The last remaining home at 198 Valencia has found a buyer, and we’d be remiss to not congratulate both this new homeowner and the developer’s sales team on their successes. Within six months of the condominium project’s Spring 2022 debut, 75 percent of the units were sold despite surging borrowing costs, headwinds for the local economy and a typical summertime slowdown in sales activity. By the end of the year, just four homes were left. Then, finally, 198 Valencia #407 was the only unsold offering.

Source: SFAR MLS

At the outset, the building’s 3-bedroom condominiums — each fully upgraded — were expected to fetch more than $1.6 million (including on-site parking valued at $85,000). All three near-identical residences would fall short, however, including 198 Valencia #407. The first to go, a penthouse-level unit, was introduced to the market in August 2022 at $1,598,000 and sold for $1,590,000. Then, the lower-level comparable sold for $1,338,000 in March 2023 after having been advertised at $1,638,000 among the first release of homes and reduced several times.

Incremental price adjustments brought 198 Valencia #407 down a full $250K to $1,398,000 by early 2023. In the months that followed, the home received no more changes to its sticker price, but the developer would become increasingly motivated to make a deal — if any buyer would start the conversation. That buyer emerged a few weeks ago, along with two others according to our insider at JS Sullivan Sales & Marketing, Inc. When it rains, it pours — amiright?!

Details of the declined offers will not be disclosed (as per usual) but we do have insight into the highest and best offer that clinched the sale:

› $1,319,000 purchase price ($79K below list)

› 12 months of HOA dues credited to buyer ($8,600+ value)

› City/County transfer tax paid by developer ($9,885 value)
 

Source: SFAR MLS

Seller concessions like these are becoming few and far between, especially in the market for new construction where an imbalance of supply and demand is growing. Nearly half of the major condo projects in San Francisco have less than 50 percent of their inventory remaining; homes at OneEleven, 2238 Market, Murano, Union House and Fulton 555 are almost completely sold out. Earlier this month, Maison Pacific booked an entire week of pre-sale showings in less than two hours, and then a second full week — totaling ±100 pre-qualified parties in pursuit of 44 market-rate units.

Across the board, many would-be buyers that had been waiting to see if mortgage interest rates will plunge (unlikely) or recession takes hold (unlikely) are now grasping at the eleventh-hour opportunity to purchase at current — relatively low — prices. And not a moment too soon. Over the past 20 years, the median home sales price rose an average 14.68 percent from January thru June, never once decreasing. If that trend holds, then the next climb begins in four months. The clock is ticking.

Pro Tips For Buyers

If you’re looking to make a purchase in one of San Francisco’s brand new condominium developments, here are 5 Things to Know:

Transparent Pricing

› Tired of being outbid by other buyers? You’re in luck! By the time new homes hit the market, there has been months, if not years, of pricing analysis by the developer to ensure they’ll hit the numbers they need. The list price you see is the price you pay (unless a good argument can be made for a reduction — and if you have independent representation described below). Make no mistake that new construction carries a premium over comparable resale units. But in a rising market, by the time escrow closes on a new place, the buyer could have already banked some healthy appreciation.

More Inventory Than Meets The Eye

› Especially in larger developments, units available for sale are held off the MLS and other public listing syndicates so as to not flood the market with inventory. By releasing only a few homes at a time, the developer and their sales team are able to keep prices up. But that doesn’t mean your dream home isn’t available — you just need a broker on the inside track to scope it out and make the deal happen for you before another buyer gets to it. That’s where we come in.

Not Your Standard SF Purchase Agreement

› New residential condominium projects of five or more units require the use of a special purchase agreement approved by the California Department of Real Estate. These contracts are long — super long — and include notices about issues like latent construction defects as well as resale restrictions. It should be accompanied by a Public Report (Final or Conditional). And if a Certificate of Occupancy has not yet been issued by the San Francisco Department of Building Inspection, you’ll want to make sure your purchase is contingent upon receiving that.

Dual Agency vs Independent Representation

› If you walk into the on-site sales office at a new building, you’ll almost certainly be asked to register yourself as a visitor. Read the fine print! Unless you disclose that you are working with a broker, you’ll be waiving your right to independent representation. Why do you want independent representation? For one, it could save you tens of thousands of dollars (and possibly a whole lot more) on the Documentary Transfer Tax described next. Conversely, if you’re represented by the sales team also representing the developer (dual agency), you have effectively zero leverage to ask for seller concessions.

Documentary Transfer Tax

› In San Francisco, this tax is customarily paid by sellers in an ordinary real estate resale transaction. Not the case when buying new construction! New construction purchase agreements almost always stipulate that the buyer pays the tax. With independent buyer representation, you have a chance at negotiating for the seller to pay. Take a look at this guide from the SF Assessor’s Office and you’ll see the tax isn’t cheap — especially when you’re dealing with a purchase price of $5,000,000 and above.