Well, you learn something new everyday. At least I do! Sometimes. Anyway I heard this story about an issue that’s currently transpired in one of Foster City’s larger townhouse communities and I thought of it as new news. I won’t mention specifically where this place so as not to start World War III, but suffice it to say that it’s a two story townhouse built on a slab foundation. Just in case you’re thinking that narrows it down a tad…you’re wrong. That out’s just about all of the two story townhouses in town.

The townhouse in question was listed for sale and in the inspection it was disclosed that the place has a 4 inch crack on the slab foundation that’s noticeable on the floor downstairs. Obviously, the foundation crack is a structural problem. Here’s my discovery…the HOA takes no responsibility for this type of issue. It’s entirely up to the homeowner to resolve this on their own. In this case, unfortunately, the crack not only effects the unit in question but at least one other unit adjacent to this one. When a contractor looked at the issue it was suggested that if this crack was going to be repaired it would need to be repaired in the adjoining townhouse(s) as well to insure the job was done right. The adjoining homeowner wouldn’t allow access to his place even for an investigation by the contractor. As a result the home had to be sold at a significant discount since there doesn’t seem to be an opportunity to fix the problem and the new buyer is going to have to live with a 4 inch crack on his/her floor until there’s some kind of agreement.

Seems sort of like a huge pain to me. Also seems like a marketing nightmare that I hope I never have to endure! I guess the thing that most surprised me was the fact that the HOA isn’t taking responsibility for this structural problem. If there’s a problem with other exterior structural elements they certainly do. Maybe none of the local HOA’s include foundations in their coverage…I intend to look pretty hard at the fine print in the homeowners docs in the future, that’s for sure. I also wouldn’t hesitate to have an engineer look at any floor element that looks out of level or seems irregular. If a townhouse has a foundation problem, particularly one who’s fix would include another neighboring unit’s cooperation, I sure want to know that going in.

One of the pitfalls about being a realtor and blogging about this business is the fear of getting into trouble by badmouthing somebody’s property or project. I really have tried hard not to do that…and sometimes that hasn’t been easy! At the outset here I want to sincerely say that I think Foster City has the best condo/townhouse projects on the Peninsula. They’re well designed, have great amenities and they’re in a town that has substance.

Here’s the problem, I’ve been concerned for a long time about the impact some of these projects association dues would have on their values. I’m really concerned what will happen when some of these projects begin to incorporate flood insurance into their monthly HOA dues. For the uninitiated, Foster City has projects like Winston Square that has dues of $175.00 a month. Treasure Isle at $255.00 a month, Shell Cove at $299.00 a month and Marina Green at $340.00 a month. There’s a bunch of others in this same category and they’re pretty normal if you ask me.

Then you have Bayfront Court at $435.00, Nantucket Cove at $488.00 and Marina Point at $483.00. You also have Meridian Bay at $546.00, The Islands at $603.00 and Promontory Point at $772.00. In 2005 a unit at Promontory Point sold for $1,551,400. No fewer than 16 units sold for more than $1,049,000 in those years. The most money spent at Promontory Point since 2007 was $880,000 in January of 2009. There’s a unit on the market there right now for $749,947.  I can’t think of a project, community or neighborhood in the Mid Peninsula that’s taken the type of pounding that Promontory Point has taken when it comes to value erosion. Call me zany…but do you suppose those dues have had a negative impact?

How does that translate in the real world? At 4.75% interest $772.00 a month is the equivalent of  $148,000 on a mortgage. It’s $116,000 for the Islands and their $603.00 a month dues. I’ve had many, many clients reject these projects when they found out about these dues. I think it’s understandable.

Again, the question is…what happens when they have to absorb mandatory flood insurance? How much will they go up? I know there are really great people living at these projects and I’m sure there are significant reasons for these dues being this high…it’s just a fact that they’re having a large impact on the project’s overall value.

What’s wrong with this picture? Currently, there are a total of 29 active condo/townhouse listings in Foster City. There are 22 condo/townhouse projects in Foster City, yet of the 29 active listings 11 of them are in only 3 projects…Promontory Point, Meridian Bay and Marina Point. That’s 39%. Conversely, there are currently 35 pending sales in the condo/townhouse category, a ratio that’s at it’s 2009 high by the way. There’s 5 pending sales in those complexes…or slightly under 14%.

Why the disparity, you ask? These are all nice projects and the unit’s in question are by and large in good shape. Average days on the market for these 11 units? 105. Average days on the market for all the others? 74. Why is it then that these nice units are not selling? I suggest it’s because of their high association dues. Promontory Point’s dues are $772.00 a month. Meridian Bay’s are $496.00 and Marina Point’s are $470.00.

OK, there’s others that are in that ballpark too…Isle Cove at $525.00 and The Islands at $547.00 yet there’s also places at Winston Square coming in at $245.00 and Marina Green at $308.00. Even City Homes arrives at $349.00. At least with Isle Cove and The Islands you’re most likely looking at a waterfront. The $500.00 a month range sure seems pricey to me…doesn’t it to you? What happens if flood insurance is mandated for these HOA’s? Yikes!

Seriosly, I like these projects. Meridian Bay is gorgeous…heck they all are nice developments! It’s just that the facts of the active listings would sure suggest that the market is not rushing to buy these places..and I don’t believe it has anything to do with the quality of the unit’s or the projects. It has everything to do with high HOA’s

As the rhyme of the ancient mariner concludes…but not a drop to drink. Not quite that bad in Foster City but the City Council last night considered approving a new water rate structure that will escalate the cost of water as more of it is used. The idea is to motivate folks to be more conservation minded in the face of drought conditions state wide. Wasting water could now become a pretty expensive issue under this new plan, but conserving will reduce your total bill.

The interesting issue to me will be the new law’s impact on HOA’s in Foster City and I suspect there will have to be a sincere effort by homeowners in the various projects in town to use water more wisely, or suffer increases in monthly dues…and that’s the last thing some of these projects in town need! Some projects are hovering near or are even over $500.00 a month right now. Here’s a link to a Mercury-News story about this topic from Saturday:

FCWaterRateStory

If I live in a Condo or Townhouse, I don’t need any insurance because I have an Association…..

I am going to make this post relatively brief, which I assure you can be a daunting task for us “Minkey’s!”   If you own a condo or a townhouse (if you rent, see my previous post on renter’s insurance), you should have a separate policy for your unit, i.e. separate from your Association policy.  No, it is not required by the mortgage company, and no, it is generally not required by your Association’s master policy.  It is also not required that we have health insurance, but most of us who can afford it, still have it.  Just like your life is valuable, your investment in your home is just as valuable.

To clear up a few things, I will give you a bird’s eye view of what your Association policy typically covers; the overall structure of the building, such as the roof, the exterior, the siding, walkways, breezeways, often referred to as the “common areas.”  It also would cover the interior and exterior structures of any amenities such as work out rooms, rec rooms or pool areas.

What doesn’t it cover?  You have no coverage for your personal belongings.  You have no coverage for personal liability.  You have no coverage for the interior feature of your home, or improvements or betterments that were made by you or a previous owner.  You have no coverage for guest’s medical expenses if injured in your home.  You have no coverage for additional living expenses should you have to temporarily relocate due to a catastrophe, such as a fire in your unit. 

Generally speaking, an Association policy covers from the studs of the walls out, plus the above mentioned items.  You are responsible for the studs of the walls in, plus the above mentioned items.  I don’t think cost is usually a factor as to why so many customers I consult with don’t have this coverage.  It is usually because it was not something that was required at the loan document signing party as it is during a single family home purchase.  Once in the home, it becomes out of sight out of mind. So,  please make sure you have the protection you need if you are a condo or townhouse owner, as your Association will not be able to help you should a situation arise where you do not carry your own insurance policy!

The Condo/Townhouse segment of the Foster City market is holding it’s own about as well as single family houses over all with 36 active listings and 13 pending sales as of today. The pendings are in the lighter tone above. That ratio has increased a tad since I did this report six weeks ago, when there were 31 active units and 18 pending sales, but it’s interesting to note that a large number of those sales, 10 of 13, sold since May 27. That sort of reflects the same little boost we had with Single Family houses during that same period. Of course these units vary tremendously in size and utility, but I can’t resist highlighting a few that are worth seeing because they’re so darn nice! I would expect to see them sell relatively quickly:

893 Erickson listed by Jan Majeski of Alain Pinel for $879,500. This is one really adorable townhouse at Winston Square. 4 bedrooms, 2.5 baths…and really done nicely! A top drawer remodel, I like this place alot.

1025 Helm listed by Debbie Wong of Prudential for $748,888. This wide waterfront 3 bedroom, 2.5 bath unit at Bayfront Court is also done well and it’s rare to see a waterfront exposure this terrific. Shows really well, it’s a great listing!

4106 Admiralty listed by Guillermo Reyes of Keller Williams for $415,000. I know, I know…the Admiralty has it’s issues, and yes, the refrigerator is in the dinning room, but you don’t see many folks willing to really fix up a one bedroom unit like these folks have. It’s a really cute unit!

Go have a look…tell me if you disagree.

I’ve been asked to comment on a couple of scenarios that have recently been brought to Jim for discussion. The first is about those fortunate souls who find themselves in the enviable position of not having a home loan.  The question posed was whether or not they will have to purchase flood insurance when the Foster City change goes into effect.  The short answer, no.  Just as you are not required to carry a homeowner’s insurance policy, you will not be required to carry a flood insurance policy.  It is worth noting however, if your home is your largest asset and you may need to access your equity via an equity loan/line or a reverse mortgage, you would be required to carry insurance at that time.  If this were to be after the 2010 deadline (assuming nothing changes in terms of the flood zones), you would not be able to lock in the “preferred rate.”  Just like some who choose not to carry homeowner’s insurance once their loan is satisfied, you would be self-insuring for better or for worse.
The second question posed to Jim was regarding condo unit owners (the following comments also apply to town homes).Typically, in a condo situation there is an HOA (Homeowner’s Association). General rule of thumb is the association has what is called a “master” policy. In most cases, the master policy covers from the studs of the walls out, plus any common areas.  They do not cover the interior of the units or any liability issues that may arise within your unit.  In the event of a flood, if you do not carry a flood policy for the interior of your individual unit, you would not have coverage.  It is very important however, that you check with the company who handles the policy for your HOA to see what the policy covers.  Lenders usually do not require evidence (proof) of insurance for condo owners who are part of an HOA, as the exterior is covered under the master policy for most covered perils such as fire.  It would typically be the responsibility of the HOA to have its own flood policy for the exterior of the building plus any common areas.  If your HOA does not have a flood policy and later becomes required to carry one, you could find yourself in an assessment situation.  Do yourself a favor, check this out, or go to a board meeting and discuss this issue with your board members.

The Condo/Townhouse market has actually been remarkably strong in Foster City, with 31 active listings as of today, and 18 Pending Sales. That’s really an excellent ratio and speaks well for this segment of the Foster City market. Condos and Townhouses are naturally more affordable than single family homes in this area and we’re certainly seeing some real activity here. I’ve color coded the actives in a darker tone for easy access in the chart above. There’s actually been more activity in this segment in the last few weeks than there has been in single family sales. In the last 2 weeks 10 condo/townhouses have sold vs. 6 single family.

Nowhere on the Peninsula is there a community boasting as many large condo/townhouse projects as does Foster City. I’ve actually sort of procrastinated about writing a post about this market segment because it’s shear vastness makes it a bit of a struggle trying to consolidate all of it’s facts into a coherent report on how it’s doing. There are 24 projects with 50 or more units, Redwood Shores by comparison, has 15. These developments span the price range from a high of over $1.3mil last year at Promontory Point to a 1 bedroom condo being sold short at the Admiralty for $329,888. It’s been a long held staple of real estate thought that a single family home will hold it’s value better than a condo or townhouse and thus it’s a better investment but the fact of the matter is that in a community where an entry level house is $900,000 minimum and lots of people want to live here condos/townhouses have done really well. Appreciation has been steady in Foster City over the last 10 years yet some values have fallen slightly over the last 18 months or so. I believe that to be the product of 3 things, 1. The market is experiencing a natural adjustment, 2. Foster City’s short sales have basically been in the lowest price ranges where zero down sub-prime loans were most prevalent and thus these properties have been sold at a discount to move them and 3. Association dues in some projects have risen to a point where it has, to some degree, effected desirability. Dues in some projects are hovering between $450.00 and $500.00 a month…one project is now at $735 a month. Here’s some fun facts:

30 Total number of Condos/Townhouses actively on the market in Foster City

13 Total number of them that are traditional 2 story townhouse units

14 Total number of Pending Sales

15 Total number of closed sales in the last 3 months

6 Total number that sold at or over the asking price

2.1% Average percentage of price reduction on the other 9 properties

6.8% Average price reduction across the board on Condos/Townhouses in the last year in FC.

Again, with 24 projects chiming in and considering the variations in units and their relative conditions it sure seems to me that condos and townhouses in Foster City has been, and will continue to be, a pretty darn good investment. I debated this with a mortgage broker buddy of mine recently…I think that if a buyer is qualified to $650,000 and it’s a choice between a house in San Bruno, South City or Pacifica or a condo in Foster City…it’s the Foster City condo all day long. In the long run it will hold it’s value better.