MAKING THE OFFER / CONTINGENCIES / DISCLOSURES

The San Francisco housing market is moving at a rapid pace. There are fewer properties for sale than buyers, which makes writing a sophisticated offer a necessity.

Writing the Contract
A licensed real estate agent will assist you in writing your purchase offer, to advise you on contingencies, customary practices and local regulations. The contract is approximately 8 pages long and is designed to protect you. At the time of writing the offer, a good faith deposit of approximately 1 - 3% of the total purchase price is expected, payable to the title company. It will not be cashed unless your offer is accepted by the seller. Your agent will keep hold of your check. Your agent will help determine the seller's motivation (a short or long close of escrow, a potential rent back situation needed, etc.) and discuss the main points of the contract with you. By comparing other sales in the area and current market activity, a skilled agent will help you to decide on an offering price. You should come to the table with any concerns that you have, so that they can be covered in the contract, like when you want/need to close escrow, when you need to take actual possession of the property, specific items to be included in the sale, particular inspections required, etc.

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Various Elements of the Purchase Contract

Financing Contingency
You may or may not choose to have your purchase subject to satisfactory loan approval. This contingency usually gives you about 7 days to obtain satisfactory loan approval. In this market, most buyers are already pre-approved and do not use this contingency. If you are already pre-approved for a loan, you may only need a satisfactory appraisal of the property for the lender to be satisfied. By adding this contingency, you are protected just in case the lender does not appraise the property for the price that you are paying. Ask your agent for more details about this.

Inspection Contingency
The contract specifies a time frame for carrying out inspections, receiving reports and approving these reports within an agreed upon time frame. Typical inspections are carried out by a General Contractor that is specialized in this area of property inspection, as well as a Pest Inspector, but more inspections may be carried out by other professionals if desired. Inspectors may recommend further inspections to be carried out by specific professionals in certain areas, if they think necessary. Some buyers opt to have inspections carried out before making an offer. In a multiple offer situation, this can make for a stronger offer without contingencies.

Preliminary Title Report
Within 3 days of the offer being ratified, the good faith deposit must be delivered to the title company. A preliminary title report is ordered from the title company and within 7 days of receipt of this report, the buyer needs to approve or disapprove of it. Any questions can be addressed by agent and title company. The title report shows anything at all recorded against the property and the legal description of the property.

Seller Rent Back
In today's market sellers are often looking for a quick close of escrow, which secures their sale and gives them cash in hand sooner, especially if they are planning to buy something else. If they are unprepared to move out of the property immediatley at close of escrow, a seller rent back option can allow the seller to rent back the property from the new owner for a short period (3 days to 3 months). Your real estate agent can help you negotiate for appropriate charges and security in this case.

Seller's Transfer Disclosure Statement
The seller is required to provide you with a disclosure statement within 3 days of ratification. From your receipt of these documents you have 3 days to approve or disapprove of them. Additional questions should be addressed in writing during this period. See Disclosures

Condominium Disclosure
If the property is a condominium, the seller has to provide all copies of condo related documents within 7 days of the offer being accepted. Typically, the buyer has 7 days from receipt of these documents to approve of them. These documents include, but are not limited to ; CC&R's, budget, by-laws, minutes of HOA meetings, financial statements etc.

Rental Property
If the property is currently rented, the seller must deliver all rental documents including leases, rental agreements, notices, any claims etc to buyer within 7 days of accepted offer. Typically, the buyer has 7 days from receipt of these documents to approve of them.

Liquidated Damages
Buyer and seller agree that if buyer fails to complete this purchase by reason of any default of buyer, seller shall retain as liquidated damages for breach of contract the deposit actually paid. The amount shall be no more than 3% of the purchase price in a dwelling of no more than 4 units, one of which the buyer intends to owner occupy. Any excess shall be returned to buyer. In the event of a dispute, funds deposited in escrow are not released automatically and require mutually consistent signed instructions from both buyer and seller, or the rendering of a judicial decision or arbitration award authorizing such release. It is important that you as a buyer, do not remove your contingencies and increase your deposit in escrow, until you are confident that you can perform within the contract.

Counteroffer
The seller should respond to your offer within 24-48 hours. It may be accepted as written or you may receive a counteroffer, which may address a number of items including pricing and terms. Then it is up to you to respond to the offer. The seller may have issued multiple counter offers and in this case, he may accept whichever offer he chooses on their return. Your agent will advise you on the best way to respond.

Ratification
When the seller ratifies, accepts, your offer, you should begin investigations of the property and the review of disclosure information with careful attention to the time frame parameters from this point on. Your agent should put a time-frame together for you, so that you can work together effiiciently.