Ups and Downs of Inexpensive Housing is SF

The following was I response I sent to Carol Lloyd who writes Surreal Real Estate regarding one of her recent posts. I take a particular interest in housing for the rest of us in this world and I thought this would be useful for agents as well as buyers and sellers of TICs:

Carol,

Your article a couple of weeks ago about the BMR studio in the fancy condo development down town was very interesting. I found it somewhat apropos, as I recently encountered some problems with a similar foundation while working on a deal to purchase a 1br TIC for one of my clients. It is 1 of 4 in a newly developed TIC building, which is to close next week.

Well, when at last the 4th partner got into contract and all the buyers were able to meet. One of the buyers (not my client) pulled me aside and told me that my client was "the weak link" since she was putting only 5% down and that he wanted assurance that my client had the reserves to cover unforeseen expenses like replacement of the aging roof. I'm felt a bit pressured, but standing my ground I told that buyer that my client was as strong as anyone in the group having a higher credit score than everyone else, a smaller loan than others (because of the particular unit she is buying) and she has plenty of reserves. I said she's got a better credit score than you!

In response I was told "I have a net-worth over$10 million" in a tone that suggested how dare I cast doubt on him. At this point I recognized the problem. While my client had less equity than the others, she was actually more closely aligned to the other two buyers in terms of financial status than this guy who had the $10M in the bank. Really, everyone except george lets call him, was really just one broken leg away from being in the poor house, and barely able to scrape together the down on a 1br TIC as their first owned home. George, on the other hand, was buying this as a 2nd home for his spouse to stay while in SF.

hmmm. I wondered to myself and to my client what other sorts of troubles could arise out of such a situation; Everyone (with good reason) loves the place, though, so the minor financial worries were brushed aside in favor of progress.

Now its time to get insurance... I did the leg work for the group since my pushing people to get quotes of their own resulted in silence; I presented the group with a quote for insurance. Well, surprise surprise, our fiend is back in 2 minutes pushing a quote of his own, except the personal liability and personal property coverage is next to minimal!!! why would that be? possibly that George has lots of coverage for those things though the policy on his primary residence... Should the rest of the group be exposed to that extra risk? Is this the last of the incompatibilities of this group? My client is no dummy and is going into this with eyes open of course.

Not sure why I relay this story to you. I guess the moral of both of our stories here, is not to push segregation between rich and poor, or one group and another, but to educate people about agreements that they are entering into: you as a journalist, and me as a advocate for my clients. Really, its a reminder that anyone buying/selling real estate should have a good real estate agent as well as read the Chronicle every week.

ps: I held off sending this to you until the deal closed. Anyway, the story has a happy ending, as they all got what they wanted and are now living happily ever after.