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6) May 16 HomeOwnership Debate in San Francisco
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Affordable HomeOwnership Alliance
HomeOwnership for Tenants (HOT): The Process, Costs and TimeFrames


Assuming that the HomeOwnership for Tenants (HOT) proposal is approved by the Board of Supervisors, we foresee the process would go as follows:

Tenants approach the owner with a request to consider subdividing the building and selling units to tenants. At least 25% of tenants must sign the request, stating their intention to buy their unit when the subdivision process is complete.
The owner must also agree in writing. Tenants must remember that it is possible that not enough tenants want to buy, or that the owner will not agree to sell; It is important that these agreements are entered into voluntarily on both sides.

The cost of the 3R compliance, engineers maps, legal fees, refinance costs etc. are quite substantial, and will have to be paid before the subdivision is complete, and the units are sold.
So it is unlikely the owner will agree to bear this upfront expense unless he is guaranteed that enough tenants commit to buying the units at an acceptable price, once the subdivision process is completed.
It is important that both owner and tenant freely agree to the price negotiated for each unit. It could take as little as a few days, to a few months or even years, for tenants and owners to get past this initial stage.

The City Department of Maps and Subdivisions would verify the signatures of the tenants and owner, and then issue preliminary approval for the subdivision. This could take a few days to several weeks, depending on how fast the City works. Cost depends on how much the City decides to charge, typically several thousand dollars per apartment in the building. These costs could be waived or reduced by the City.

The owner applies for a 3R Inspection Report from the Department of Public Works. This Report typically costs several hundred dollars, depending on how many apartments need to be inspected. It will take several weeks to a few months for the inspections (if required) to be performed. It will typically take 2-3 more months (sometimes more, depending on the amount of work the City requires) for the work to be done, inspected and signed off. The only good thing about this phase is that it takes so long that all the other tasks can be accomplished while waiting for this step to be completed.


While step 3 is in process:

1. Obtain a preliminary title report from a title insurance company. (cost = none; time = 1-2 weeks)

2. Hire a civil engineer and surveyor to draw the maps (cost = about $ 3,000; time = several weeks to several months, depending on their workload)

3. Hire an attorney to prepare and submit the subdivision application to the City, and to draw up the Condominium Association documents (cost = typically several thousand dollars, but depends somewhat on the number of units; time = several weeks; the City review process could take several months, depending on the backlog).

4. Obtain signatures on the maps from all owners and from the lender who holds the existing mortgage.
If the lender is amenable, it may cost just a few hundred dollars and take 2-3 weeks.
If the current lender on the building does not agree to sign the subdivision map, the owner will have to refinance the property with a more cooperative lender.
The new lender should then sign the subdivision map.
This entire process will take several months, and if necessary, it should be initiated as soon as the current lender has communicated their decision.
This will cost several thousands of dollars, depending on the size of the loan to be obtained.


Since all the costs detailed above can be quite substantial, the owner may require tenants to share in these upfront costs. This is something that tenants and owners should negotiate between themselves, preferably in the initial stages, and memorialize these agreements in a signed document, to reduce the chance of misunderstanding or acrimony later. Purchase forms and agreements are available in standard formats for this purpose from real estate brokers.


After final 3R signoff by the City, the subdivision map should then be recorded, along with the CC&Rs at the City Recorders Office. The City will require additional fees, and also require more money to be deposited to pay property taxes in advance.

If the building contains 5 or more units, then a separate (approximately 3-6 month) process with the Department of Real Estate of California will also have to be undertaken. This may require additional monies deposited into an escrow account, certain upgrades to the property, the filing of certain informational documents, and certain additional obligations undertaken by the Owner. They will impose certain deadlines for the completion of their requirements, which will have to be met.

Tenants who intend to buy their units should undertake a parallel loan process, and perhaps this should be initiated much earlier, perhaps even before step 1. This is the loan qualification process. There are many readily available loan programs requiring zero-or-low downpayment. However, each one has different requirements, and not all tenant-borrowers will fit into the pigeonhole for every program. So the best or most appropriate loan program has to be identified for each individual tenant, based on the individual circumstances.

Bad credit from the past may have to be cleaned up. Co-borrowers and co-signers may have to be enrolled and their paperwork obtained. This may take some time. On the other hand, in many or even most cases the loan qualification process may prove to be fairly easy, fast and straightforward.

Several loan companies have already been approached by AHA, and have agreed to train their loan agents in the intricacies of the loan programs contemplated by this proposal. Depending on demand, more can be recruited.
Details about the several loan programs are to be found in the folder: "Loans" at the C4T website, available for download by those who have been registered. To register, simply email your request to be registered for access to the files, to Condos4Tenants@aol.com, with your name and email. If you want to receive supplementary materials by mail, or want to speak to a loan counselor, send your telephone number and address as well.

Though all of this may sound daunting, it is standard practice, and many thousands of buildings go through just this process every year in California. There are professional subdivision attorneys, lenders, escrow and title companies, civil engineers, surveyors, contractors etc. who are quite attuned to performing these tasks and helping people subdivide their buildings.

Once all of the above has been completed, then sales of individual units to tenants can commence.
If an individual owner does not want to undergo the work and expense in going through the subdivision, he may hire someone to manage the process. He may even sell the building as a whole to someone else who is willing to undertake the expense and effort of going through the subdivision process.


Find out about the Affordable HomeOwnership Alliance, the Housing Ownership for Tenants (HOT) proposal, and how to achieve homeownership for yourself in SF at our website:
www.affordable-homeownership.org. Some files available for viewing and download:
Affordable HomeOwnership Alliance: Who We Are
Brief introduction to the HomeOwnership for Tenants (HOT)concept
The HomeOwnership for Tenants Proposal (also called: Condos4Tenants)
Extensive data on Federal, State and private zero or low downpayment loan programs, rehab/fixup loan programs, and extensive links to FHA, FNMA etc
Detailed description of the HOT subdivision / homeownership process from inception to purchase, with estimated costs and timeframes, demystifying the process
Charts of the dynamic interactions between the economic forces affecting prices
Poll results on housing and homeownership issues in San Francisco
What SFs Supervisor-candidates have to say about HomeOwnership for Tenants



 


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