Plus, there are too many owners like the old bag, who earned nothing in this life. She had it handed to her, just like so many buyers who had mummy and daddy money behind their purchases.

  37. Posted by A.T.

    “You mean to tell me that I got ripped off and could get the same thing for $500k today? Yeah right. Not even close.”
    Who knows? But one thing that is certain is that you are paying far more all-in to “own” (i.e. rent from the bank) than you would be paying to rent the same place from a landlord other than the bank. Thanks for paying those extra $$$ every month to the bank as that is one small piece the rest of us will not need to bail out!

  38. Posted by NewBuyer

    Sorry A.T., but your math is just wrong.
    *My unit costs me $3800/mo to own. That is the price of my mortgage + HOA + property tax + a small budget for maintenance.
    *To rent, it would cost about $3000/mo, based on recent comps I have checked out.
    *My monthly income from tax write-offs and home equity built is about $1,500 per month.
    Now, you tell me, A.T…
    Is -$800 + $1,500 a positive number? YEEES….

  39. Posted by A.T.

    Newbuyer, if your mortgage + HOA + taxes + maintenance on a $620,000 2/1 is 3800/mo, you put down a lot. Your calculations completely ignore that $150,000 cash you no longer have. You also need to factor in the selling costs when you want to move, which a renter would not have to pay.
    Let’s see those “recent comps” for a 2/1 rental at 3000/mo. You can get a big, nice place for that sum.

  40. Posted by tipster

    I don’t know what New Buyer’s home would sell for or rent for, but I’m sure of one thing:
    If you asked any of the purchasers of 2004-2008 who ended up selling their homes for over a hundred thousand dollars less than they paid for them, whether the value of their homes had fallen one cent, all of them would have told you no, until the cold hard reality of the marketplace was staring them in the face.

  41. Posted by anonn

    f you asked any of the purchasers of 2004-2008 who ended up selling their homes for over a hundred thousand dollars less than they paid for them, whether the value of their homes had fallen one cent, all of them would have told you no, until the cold hard reality of the marketplace was staring them in the face.
    That’s a lie. “All of them” ? Half of them probably LISTED their houses for less. Jeez man. Propaganda is supposed to have kernels of truth in order to work.
    You like that Hoffman property as avatar of value? I like 41 Cumberland myself. Whatever.

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