Napa County Real Estate January 2020 Report

Generally speaking, after years of high appreciation rates, annual 2019 Bay Area median home prices went down a little bit, went up a little bit or basically remained unchanged as compared to 2018.

For 2020, economist Ken Rosen at UC Berkeley has said he expects the Bay Area median price to remain basically flat, within a general range of up or down 2% – in other words, similar to what happened last year. We can’t predict the future, but that certainly doesn’t sound unreasonable, and happily avoids the sensationalism of many other media-grabbing forecasts.

In this report, some Sonoma County cities are included in the city stats for further context to the greater Wine Country market.

Median sales prices are generalities and not exact measurements of changes in fair market value. They can be affected by a number of factors and are sometimes subject to anomalous fluctuations. How they apply to any particular home is unknown without a specific comparative market analysis.

Napa County is challenging as regards to city median home prices: It only has 3 cities with a relatively substantial number of sales (Napa, American Canyon, St. Helena), and of those, St. Helena – with the fewest sales of the 3 – has such a huge range of sales prices that its median price often fluctuates simply due to what homes sold in a given period.

Economic Factors Affecting
Real Estate Markets

San Francisco Real Estate January 2020 Report

Generally speaking, after years of high appreciation rates, annual 2019 Bay Area median home prices went down a little bit, went up a little bit or basically remained unchanged as compared to 2018. SF hit new quarterly price highs in spring of 2019 (amid all the IPO excitement), but ended up the year at about flat for houses and a little up for condos. (Since there has been so much new luxury condo construction in recent years, year-over-year median price comparisons may not be exactly apples to apples.)

For 2020, economist Ken Rosen at UC Berkeley has said he expects the Bay Area median price to remain basically flat, within a general range of up or down 2% – in other words, similar to what happened last year. We can’t predict the future, but that certainly doesn’t sound unreasonable, and happily avoids the sensationalism of many other media-grabbing forecasts.

One of the big factors in SF house price appreciation since 2012 has been that fewer house owners are selling (dark green portion of chart below). If demand increases, but supply drops, that puts upward pressure on prices. Overall, house prices have out-appreciated condos over the past 7 years due to 2 factors: All the new condo construction and the fact that condo owners sell their homes more often than house owners. Both those factors increase supply to help meet increased demand.

San Francisco Home Prices by Neighborhood

Below are just two of the tables in our much longer analysis of home prices by property type and bedroom count for every neighborhood in the city. If you’d like the complete report, contact your Compass agent.

San Francisco Luxury Home
Markets by District

Economic Factors Affecting
Real Estate Markets

Napa County Real Estate December 2019 Report

Bay Area Median Home Prices and Bay Area County Market Size. By number of annual sales, Napa County is the smallest county market in the Bay Area.

Market Seasonality: New Listings
Coming on Market

The market is now deep into its seasonal plunge in activity, which hits its nadir in December. (This chart is updated through October. November saw its usual big drop in new listing activity.)

Bay Area Markets for Homes of $5 Million+

This chart compares the number of $5m+ listings in MLS in October 2019 to the total number of $5m+ sales reported to MLS in the 12 months through October. For a county market of its size, Napa’s numbers are high. The number of active listings is running very high.

Median Home Price Trends since 1996

This chart is an estimated calculation of median home price trends by an algorithm created for that purpose. Long-term St. Helena data is not available from this data source – though its median prices are typically the highest in Napa and Sonoma Counties. As always, these numbers should be considered very general approximations of prices in markets often containing homes of widely varying size and quality. Many Napa County markets are very small, which always makes these calculations more prone to anomalous fluctuations.

Median Dollar per Square Foot Values

Selected Market Indicators

The following 6 charts review supply and demand dynamics from a variety of angles – by county and by city. In the comparative city statistics, a number of factors are at play, including location, of course, general price range, and the size of the second-home market.

San Francisco Real Estate December 2019 Report

When the media reports on the “Bay Area median home price,” it’s worth remembering that SF is a relatively small market compared to the big 3 counties.

Appreciation in Very Expensive Markets

Based on the calculations of an algorithm created to track long-term price changes, this next chart looks at percentage appreciation since 2012 in the most expensive markets of 5 Bay Area Counties. (In Marin, Tiburon, a very expensive, but not the most expensive market in the county, is graphed due to data issues.) This chart does not delineate prices, which vary hugely, only estimated percentage home price changes over time.

According to this algorithm, prices in these most expensive markets have generally declined from recent peaks in 2018.

Bay Area Ultra-Luxury Home Markets –
Active Listings vs. 12 Months Sales

SF has the third largest market for homes of $5,000,000+ in the Bay Area.

Market Dynamics & Seasonality –
New Listings & Price Reductions

The market is now deep into its seasonal plunge in activity, which hits its nadir in December. (This chart is updated through October. November saw its usual big drop in new listing activity.)

The percentage of listings reducing price in October – typically the peak month for price reductions – ticked up a little year over year, to its highest point since the recovery began in 2012.

Home Prices & Market Statistics by SF District

Median House Prices by Realtor District

As always, these prices should be considered very general approximations of prices in complex district markets containing homes of widely varying size and quality.

Median Condo Prices by Realtor District

Market Statistics by Realtor District

As mentioned in previous reports, market dynamics in San Francisco are often – but not always – separated by price segment as much as by neighborhood/district location. More expensive segments not unusually have somewhat softer supply and demand dynamics. However, District 5 – the greater Noe, Eureka & Cole Valleys district – one of the city’s more expensive districts, has been bucking that trend in 2019.

Districts dominated by condo sales also typically have softer dynamics than those dominated by house sales.

Napa County Real Estate November 2019 Report

Long-Term Trends in Median Home Sales Prices

Using a six-month-rolling average of monthly median sales prices smooths out the often meaningless monthly fluctuations to illustrate broad, long-term appreciation trends with more clarity.

Sales Volumes and Median Prices by City

In this first chart, we have included some cities in Sonoma County to add further context to the greater Wine Country homes market.

Median sales prices are generalities that disguise a wide range of prices in the underlying sales, and how they apply to any particular home is unknown without a specific comparative market analysis. Median prices are more prone to fluctuate – without reference to changes in fair market value – in communities with lower sales volumes and wide ranges of sales prices.

Monthly Sales Volumes

An illustration of the substantial role of seasonality in the real estate market. One month’s sales volume mostly reflects accepted-offer activity in the previous month. Market activity hits bottom in December and January, which then makes January and February the months with the lowest number of closed sales.

Homes Going into Contract Quickly,
Subsequent to Receiving Multiple Offers

The percentage of 2019 YTD home sales that went into contract within 30 days of coming on market while receiving multiple offers is down from last year. About 1 in 8 such sales have occurred in 2019, and they averaged a sales price 2.4% over asking price – i.e. buyer competition pushed sales prices up.

Sales vs. Listings for Sale by Price Segment

Demand vs. supply: If the price segment’s percentage of sales is significantly lower than the segment’s percentage of listings available to buy, it signifies softer demand as compared to other price segments: This is the situation especially for $2 million+ segment in Napa with 7.4% of the area’s sales, but 28% of listing inventory. The median list price of active listings in this segment is a whopping $4.85 million.

The reverse is true for the $500,000 to $750,000 home segment: A higher percentage of sales (41%) than its percentage of active listings (24%) on the market – signifying much stronger demand.

These are generalities: Overpriced listings in any segment will typically fail to sell without price reductions, and appealing, well-priced listings can sell very quickly.

Home Listings & Sales by Month, $1 Million+

Active Listings within Month, $1 Million+: The number of higher-price listings in Napa County has surged in 2019, altering the balance between supply and demand.

Monthly Sales Volumes, $1 Million+

Market Dynamics by Price Segment

Location is, of course, always important in real estate value – within the county, within the city, within the neighborhood – but to a large degree, market dynamics within the county are also determined by the home’s price segment. And individual cities will often have homes in several or even all of the price segments broken out in the 2 charts below, with these segments seeing differing supply and demand conditions.

Generally speaking, demand is considerably softer and supply is higher (as compared to demand) above the $1.25 million price threshold, and that difference becomes much more substantial above $2 million. In this highest price segment particularly, correct pricing is an imperative.

Sales without Price Reductions
& Withdrawn (No-Sale) Listings

The following 2 charts illustrate both year-over-year changes in market conditions and the role of seasonality within the calendar year.

Last year saw a large jump in the number of listings pulled off the market without selling in November and December – this was a particularly volatile time in financial markets and interest rates were relatively high. The situation with both of those factors has changed dramatically in 2019, but it is too early to see how that will affect the number of listings withdrawn in the last 2 months of this year. It is unknown how the terrible fire in Sonoma will affect Napa County market dynamics.

San Francisco Real Estate November 2019 Report

Using six-month-rolling figures for monthly median sales prices smooths out the often meaningless monthly fluctuations to illustrate broad, long-term appreciation trends with more clarity.

Home Sales Volume by Month

A crystal clear illustration of the role of seasonality in the SF real estate market. Starting in November activity begins to plunge towards the mid-winter nadir. Remember that November sales volumes mostly reflect October accepted-offer activity. Market activity hits bottom in December, which makes January the month with the lowest sales volume.

Home Sales & Median Prices by District
HOUSE Sales & Median Sales Prices

Note that districts often include neighborhoods of varying values and that the district median sales prices quoted reflect combined sales. Median prices are broad generalities useful for comparative values and home-price trends, but how they apply to any particular home is unknown without a specific comparative market analysis.

Median sales prices broken out by neighborhood, property type and bedroom count are also available upon request.

Condo, Co-op & TIC Sales by District
2-BR, 2-BA Condo Median Sales Prices

Luxury Home Sales

Sales of homes of $3 million and above in October were a little below the number in October 2018, but looking at September-October sales, there were gains over same-period sales in 2016, 2017 and 2018.

Sales vs. Listings for Sale by Price Segment

Market Dynamics by Property Type & Price Segment

Location is, of course, always important in real estate value – within the the city and within the neighborhood – but to a large degree, market dynamics within San Francisco are also determined by the property type and the price segment. And individual neighborhoods and districts will usually have homes in several or even all of the price segments broken out in the 3 charts below, with these segments seeing differing supply and demand conditions.

Generally speaking, demand is stronger and supply is lower (as compared to demand) for houses over condos. For both houses and condos, market dynamics are somewhat softer in the higher price segments, especially above the $3 million price threshold for condos, and in the $5 million+ price segment for houses.

People Moving in & out of CA in 2018

According to new census estimates, approx. 501,000 people from other states moved to CA in 2018, while 691,000 Californians relocated to other states – a net loss of 190,000. In addition, an estimated 284,000 foreign nationals moved into CA from outside the country. (Foreign out-migration numbers are not available.)

The top states for out-migration are Texas, Arizona, Washington, Nevada & Oregon, states with high-tech centers of their own and/or no state income taxes, and/or significantly lower housing costs – thus attracting working residents, local businesses, and retirees. Updated Bay Area figures are not yet available, though migration trends here have generally paralleled state trends in recent years.

Sales Without Price Reductions & Withdrawn (No-Sale) Listings

The following 2 charts illustrate both year-over-year changes in market conditions and the role of seasonality within the calendar year.

Last year saw a big jump in the number of listings pulled off the market without selling in December – this was a particularly volatile time in financial markets and interest rates were relatively high. The situation with both of those factors has changed dramatically in 2019, but it is too early to see how that will affect the number of listings withdrawn in the last 2 months of this year.

Napa County Real Estate October 2019 Report

Updated Market & Census Statistics, Home Prices & Appreciation Rates, Luxury Home Sales, Price Reductions, Employment & Interest Rates.

Year-over-Year Q3 Comparisons – Q3 2016 – Q3 2019

Median House Sales Price by Quarter

Year-over-Year Quarterly Appreciation Rates

Home Sales by Price Segment & Bedroom Count

The variety of homes sold in Napa County is astounding, but by far the most common sale is of a 3-bedroom house at a price between $500,000 and $750,000.

New Census Estimates

Underlying the real estate market are the changing details and circumstances of its population. At the end of September, the U.S. Census released its 2018 American Community Survey 1-year data estimates for a broad range of economic, social and demographic statistics. Below is a selection of survey insights into our community, plus 2 or 3 statistics from other sources. (You may want to expand this slide for easier reading.)

Higher-Price Home Sales

Overall, home sales of $1 million and above were down from their peak in Q3 2018, but, as seen in the second chart below, home listings and sales of $2 million-plus hit new highs, by a tad.

Selected Market Indicators

Activity in the market usually begins to decline after the end of the summer selling season, and then plunges in mid-November. Note that the nadir of sales in Q1 mostly reflects the plunge in accepted offer activity in the last 6 weeks of Q4. Of course, sales occur in every month of the year, and indeed, slower periods can be advantageous to buyers since competition for listings drops.

The percentage of listings reducing price usually climbs through the end of summer and stays relatively high in early autumn, as sellers of unsold homes try to recapture the attention of buyers while the market is still relatively active – i.e., before the big, mid-winter holiday slowdown that begins in mid-November.

Employment Trends

Unsurprisingly, a major dynamic affecting home price appreciation or depreciation is the ups and downs in county employment numbers. Though Napa-Sonoma has had a very strong recovery in employment numbers since the market recession of 2009-2011, it has not experienced the stupendous new highs in (generally, very well paid) jobs seen in counties most affected by the high-tech boom – which have pressurized their markets more intensely.

Mortgage Interest Rates

A year ago, many experts predicted that interest rates in 2019 would average in the 5.5% range, but they plummeted instead, a major dynamic in this year’s market. Buyers generally saw substantial drops in homeownership costs as compared to late 2018. Note that historically, it has been very difficult to predict interest rate movements.

San Francisco Neighborhood Home Prices, Market Trends

Updated Market & Census Statistics, Home Prices & Appreciation Rates, Luxury Home Sales, Price Reductions, Employment & Interest Rates.

It will be another month before hard data on the autumn selling season begins to become available. In the meantime, below is a review of market trends and statistics through the third quarter. Note that September sales data mostly reflects market activity in August, a historically slow month.

Year-over-Year Q3 Comparisons – Q3 2016 – Q3 2019

Looking back over the Q3 statistics in the past 4 years, the San Francisco market has remained quite strong, though the number of sales has declined. The “IPO effect” may well be playing a role in keeping demand up, especially in the higher price segments where sales volumes have continued to increase.

Median House Sales Price – 3-Month Rolling Figures

Median house sales prices hit a new high in spring, though the year-over-year increase was relatively modest. However, many Bay Area Counties have seen small declines in median home sales prices over the last 4 quarters.

Year-over-Year, Quarterly Median House
Sales Price Percentage Change

Generally speaking, San Francisco is seeing significantly better year-over-year home price appreciation rates over the past 2 quarters than most Bay Area Counties, but the increases are well down from those seen during much of the recovery since 2012.

Median Condo Sales Price -3-Month Rolling Figures

Median condo sales prices have hit new highs, but the apples-to-apples appreciation issue is complicated by the thousands of new condos that have come on market, many of which have been at higher price points.

San Francisco Home Sales
by Price Segment & Bedroom Count

The most common sale in San Francisco is that of a 2-bedroom condo selling between $1,000,000 and $1,500,000. 2 & 3 bedroom condos now have higher median sales prices than 2 & 3 bedroom houses. This is due to 2 issues: 1) the tens of thousands of newly built, higher-price (often high-rise) condos coming on market in the last 15 years, and 2) condos are commonly found in more expensive neighborhoods than those where most house sales occur.

Updated Census Statistics

Underlying the real estate market are the changing details and circumstances of its population. At the end of September, the U.S. Census released its 2018 American Community Survey 1-year data estimates for a broad range of economic, social and demographic statistics. Below is a selection of survey insights into our community, plus 2 or 3 statistics from other sources. (You may want to expand this slide for easier reading.)

Luxury Home Sales

Sales Volumes & Price Reductions

Looking forward, October is typically both a big month for closed sales, reflecting the surge in deals after September’s big spike in new listings, as well as for price reductions, as sellers of unsold homes try to spark renewed buyer interest before the market slows in mid-November for the winter holidays.

Then in December, many sellers pull their unsold listings off the market altogether to wait for the market to wake up again in January-March. Of course, sales occur in every month of the year, and indeed, slower periods can be advantageous to buyers since competition for listings plunges.

SF Employment Trends

Behind the story of home price appreciation since 2000 are the ups and down in the number of employed residents. After a spectacular boom in job creation since 2010 – many of the jobs extremely well paid – the number has generally leveled off in the past year (according to the CA Employment Development Department).

Trends in Rents

The 2 big recent factors in rent rates have been changes in employment numbers, and the increase in the supply of apartments on the market due to the boom in rental unit construction (the first such boom in many decades). Economists believe there should be generally parallel trends in rents and ownership costs, those being the 2 housing options (besides living with one’s parents).

The dotted line delineates the approximate divergence in rents between a market rate unit and a rent-controlled apartment leased in 2010.

Mortgage Interest Rates

A year ago, many experts predicted that interest rates in 2019 would average in the 5.5% range, but they plummeted instead, a major dynamic in this year’s market. Buyers generally saw big drops in homeownership costs as compared to late 2018. If you are already a homeowner, depending on when you purchased your home, you might want to investigate the option of refinancing your mortgage with a new, long-term, fixed-rate loan. Note: Historically, it has been very difficult to predict interest rate movements.

Review of California New Laws

  • State Rent CAP/Just Cause
  • COPA – Qualified Non-Profit
  • 3-Day Notice/ Unlawful Detainer Serve Dates
  • Owner/Relative Move-In Evictions & Protected Tenants
  • Tenant Buy- Out
  • ADUs / Removal of In-Law unit
  • SF Rent Ordinance
  • Q&A Session

State Rent Cap/ Just Cause – General
► All Residential Rental Property (unless exempt)
► Tenants must be in possession for 12 or more months

State – Rent Cap – Regulation
(Retroactive to March, 15, 2019)
► Maximum rent increase in any twelve-month
period:
► 5% plus CPI or 10% (whichever is lower)
► No more than 2 increases in any 12-month period

State – Rent Cap – EXEMPTIONS
► Property already subject to rent control
► Condo/ Single family home :
► EXCEPT: WHERE CORPORATE OWNERSHIP; OR LLC OWNERSHIP WHERE ONE
MEMBER IS A CORPORATION; OR REIT OWNERSHIP.
► Certificate of occupancy issued w/in the previous 15 years
► Public Housing
► Dormitories (Higher institution)
► Duplex where owner lives in one unit since beginning of tenancy
► Exemption: Disclosure requirements:
► MUST BE DISCLOSED IN LEASE EFFECTIVE JULY 2020

State – Just Cause Eviction
► Non-payment of rent
► Breach of Covenant CCP: 1161(3)*
► Nuisance CCP: 1161(4)
► Waste CCP: 1161(4)
► Failure to renew lease
► Criminal activity as provided by penal code
► Assignment Sublet CCP: 1161(4)
► Failure to provide access
► Unlawful purpose CCP: 1161(4)
► Tenant’s failure to vacate after Tenant provides notice of termination
► Occupant’s failure to vacate after termination of employment CCP: 1161(1)
*Note: Tenant must be provided opportunity to cure; if not cured then notice to quit may issue

State – Just Cause/No Fault Eviction
► OMI/RMI (Effective July 2020, lease must disclose right to OMI/RMI)
► Ellis Act
► Government requires property to be vacated
► Demolition/Substantial remodel
► Relocation requirement:
► Owner must provide one month rent waiver OR pay tenant one
month’s rent within 15 days of service of notice.

State – Just Cause Eviction – EXEMPTIONS
► Property currently subject to a Just Cause Eviction Ordinance
► Property subject to eviction control enacted after Sept 1, 2019 is such law is more protective
► Condo/ Single family home:
► EXCEPT: WHERE CORPORATE OWNERSHIP; OR LLC OWNERSHIP WHERE ONE MEMBER IS A COPORATION; OR REIT
OWNERSHIP
► Certificate of occupancy issued within previous 15 years
► Public housing entities
► Dormitories (Higher institution & K-12)
► Duplex if owner lives in one unit since beginning of tenancy
► Transient / tourist units
► Nonprofits, elder care; hospitals
► Tenant who is roommate of owner
► Owner Occupied SFH with ADU
► IF PROPERTY EXEMPT PER THE ABOVE MUST BE DISCLOSED IN LEASE
EFFECTIVE JULY 2020

What is COPA

Latest SF Ordinance – Community Opportunity to Purchase Act
► Intended to create more affordable rental housing
► Gives QUALIFIED Non-Profits (QNP) the right of first purchase
for any multi-family building sold in San Francisco & the right
to match offers
► Applies to all buildings with 3+ residential units and vacant
land zoned for 3+ units

Source

Coping with COPA – New San Francisco Law Requires Owners of Certain Apartment Buildings to Offer to Sell to Nonprofits

The information in this article is based on new regulations issued by the City of San Francisco, and supersedes the article published in early June of this year.

San Francisco has recently enacted the Community Opportunity to Purchase Act (COPA), a law that provides San Francisco nonprofits with the right to purchase apartment buildings of three or more units before they are put on the market. It also provides these nonprofits a right of first refusal when a third party makes an offer later in the process. The law became effective September 3 as to all apartment buildings with three or more rental units, regardless of other uses on the same lot (such as retail, offices, etc.)

COPA confers upon San Francisco Qualified Nonprofits a first right to purchase real property in San Francisco improved with three or more residential rental units and property on which three or more residential units could be or are being built. The first right to purchase consists of both a right of first offer as well as a right of first refusal. A multifamily residential building acquired by a Qualified Nonprofit under COPA must be maintained as rent-restricted affordable housing in perpetuity.

The impact of COPA on owners of multifamily residential buildings in San Francisco is fraught with practical questions and legal implications. The seller of a multifamily residential building in San Francisco will be subjected to transactional delays and related costs, and clients and their agents could spend a good deal of extra time on any transaction. Owners who have to sell in a timely way to help fund a move to a new location (perhaps due to a job transfer or other reasons) and sellers needing to meet a 1031 exchange deadline will be greatly affected. Also, this could affect those who have a deadline related to settling an estate or completing a court settlement. There are some regulations to help understand the law, but even with the regulations in place, the logistics of complying with the law are complex and easily misunderstood—delays from five days to perhaps six months or more can be anticipated.

What is a “sale”?A sale includes not only the transfer of a fee interest in the building for money or anything of economic value, but certain transfers of controlling interests in trusts, corporations or other entities. There are exceptions such as transfers to heirs; and transfers among defined family members. The COPA regulations state that the sale of an individual property interest in a building, such as a sale by one tenancy-in-common owner (regardless of percentage ownership), will not be considered a building sale if such sale is not substantially connected with the transaction or set of transactions for sale of all property interests in the building.

What is a “Qualified Nonprofit”?

The city has created a list of six nonprofit organizations that meet certain specified criteria, including demonstrating (i) a commitment to the provision of affordable housing for low and moderate-income residents and (ii) the capacity (including the legal and financial capacity) to effectively acquire and manage residential real property at multiple locations in San Francisco.

The six Qualified Nonprofits are as follows:

• Bernal Heights Neighborhood Center (BHNC)
• Chinatown Community Development Center (CCDC)
• Mission Economic Development Agency (MEDA)
• San Francisco Community Land Trust (SFCLT)
• San Francisco Housing Development Corporation (SFHDC)
• Tenderloin Neighborhood Development Corporation (TNDC)

What is the “right of first offer”?

Before a seller may “offer” a multifamily residential building for sale to any purchaser other than a Qualified Nonprofit, or solicit any offer to purchase such as placing the property on the MLS, the seller must notify each Qualified Nonprofit of its intent to sell and allow those nonprofits an opportunity to make an offer to purchase. Each Qualified Nonprofit has five calendar days within which to notify the seller of its intent to further consider whether to make an offer to purchase. Upon receipt of any such notice of intent from a Qualified Nonprofit, the seller must disclose to each such Qualified Nonprofit the names of, and any available contact information for, any tenant in each rental unit along with rental amounts. The Qualified Nonprofit then has 25 additional calendar days to make and submit to the seller an offer to purchase. The seller is free to accept or reject any offer. If the seller rejects all offers, or if no Qualified Nonprofit makes an offer during these 25 days, the seller can offer the multifamily residential building for sale to the public, subject to the right of first refusal described below.

What is the “right of first refusal”

Before accepting any offer of purchase or offer of sale from a party other than a Qualified Nonprofit (unless such acceptance is expressly subject to the condition that no Qualified Nonprofit exercises its right of first refusal), the seller must offer to sell the multifamily residential building to any Qualified Nonprofit that previously submitted an offer to purchase during the first five days. Such offer is required to contain the same terms and conditions as the third party offer that the seller desires to accept, including the same closing date. If a Qualified Nonprofit did engage with the seller during the first 30 days after the seller informed the nonprofits of the intent to sell, any such Qualified Nonprofit has five calendar days after the seller’s submission of terms of a third party offer of sale to notify the seller of its decision to purchase on the terms offered by the third party.

If no Qualified Nonprofit elects to proceed with the purchase or the applicable time period within which they are required to do so expires, the seller may proceed with the sale of the multifamily residential building consistent with the third party purchase offer. If the terms of the proposed third party purchase offer later become materially different from those submitted to the Qualified Nonprofits in the right of first refusal notice, the materially different offer of purchase will be considered a new offer subject to the right of first refusal process once again. For example, a major price reduction as a result of due diligence that finds an underground storage tank would re-trigger the right of first refusal. The difficult question presented here is whether or not a change in terms results in a materially different offer. Whether there is a material difference will depend on the facts of each case. We suggest that you engage an attorney when changes occur so that there can be an accurate analysis (based on interpretations of California court decisions) as to whether or not a particular change is, in fact, material.

The nonprofit that presents a purchase offer on the same terms of the third party offer can be required to include the same closing date and contingency removal dates. But if the third party offer does not have such dates, or later postpones such dates, the close of escrow with a nonprofit could be many months. The regulations state that the nonprofits must be given a minimum of 60 days to release contingencies.

What happens if you violate COPA?

Every seller of a multifamily residential building in San Francisco must, within 15 days of the close of escrow, submit to the City Agency a signed Declaration under penalty of perjury affirming that the sale substantially complied with the requirements of COPA. If a multifamily residential building is sold in violation of COPA, Qualified Nonprofits are permitted to bring a legal action against the seller. Potential remedies include damages, attorneys’ fees and, if the violation is knowing or willful, civil monetary penalties presumptively tied to the value of the property. These remedies are imposed against the seller or a party that has willfully colluded with the seller to violate COPA. This latter party could include brokers and others listing multifamily residential buildings for sale in San Francisco.

Source