If you’ve been looking for real estate in San Francisco, you have probably heard the term “contingency”; it means “dependence on the fulfillment of a condition”. In the world of SF real estate, a contingency is simply a period of time in which the buyer can investigate a property or mortgage loan while still protecting their deposit.
Contingencies are sometimes used for property inspections like a termite inspection. Other contingencies are for mortgage loan approval, appraisal, or the sale of another property. Sellers can have have contingencies too, like finding a replacement property, but buyer contingencies are more common.
In this very frenzied seller’s market, any buyer contingency can give the seller some pause when they are considering whether to accept an offer.
It can be challenging for buyers to protect their interests while still getting their offer accepted. As I’ve written about before, disclosures are important. Seller disclosure packages (complete with inspection reports) allow the buyer to be reasonably informed about the property at the outset before submitting an offer.
Regardless of disclosures, some buyers opt to roll the dice and waive all contingencies as a strategy to make their offer more attractive to the seller. Buyers should be aware that waiving contingencies is risky. As usual, it boils down to risk tolerance and of course every buyer (and every property) is unique. If you are considering buying or selling, let’s talk about how contingencies might impact you.
If you are considering a move to the U.S. from another country, you will quickly learn that the process of buying a home here is unique and probably even a little baffling at first. Here is what you need to know:
- Step one is to find the right real estate broker to guide you. In San Francisco, like much of the U.S., buyers and sellers each have their own dedicated broker to help them. Your broker is your primary advocate throughout the real estate purchase process and can help you to buy any available home on the market regardless of which broker is representing the seller. He or she has a fiduciary duty to represent your best interests. Sellers pay the commission which is the compensation for both brokers. Buyers rarely pay any commission at all.
- Get pre-approved for a loan. Without a U.S. credit report and social security number it can sometimes be challenging to get a mortgage loan. Here is how the system typically works: after a potential home buyer applies for a loan, the mortgage lender uses their social security number to check credit history which is pulled from three credit bureaus: Trans Union, Equifax, and Experian. Each of these bureaus collects data from various creditors like banks and credit card companies regarding an individual’s payment history, amounts owed, etc. That data is used to formulate a score called FICO which gauges an individual’s perceived credit-worthiness. The score can range from 300-850. Anything over 700 is generally considered very good. The credit bureaus and resulting FICO score only considers credit history earned in the U.S., not overseas. If you are new to the U.S., this is clearly a bit problematic. There are some alternatives for expats who are new to the U.S., so finding the right mortgage lender is key. Your real estate broker can refer you to a few lenders that can help.
- Start looking at neighborhoods and homes with your broker. This step may take a while as you learn the areas and nuances of the city along with the various property types that fit into your budget. San Francisco is geographically small but it has 89 distinct neighborhoods, so there is a lot to learn. Your broker can give you access to MLS, the database of all available homes in the city.
- Once you find the right home for you, then it’s time to make an offer. Offers are comprised of price and various terms that your broker will discuss in detail with you. Offers can be contingent upon certain events like a professional home inspection or even full mortgage loan approval. Your broker will discuss the pros and cons of various offer terms to make it attractive to the seller while still protecting your interests. The timeframe of offering on a home to actually getting keys in your hand is generally about 35 days or less.
I have represented many buyers from other countries. I’d be glad to sit down and talk with you about the process to see if buying a home in San Francisco is the right move for you. Just let me know when you’d like to meet. I can be reached at (415) 971-5651.