999 Green #2802 Flyer

From the flyer for 999 Greet Street #2802 making the rounds amongst the brokerages by way of a tipster: “Very Motivated Seller! (Seller has tax advantage if sold in 2009!).”

No word on exactly what advantage (other than yours in negotiating). And once again, purchased “off the market” for $2,500,000 in October 2008, no movement at $2,099,000, and currently seeking $1,950,000 (a drop of 22 percent).

The (Eichler) Summit Of 999 Green Street #2802 [SocketSite]
∙ Listing: 999 Green Street #2802 (3/2) – $1,950,000 [MLS]

21 thoughts on “Motivated Seller Seeks Motivated Buyer For Mutual “Advantage””
  1. maybe it has something to do with the RE cap gains exemption. You have to have owned and used the home as your main home for a period totaling at least two years within the five years before the sale date.
    If this became the owner’s second home, or a rental in Jan 2007 then they could be on the verge of missing-out on this exemption (upto $500k if owned by a couple). That would be a potential $75k worth of “motivation”.
    [Editor’s Note: “…purchased “off the market” for $2,500,000 in October 2008…”]

  2. Since we seem to be entertaining wholesale guesses, here’s mine: the seller has a huge one-time capital gain she realized in another asset class in her portfolio for the current tax year. She wants to reduce the amount of taxes she’ll pay in April 2010, so she wants to take the loss from the sale of this condo now, and use it to offset the amount she normally would have had to pay four to five months from now.
    Go ahead and shoot that down; if it’s not obvious, I’m not a tax lawyer or accountant 🙂

  3. If it was purchased for business use or rental, perhaps the 2009 deadline relates to the extended NOL carryback election for losses in 2008 or 2009.

  4. what’s the purpose of announcing that a seller is motivated. does it convey an understanding that they absolutely will accept an offer below asking? if that’s the case, why not just lower the price now. if it’s not the case, then what’s the point of saying it at all.

  5. ^^^ I think that the purpose is to get prospective buyers in to see the unit in the hopes that some will fall in love. If you’ve got two or more interested buyers then you could potentially have them bid against one another and score a good sales price for the seller.
    Seems like a reasonable strategy and would apply to any “motivated seller” listing.
    The other reason might be that the seller truly wants to sell quickly and would rather accelerate the sales date than get absolute top dollar.

  6. She wants to reduce the amount of taxes she’ll pay in April 2010, so she wants to take the loss from the sale of this condo now, and use it to offset the amount she normally would have had to pay four to five months from now
    I don’t think you can do this. to my knowledge RE losses are not tax-deductible. That is, unless it is an investment property. (also not a tax person).

  7. “I don’t think you can do this. to my knowledge RE losses are not tax-deductible. That is, unless it is an investment property. (also not a tax person).”
    IIRC, real estate losses on a primary residence aren’t deductible. Gains on a primary residence are subject to the Section 121 exclusion (up to $500K for married filing jointly), but are taxable. That 24 months holding in a 5 year period rule applies to the exclusion.
    Real estate losses for rental properties count as passive income. So you can net rental losses against passive gains. You can also net passive losses against a limited amount of active gains, but I believe this ability phases out entirely at around $150K. You can carry the losses forward to subsequent years.
    If you qualify as a “real estate professional,” you can deduct losses. I don’t know the qualifying rules for this, but I assume it’s intended for developer-types.
    So, it’s possible the owner is either a real estate professional or that the owner has passive gains this year to net against. It seems unlikely that the owner has less than $150K in AGI.

  8. Real estate losses for rental properties count as passive income.
    I don’t think this is correct. Whether the loss counts as an ordinary loss or a capital loss depends on how actively involved you are in managing the property.
    If you manage it yourself, collect the rent every month, arrange to have problems fixed on a regular basis, look for new tenants, etc., then it definitely counts as an ordinary loss. If you just hire a management company to take care of repairs and find new tenants, then it definitely counts as a capital loss. If you manage it yourself but you just have one tenant who’s been there for a decade and you almost never have to schedules repairs or anything, then it could go either way. There’s a gray area.
    Last week I asked: Our resident RE experts tell us that prices have only fallen 10% (maybe max 15% in exceptional cases) in prime neighborhoods. And this is certainly a prime neighborhood, no? So why in the world would any realtor list a place like this at over 28% below the 2007 price of a comp unit?
    There was some talk of the comp being imperfect, but ultimately it’s irrelevant because the unit is also listed at 23% below its own Oct 2008 sales price (I should have included that in the original question). Perhaps this “motivated seller” twist is the answer to the question. So now the question is whether it will go for over asking (validating our resident RE experts’ claims) or at/below asking (validating the SS bears’ claims)…

  9. If it is an investment property and it is sold at a loss it is a capital loss not a rental loss and I believe it can be used by anyone, “real estate professional” or not, to offset any sort of capital gain.
    http://www.irs.gov/newsroom/article/0,,id=106799,00.html
    My guess is that the seller has a short term capital gain in 2009. Short term gain is taxed at a higher rate than long term gain. But it can be offset by either short or long term capital loss.
    But I’m not a tax person either.

  10. Rare? A condo on Russian Hill with a “motivated” seller? Not so rare…
    I was in this building about six months ago. It felt like an office building or a hotel. The “spectacular views” were a lot like the Embarcadero Center.
    The Eichler angle? Well, he was great at the little houses but this building isn’t any architectural gem. It’s a monument to crappy/corrupt zoning during the Alioto era. On the other hand, I guess it has some “celebrity value” as there is in fact a former secretary of state/corporate oligarch living out his final days on the uppper floors.
    Maybe somebody buys it at that price. But all in all, I’d say this is a rather distressing “mark” for this asset class in SF.

  11. ^^^ Isn’t transferred property tax pro-rated based on the day of the sale ? Property tax should not be a motivation to sell by the EOY.

  12. Very Motivated Seller,
    Please meet Very Unmotivated Buyer who couldn’t care less about your tax issues.

  13. yes of course. i’m joking around but a seller would in fact save some property tax by selling this year vs. next year and they would not be lying by making that misleading claim.
    i would agree that (if their statement is not meant to be misleading) they are simply trying to offset another 2009 capital gain.

  14. salarywoman — hmmm, that was off the top of my head. I double-checked Sections 1231 and the passive income rules because it’s been a while. I am right that income/loss in the course of running an investment property is passive unless you are a “real estate professional.”
    But actual sale of the investment property is different. It appears that gains from sale of a rental property can have capital gains rates apply for part of the gain, but that losses from sale of a rental property count as ordinary income. I find that odd and not consistent with most other tax laws, because it seems like having your cake and eating it too. So if this is truly an investment property, it looks like it might be deductible against ordinary income.
    and anon — it doesn’t matter how active you are in managing your rental property, it still counts as passive income. But you may get certain benefits for active participation, but it’s still passive income if you’re not a real estate professional. You should see Publication 527.

  15. The owner has developed real estate in Mexico so he may qualify as a ‘real estate professional’ under IRS rules. Evidently, he did not find the highest quality of life in Ess Eff.

  16. and anon — it doesn’t matter how active you are in managing your rental property, it still counts as passive income.
    No, but it matters for whether it will be counted as an ordinary loss or a capital loss. Trust me, I’ve been through this scenario before.

  17. SS said on the previous thread:
    And the sale price might have been partially based on the “comp” sale of #2804 for $2,720,000 in December of 2007 (which “was in worse condition” than #2802).
    Ummmm… it looks to me that #2804 was bought by the same person(s) who bought #2802. I’m guessing that at one point they were going to combine the two units (scuttled by the coop board or the economy?) I’m imagining a nice subtle orange interior…

  18. That should read HOA (above) as 999 Green is a condo (not coop)… but speaking of coops, I’m guessing the owners of #2802 & #2804 are the likely buyers of 2100 Pacific Ave #9 as they signed a lease with 2100 Pacific Ave. Corp (the coop) on Sept. 2. I believe this is how coops work: you buy a share in the coop and they lease the unit back to you. All this to say, perhaps they did find the highest quality of life in Ess Eff and are here to stay.

  19. Use to be a tax guy in a former life, but I am not fully up on the most recent law. But, IMO:
    If we assume (always dangerous) that the seller had rented out the property, had suspended passive rental active losses and will have a loss (sales price – basis) when the property is sold, you trigger two types of losses:
    A. Loss on sale. This should be a Section 1231 loss, which can be used to offset all types of income;
    B. Suspended Passive Activity losses. Upon selling the property, these are can be deducted.
    These are powerful reasons for the seller to want to get the deal done in 2009.
    Caveat: There are complications if the seller owns multiple rental properties.

  20. I rented in this building recently. To this day I’m puzzled about all the ‘hype’ around this building. The lobby is ugly, the hallways are ugly, the units are very dated. The location is nice given proximity to Hyde, Polk, North Beach etc. But the prices are insanely inflated. Yes, the “Shultze’s” live in the Penthouse…but does that really mean that the rest of the building deserves a “shultz-premium”? Very sterile look and feel. Not sure why everyone loves this building…you can rent this three bedroom for $4K/month, why would anyone want to buy and pay more then double that to own? Even $1.5 is too high for this building.

Leave a Reply

Your email address will not be published. Required fields are marked *