104 Funston
As we wrote this past May:

104 Funston was purchased for $2,750,000 in May of 2007 and returned to the market this past March asking $3,150,000. Reduced to a “lucky” $2,988,888 on April 15, the price was further reduced to $2,875,000 eight days later. On Friday it was reduced to $2,750,000.

According to the listing the property “appraised at $2,850,000” and you can “move in with equity.” Who are we to suggest that its three weeks on the market at $2,875,000 without a sale would suggest otherwise.

Oh, and it’s also another property with “$400K of recent upgrades” which won’t be accounted for when it comes time to be counted in any industry “appreciation” (a.k.a. median sales price) reports.

Yesterday the listing for 104 Funston was withdrawn from the MLS after 155 days on the market without a reported sale or buyer capturing the aforementioned “move in equity.”
No word on whether or not 104 Funston will soon return to the MLS at a lower price and touting “even more move in equity!”
Instant (Appraiser’s) Equity At 104 Funston [SocketSite]
A Newly Renovated 355 Bryant #308 Returns [SocketSite]
Medians Are Up, But Don’t Confuse That With Increasing “Prices” [SocketSite]

45 thoughts on “Will 104 Funston Return With Even More “Move In Equity?””
  1. this home signifies a change since the height of the bubble. but, what is the change? this particular home is in a less desirable Lake District location. first, it is south of Lake. It is the north of Lake homes that command more money. second, it is on a busy corner. third, the homes that would command the most dollars in this district and that have recently been on the market need a lot of work.

  2. “move in with equity.”
    quite possibly the dumbest RE expression.
    with rare exception, the amount of equity one has in a home is exactly equal to your downpayment. If there is no downpayment, the equity is 0 at the time of sale.
    over time appreciation and/or principal reduction will increase the equity. but to claim that a house is “instant equity” is to pretend that it is underpriced for some reason.
    if it is underpriced then it will go into a bidding war, and the clearing price will then reflect the “value” of the home.

  3. “A less desirable Lake District location?” North of Lake, south of Lake, upper Lake, Mountain Lake Lake – can you really put that fine of a point on it?
    Putting aside the issue that Lake Street is really just one street in the Richmond district, the fact remains that the house abuts Lake Street today when it failed to sell at $2.75m just as it did in 2007 when it sold for the same price.

  4. It’s actually a horrible, terrible, no good location, despite being on Lake street. Unless you like living near a busy highway next to a popular park and having everyone who walks by be able to peep in your windows.
    Which doesn’t mean the bubble isn’t deflating on Lake… just that I don’t know why anyone would want to buy this house to live in.

  5. anyone know which appraiser was used to price this? may come in handy when I need a house appraised $1,000,000 over its value to qualify for a ridiculous mortgage.

  6. ^^^
    Good luck picking your appraiser, ab. If you get to do that I’m sure the mortgage industry will like to know how you did it.

  7. Is anyone surprised by this? I stand by my comments in the previous thread. The location is poor what with the freeway in the front yard, and the awkward changes to the yard, etc. actually ended up making the house much less desirable. It certainly doesn’t help that prices in better neighborhoods have come down fairly significantly. Why live here when you can buy in Cow Hollow or the Marina for much less?

  8. sparky-b’s comment was a little terse, so let’s expand upon it a bit. It seems to be a reference to the Home Valuation Code of Conduct that Fannie Mae and Freddie Mac instituted in 2009. From The Wall Street Journal, in June 2010:

    The mortgage-broker and real-estate industries are pushing to have a measure that would kill new home-appraisal rules inserted into pending legislation to overhaul financial-sector regulation.
    The Home Valuation Code of Conduct
    , adopted in May 2009 to ensure appraiser independence, bars mortgage brokers and bank loan officers from selecting appraisers. Mortgage brokers and realtors complain that the rules have produced low-ball appraisals that have blown up deals, while appraisers argue the change has harmed appraisal quality…Realtors and mortgage brokers succeeded in inserting language in the House-passed financial-regulation bill to end the new protocols. The measure would direct federal regulators to come up with an improved set of rules.

    From what I’ve read, the becoming-standard practice now is for real estate agents and mortgage brokers to farm out the selection of an appraiser to an appraisal-management company (a so-called “AMC”). But I haven’t read anything on whether or not this set of rules was ultimately kept in The Dodd–Frank Wall Street Reform and Consumer Protection Act that became law in July. Anyone here have a good legislative summary link?

  9. Only banks/lenders hire appraisers these days. Agents and mortgage brokers are not involved in the process, at all. That is the long and short of it.

  10. How is this not schadenfreude? This didn’t deserve a follow post and its piling on for a listing that likely just expired. That said, quite a few homes have been pulled west of Park Presidio in the nicer parts out that way with only one notable sale recently out on Lake in Sea Cliff. I think there are some good values out there in the 700-850 $/psf range.

  11. eddy, given that inventory numbers have been dropping lately, it would be helpful to know the mix between dropping due to expiration/termination or dropping due to sale. This individual post doesn’t help with that, except perhaps with respect to $2.5M+ properties, but the collective knowledge on this site might.

  12. 155 days on market is pretty darn close to 5 months on the dime; so this is probably just an expiration. This will probably pop back next month. Curious to see who will be the listing agent if/when it does re-hit the market.

  13. How is this not schadenfreude? This didn’t deserve a follow post and its piling on for a listing that likely just expired.
    The MLS listing didn’t expire, it was withdrawn.
    Perhaps the topics of an appraisal versus the market, “instant equity,” withdrawn listings at this time of the year, and the impact of upgrades on medians make it worthy of a follow up post and discussion.
    Then again, simply calling “schadenfreude!” requires a lot less thought.

  14. this also is an interesting property for how it underscores the re-transformation of the real estate market. remember the old meme: “location, location, location”? it was shelved for four or five years recently in favor of “appreciation, appreciation, appreciation”. as mikey said, it’s in the same physical spot it was in ’07, but now that we’ve returned to the old paradigm, the location clamps a lid strongly on the price this will fetch despite its many impressive qualities. welcome back, “location, location, location”.

  15. Marina girl is exactly right, and the reason we’ve returned to the old paradigm is it has finally sunk in (the Zeitgeist — since we’re on a German word kick) that the only good reason to buy a place in SF is to live there (except at the low end, where investors are buying some places to rent them out). One cannot just assume that if you don’t like something about it, life changes arise, etc., you can just quickly sell it to “someone” for more. Thus you need to think really, really carefully about the place you buy.
    The return to the old paradigm, where value matters, is having a big effect on the prices buyers are willing to pay. And the absence of no-down funny money has dramatically reduced the prices buyers can pay. These are all driving prices down even before taking into account ARM recasts, unemployment, and all the other oft-discussed schadenfreude factors.

  16. Perhaps the topics of an appraisal versus the market, “instant equity,” withdrawn listings at this time of the year, and the impact of upgrades on medians make it worthy of a follow up post and discussion
    I’d retort that those topics all had their own thread recently and the discussion here is nothing more than a rehash from the original. Not trying to be critical, well maybe a little, but only for the greater good. Cheers, and thanks for supplying the “outlet”!

  17. The net loss on this place is going to exceed a half million dollars, plus a lot of time.
    Wow! Who knew real estate could be such a bad investment.

  18. ^^^
    You did tipster, you knew and you told us. Why oh why didn’t we listen. Now I am stuck with this ARM at 2.83%.

  19. Well, lets add that 2.83% cost onto the 1.2% property tax and multiply by 0.72 to get the after tax payment rate of about 2.8%. I get $6700 that, if these people had the “benefit” of 2.83%, they would have been paying.
    Now add another 600,000 in total loss and divide by 39 months. I get $16,700.
    If you think living next to a highway for $23,400 per month is a “deal” because of a 2.8% mortgage, you’re smoking crack.
    You see, what you don’t realize is that the rate of deflation is so high, you’re actually getting ripped off with that 2.83%. It only looks cheap because you are living in the past, when we actually had inflation.
    We don’t any more. Even with an interest free loan, this place would have been a complete rip off for the buyers.
    So crow about 2.83. It just doesn’t make that much of a difference. The rate of deflation of the asset overwhelms any benefit.

  20. I didn’t say a low rate makes that place a good purchase, did I. I just responding to you telling us “Wow! Who knew real estate could be such a bad investment.”
    Plus, is your new thing just believing agents descriptions of properties verbatim. This owner did dryrot repair and a new deck. The kitchen and baths and a bunch of other work are for 97-98. So your loss number is way off.
    Also, you seem to have left out they they would have been living somewhere in your cost analysis. But worst of all you seem to slamming smoking crack for no good reason. I mena come on, you have to agree that this ecomony has really seen the quality of crack for the money skyrocket.

  21. “This owner did dryrot repair and a new deck.”
    Go back and look at the comments in the previous thread on the property. Even I was able to show the den expansion just by showing photos taken at two different recent times, and the agent confirmed it.
    Apparently the new thing is to try to minimize the work done. You clearly didn’t catch turning a porch into a den (the photos of which were in my prior post) so why should anyone believe that you really have any idea what they did. The agent said she had a book full of improvements. Just because they didn’t pull permits doesn’t mean they didn’t lose a bunch of money on other stuff like a new air filtration unit.
    Yes, they would have been living somewhere, but honestly, I can’t see this place renting for more than $5K, if that. $18,400 per month was flushed down the toilet in non-rent.

  22. Why believe me I got my information off the DBI website, but you have agent confirmation.
    The permit refers to being rebuilt in kind with a new deck. They even reference the Sanborn map, so it would be scrutinized at planning if it was off. They added a deck to that. Now I looked at the electrical and plumbing as well to cross reference:
    Electrical: One room &one deck, 6 lights, 3 switches
    Plumbing: New furnace to existing ducts and a gas line to the BBQ. I peg that work at $4000.
    SO is the $400K? If anyone thinks it is I am available to do the work for you.
    But I guess the fact is the agent confirmed it. There is no question that they were at the house years before the sale and before they had the listing to check out what work was being done. I wouldn’t be suprised if they poured the foundations thereself to try to lock in the future commission.

  23. Honestly, who knows what they did.
    You don’t need permits to do the work. You can have some work permitted and then later go back and do more when DBI is long gone. So just because DBI scrutinized something else doesn’t mean they didn’t go back later and do more.
    But you bring up a good point, which is none of the buyers really care any more. The agents know that anyone can look up how much the seller paid, and so they all try to eek out all sorts of improvements to justify a higher price, but what I am hearing over and over again is that such information is an outright lie, and that it should be ignored, pretty much along with everything else any real estate agent tell you.
    What’s hilarious is how much grief from the realtors (and contractors) I get for repeating that over and over, but the first time I actually use any information a realtor is providing to the public, I get jumped on by those same people for actually believing a word they say, as if it’s just so plainly obvious that every word out of a realtors mouth is an outright lie and how could I possibly do such a thing.

  24. That’s more like it! But to be honest, you should believe what the permit history says, and figure the rest out for yourself. If an agent is telling you how much something costs you can toss it out. How would they really even know? Why wouldn’t the selling agent err on the side of more money spent?
    Cost of construction is the new square footage.
    “You go back and do more when DBI is gone”. You don’t do that with the building envelope. ‘Now he’s gone let’s pour a new foundation and move this wall out further.’ You do stuff they won’t let do to get sign off: You change your outside lights from motion sensor to something nice, you take off the hand rail, you change some kitchen lights, at most you add a downstairs kitchenette. You don’t do tons of expensive stuff later after inspection.

  25. and just to add one more thing. The agent said, “$400K in recent upgrades”. There probably were $400K in upgrades from ’97-’08, it’s just that only a small portion of those upgrades relate to this buy and sell.
    So, it wasn’t an “outright lie”, it is just a matter of how long is recent.

  26. and just to add one more thing. The agent said, “$400K in recent upgrades”. There probably were $400K in upgrades from ’97-’08, it’s just that only a small portion of those upgrades relate to this buy and sell.
    I agree
    So, it wasn’t an “outright lie”, it is just a matter of how long is recent.
    If what you say is true, and I do… I disagree.

  27. Thank you Marina Girl. that is what I was trying to say…location, location, location and this is not an ideal Lake location. why the current owners paid so much in 2007 is really not a concern of a future buyer. why they did it? My guess is that there was less housing on the market, their was a different psychology (appreciation, appreciation, appreciation), and this house is very close to Lake District Ideal homes.
    Miley, it is apparent that you do not know the city. Most neighborhoods have prime blocks and less than prime blocks. this home is on a busy corner and a bunch of trees separate it from what everyone here is calling a highway.

  28. Did anyone see this article about 104 Funston (linking to the realtor’s website for the property listing as well) in the Bay Citizen?
    Here’s a quote:
    But Bueno de Mesquita, a political science professor at New York University and a senior fellow at the Hoover Institution at Stanford University, did not foresee one thing: the inadvisability of spending $2.75 million on a 1913 Edwardian house in San Francisco in early 2007 and then spending $400,000 more renovating it.
    He and his wife needed to move back to New York, so since March Bueno de Mesquita has been trying to sell their home in the Richmond district amid one of the worst housing crises the state has seen.
    He has lowered the price four times (from $3.15 million to $2.6 million), but to no avail.

  29. Oh man, what a find. The irony here is simply astounding. I never like putting a face/name to the homes featured on SS, but this individual is already in the public space. Seems like a nice guy. Terrible situation.

  30. I guess Tipster and the agent were right about the $400k. I wouldn’t have expected an academic to be the 2007 buyer but I guess anyone can have inherited wealth. At least he’s losing free money.

  31. Sorry – that was probably uncalled for. I don’t know anything about the guy – he may have invented something or have a booming private consulting or expert witness practice; or his wife could be the family money-maker. In any case, $550k and counting, just on the principal.

  32. He talks about selling a home before he bought this one so it is entirely possible he just shifted the equity loss from the Valley to SF. Still, a loss is a loss. He rents in 2007 after selling in the valley and its an entirely different situation.

  33. I love how he talks about his problems being that the credit markets are “frozen”, like they are some sort of Popsicle.
    No dummy, no one believes the underlying collateral is worth anything near the current prices so people would rather loan their money to xyz corp at 1% than to any homeowner at 5%.
    Put your money where your mouth is: offer 100% owner financing. Then you’ll be in another article three years from now, on how you were “unable to predict” that the buyer would walk away and you lost another X% in the process and how you had to pay two commissions to really sell your house once. Then you’ll understand that the credit markets weren’t “frozen”, they were quite rational in a market with the demographic of the baby boomers on their way out of it.

  34. “I love how he talks about his problems being that the credit markets are “frozen”, like they are some sort of Popsicle. ”
    Yeah, this is a common myth that is perpetuated by buyers and sellers alike, including in the SFGate article I mentioned the other day on the inventory update thread. The credit markets aren’t frozen at all. In fact, non-agency loans are just back to *normal*. Agency loans are ridiculously generous through FHA, and government-backed loans comprise way too much of the mortgage market for it to be healthy.
    It’s not that credit markets are frozen. It’s that people are making a false comparison to when the liquid got so heated up it turned to steam.
    I definitely had a co-worker back in the day who kept telling me to call her friend who’s a mortgage broker because “you’d be surprised what you’d qualify for.” But that was still lala-land.

  35. There’s a generation that’s grown up thinking that the 1996-2007 market was “normal” and that once this little hiccup is over we’ll go back to it.
    They’re going to be unpleasantly surprised. That market is never coming back.

  36. I love how he talks about his problems being that the credit markets are “frozen”, like they are some sort of Popsicle.
    tipster, it brings a smile to my face every time I read that line. You can’t really blame him for his ‘misperceptions’, as this timeline(courtesy of Wikipedia) will show:
    – 2007: On May 31, buys 104 Funston with mortgage from National City.
    – 2007: National City announces that their Wholesale Mortgage Division will cease operations effective December 31, 2007 in the face of record foreclosures. Employees were notified via email and conference call from Buck Bibb, head of National City Mortgage.
    – 2008: National City Corp. disclosed in a regulatory filing that it is the subject of an “informal” Securities and Exchange Commission investigation related to matters including loan underwriting, bank regulatory matters, and the sale of a subprime subsidiary, First Franklin Financial Corporation, to Merrill Lynch & Co. for $1.3 Billion in 2006.
    – 2008: On October 24, 2008 PNC Bank announced that it had purchased National City.

    – 2009: Popsicle
    – 2010: “You Will Die”
    He shouldn’t worry, though. I don’t think Nostradamus predicted Tulip mania.

  37. “There’s a generation that’s grown up thinking that the 1996-2007 market was “normal” and that once this little hiccup is over we’ll go back to it. ”
    What’s interesting is that many people have seen Depression-era grandparents and Boomer parents do really well relative to inflation and think that’s normal too. I would be interested to see what types of changes there are in the market if Boomers start to retire and need to sell their houses because their 401(k)s are down. Some Boomers bought houses in the 80s at the heights of interest rates when houses were dirt cheap, and made a ton of money if they sold at the right time because interest rates dropped dramatically and people could “afford” to pay more for a house with the payments staying the same (e.g. the phenomenon that $800K at 6% means the same interest paid in the first year as $600K at 8%, $480K at 10%, $400K at 12%, and $300K at 16%). Maybe the Boomer generation will spread the sales out slowly enough that younger generations will be able to absorb them, especially since we’re still playing with funny money under FHA.

  38. Americans are a very optimistic species (this is one reason it is easier to makes piles of money in a short market than in a long one). It is why people are in favor of lower taxes on the wealthy at their own expense — because they think they will join that wealthy cadre one day. I remember surveys taken around 2000 that showed investors expected 20% market returns each year forever. And we had only had returns like that for a few years ever (some of which happened to be just before these surveys). Same with housing, and as sfrenegade points out, the “proof” is all around us based on large (at least in nominal terms) gains over the last several decades. Sentiment is turning, but you can scratch your head all you want at the naive expectations of the general public as being contrary to the evidence and to all rational thought. It ain’t changing.

  39. Just got the “Z-estimate” from Zillow for my new house purchase. Paid $850k in June and it is already up to $915k as of right now. Plenty of room to go up too, it was at $1.08M back in ’07.
    Couple more years and I’m gonna be rich!
    Can’t wait to re-fi at 3.5% fixed rate either. Then the mortgage will be less than rent. That’ll learn all u perma-bears. Can’t wait for 2011!

  40. Those are real numbers from Zillow actually. I paid $850k in June and Zillow has it up at $915k three months later.
    My other place went from $408k to $445k over the summer …
    Best I can tell is that Zillow is a lagging indicator and not awfully precise but a lot of (un-sophisticated?) people do actually look at it as an indicator of property value.
    I know I get a warm fuzzy feeling when I see those made-up numbers going up.

  41. ^^Got ya. Despite a more realistic view, I too can still catch a nice “Zillow-y” feeling when the numbers go up (as they have recently).

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