Buying a Condo in SF

Ever wondered what the process is like to buy a home? Check out this post to learn more!

Disclaimer: I am not a real estate agent, nor a CPA or CFP. My opinions are solely my own and are intended to help you learn more about the process of buying a home. Any values used for interest rates or any other numerical requirements from banks for mortgages are for illustrative purposes only.

I recently purchased my first home and that was an amazing experience! So much research, a lot that I learned, and of course, many questions from my peers about the process! For some top-level stats:

• 2 months of searching

• 4 banks that pre-underwrote me

• 2 property tours, consisting of 5 properties in total

• More than 100 properties virtually toured

• Thousands of pages of disclosure documents reviewed, across 3 properties

I wanted to write this blog post to explain the process for anyone who is considering buying a home, especially one in San Francisco, and also because I think there are a lot of minutiae that are not explained online which I wished I had known when I was searching.

This post will be more of a guide, but with my own experiences filtered in so you have some handy tips and tricks!

Before getting into the main content, I want to give a special shout-out to my family, friends, and my realtor. My family was there for my incessant questions, as well as coming along on tours. My friends kept me sane and asked some good questions, which in turn, made me research more and be a more educated buyer.

And my realtor, Mia Takami, was fantastic. I owe a lot to her for her tireless dedication to helping me find the perfect home, her patience in explaining home buying concepts to a newbie like me, and her active involvement in connecting me with lenders. If you're looking for a place in SF, I highly recommend Mia. Check out her website, as well as reviews for her and her team to learn more.

Now, without further ado, let's talk about buying a home in SF! This is a very large post, so refer to this outline to see all the sections:

Pre Work

What kind of home do you want?

The first thing to do when you've decided you'd like to buy a place is to think about where you want to live, as well as what sort of home you'd like to have (condo, townhome, house, etc.). There are a lot of factors to consider, including commute time to work, nearby attractions, shopping convenience, personal taste for neighborhoods, schools, and myriad others which are subject to each buyer. While I can't give much specific advice on this step, what I can say is to go with what you personally like. This is gonna be your home so you should love it!

Mia has a great overview of all the neighborhoods in SF and what they are known for, so I would recommend checking that out too.

Show me the money!

Next, start thinking about how much of a down payment you can make. What sources of funds will you use for that down payment (cash, vested RSUs, personal stock holdings, cryptocurrency, etc.)? The down payment is likely the thing you will panic about the most, so it's worth making sure you have the right amount set aside for the type, size, and quality of home you are searching for.

Note: The down payment is not the only cost you will pay when purchasing a home. There is also a set of costs to be paid at Close of Escrow, called Closing Costs. There will be more on this in the Closing Disclosures section, but briefly this includes stuff like lender costs, title insurance, escrow fees.

If you are considering using some stock holdings toward your down payment, note that the capital gains you will make from selling those holdings will be subject to either long-term or short-term capital gains during tax season (which you will pay the following calendar year).

Note: If this is going to be your first place, you might also want to have another allocation for buying furniture, kitchen stuff, TV, etc.

Aggregating Funds

If you would like to have a full accounting of your assets, I highly recommend using a service like Mint. I wrote about Mint in my "Mastering your personal finances with Mint" blog post because I think it is a fantastic service that really helps me get both a high-level overview of all my accounts, as well as providing detailed aggregation of transactions.

While condo hunting, I would sometimes have to submit updated asset numbers to underwriting departments at lending institutions and it was super easy to do that with Mint's dashboard (the mobile version is great for this use case too) because it gave me the top-level values for each asset class.

Light Research

Now that you've done some initial thinking about what sort of home you want and you have a ballpark for the amount of down payment, it's time to start searching! Zillow is an excellent first place to start. You can set search areas and see recent sales. You can even make filters and save them so Zillow can automatically notify you when new properties are listed that meet your criteria.

Once you've started finding some properties that are within range, this would be a good time to decide on a realtor. Zillow can recommend some good ones to you, based on the area(s) in which you're searching.

Aside: I met Mia at an open house for a property she was listing that I was interested in. I was new to the process and didn't have a realtor already, so Mia offered to be my realtor. To instill confidence in her skills, she even invited me to interview her before deciding on her as my realtor!

Note that once you decide on a realtor, you generally have to sign a form saying that realtor is representing you (meaning, you can't have two realtors). This form is colloquially called a Buyer Representation Agreement, but the full name from the California Association of Realtors set of documents is "Disclosure Regarding Real Estate Agency Relationship".

Do the math

Every month, your housing costs will be:

• Monthly Principal + Interest (P&I): Your monthly mortgage payment

• Property Tax Reserve

• HOA dues (if you buy a condo)

What is the Monthly Principal + Interest?

This is super easy to calculate and should definitely be automated as you are doing your property search. The monthly principal + interest will be comprised of two main parts:

• Payment toward the remaining principal of your mortgage

• Interest on that principal

Refer to the "Monthly Payments for Financing" section in my "How to buy a car" post to see how to automate this calculation in a Google Sheet. The steps are gonna be exactly the same.

Briefly, use the PMT() function in Google Sheets with the interest rate for the loan and the principal.

Principal = Listing Price - Down Payment

Private Mortgage Insurance (PMI)

A normal down payment is 20% and that means your loan-to-value (LTV) is 80% (the lender is covering 80% of the value of the property). A lender might allow you to make a down payment lower than 20%. In that case, they charge you an additional monthly fee called Private Mortgage Insurance (PMI). So if you want to explore that option, make sure to take it into account when you calculate your monthly fees.

Note: Some buildings in SF could be under litigation (property developers being sued over some deficiency found after residents moved in) and that makes them riskier for lenders. In that case, a lender that previously allowed for a PMI arrangement might still require 20% down payment, or more.

What is the Property Tax Reserve?

When you own a property, you have to pay property taxes on that property. In San Francisco, the fiscal year is July 1st to June 30th and tax payments are due twice per year in December and in April. However, there isn't an automatic deduction from your paycheck to cover these taxes. So every month, you have to make sure to set aside enough from your paycheck to cover property taxes. And after 6 months, you will then use the reserve you have continually been building up over the previous 6 months to pay your property tax bill. Then the process will repeat for the next 6 months.

Tip: Make a new bank account with your primary bank where you can keep the property tax reserve.

Don't worry about making sure to buy a property at the start of the nearest 6 month window. Let's say you buy a property 2 months after the start of the 6 month period. Then, during close of escrow, the seller will pay you a pro rata amount of property taxes for the 2 months he/she still owned the place, within the current 6 month property tax period.

What are HOA dues?

An HOA is a "Homeowners Association". They are established in residential communities and neighborhoods of single-family homes or multi-unit buildings (like condominiums). In addition to handling maintenance and general functioning of the communities they serve, they also normally enforce some rules for homeowners (stuff like parking restrictions, noise regulations, procedures for how to reserve common areas for parties, etc).

So if you buy a condo, it's likely that there will be an HOA that manages the building. For their operations, they require that each homeowner pay an HOA fee per month. This fee is not the same for each resident and is highly dependent on the type of unit. For example, a 1 bedroom unit will not have the same HOA fee as a 2 bedroom unit. And a 1 bedroom corner unit with views of the Bay may have a more expensive HOA fee than a 1 bedroom unit that faces inward toward a building courtyard.

Underwriting

You should submit applications for underwriting to preferably more than 1 bank. In my case, I rate-shopped with no less than 6 banks and was pre-underwritten by 4 of them. Why did I go through this process so early? Because being pre-underwritten allows you the option to remove a financing contingency from your offers, which in turn makes them more attractive to sellers (more on contingencies later in this post).

And why did I contact so many banks to get pre-underwritten? A few reasons:

• The banks have different rates they can provide, based on the mortgage package you go for (15 year fixed, 30 year fixed, ARM packages, etc.)

• Some banks might be relationship-oriented and will request something from you, like a non-negligible deposit into a new account (if you are not already a customer)

• The banks have different allowed debt ratios and max amounts they'd be willing to loan. A debt ratio in this case just counts all major payments per month, divided by gross monthly income. What that means is banks generally won't include stuff like Internet cost, electricity, gas, and credit card bills for this analysis, but they will count:

  • Monthly principal + interest for a possible mortgage

  • Property Tax Reserves

  • HOA fees (if you buy a condo or townhome)

  • PMI (if down payment < 20% of purchase price)

  • Any outstanding loans (student loans, car loans)

• All the banks will want to see some amount of reserve for after you've made your down payment. You normally make an application to the bank to get pre-underwritten at a certain loan amount. So if your down payment is say, 20%, the bank would want to see that across all your assets, there is still an amount left over beyond the value for the 20% down payment. And not all banks will count the remaining assets the same way. Some only count cash toward the reserve, others count cash and stocks, but they discount the stock value at some percentage of its value, like 70%. Others can count cash, stocks, and retirement funds (and retirement funds are at another discount rate). The amount of reserve that they calculate after your down payment can affect how much of a down payment you can make (and additionally how large of a loan they will underwrite you for).

• Different lending institutions operate at different speeds to be able to finalize a mortgage for close of escrow. The escrow period is an important part of any offer you make, so you want to find a lender who can work very fast so you can have a short escrow period (that instills confidence in the seller).

• They can have differing levels of experience within the market you are researching

When you submit an application to a lending institution to pre-underwrite you, they will perform a hard inquiry credit check. That means your credit score will drop a little. But, there is a important tip to utilize: You have 14 days to rate shop at lending institutions and it will all be counted as though it were 1 hard inquiry! So once you've started the process with one bank, do submit applications to as many other banks as you'd like.

Aside: I found a lender after the 14 day rate shopping period who was going to match my best rate from previous pre-underwritten offers AND underwrite me at a higher mortgage. So I technically took another hit to my credit score since that lender had to perform another hard inquiry check, but that credit score hit was incredibly minor (like 10 points), so it was absolutely worth it to get a better mortgage.

Ask your friends, family, and even work colleagues about any lender recommendations they have. Also, your realtor may have a lot of connections with lending institutions, which can help you get the best rate!

The underwriting process is a little long. This is due to how many people need to be included within the bank. You may see the phrase "submitted to underwriting" a lot in your correspondence with your mortgage agents and the reason why is because most banks have separate divisions responsible for looking at your application and assets to determine underwriting. Your agent is not the person who will approve you, but rather he/she will act as the liaison between you and the underwriting department.

Note that the process will require you to share a lot of information too. That might feel a bit uncomfortable, especially because they need to look at all the assets that you want to be included as part of their analysis. There will be a lot of online forms and document sending.

Aside: I felt a bit uncomfortable about providing so much personal information to banks while I was submitting mortgage applications. My biggest qualm was about security of my documents on the banks' side.

Most banks will use at least a password-encrypted portal, but many of these portals will support 2FA (ABSOLUTELY do that). In addition, whenever you are sending documents, you can request that the bank provide you with an encrypted email link (you follow that link to a web page where you can upload documents over a secure, encrypted platform).

Derive a loan value

Now that you know how to calculate your monthly costs for housing, it would be a good idea to have a ballpark of how much you'd like to request a bank to underwrite you for. Some banks will look at all your assets and derive a maximum value that they would want to underwrite. But most will require you to give them a number and then upon analysis of your assets, they will provide approval, or request an updated number.

There are different kinds of mortgage packages you can get and they have different interest rates, along with additional requirements. The same package type in one bank may not have the same interest rate at another bank, which is why you really should rate shop.

What most lending institutions will check first is if the requested loan amount over the specified number of years in the mortgage package you select results in a monthly payment that does not exceed their debt ratio policy.

Remember when I said above that the debt ratio is the sum of all large debt payments per month (P&I, Property Tax Reserve, HOA, other debts), divided by your gross monthly income? For most non-Federal mortgage loan packages, a good ballpark for debt ratio maximum is 42%. The debt ratio maximum is highly dependent on each bank, so make sure to ask when you reach out to lending institutions.

The debt ratio maximum for each bank you reach out to will help you filter your property selection based on cost alone. How? Because your costs for housing cannot exceed the debt ratio maximum for a particular bank in order to be approved for a mortgage from that particular bank:

Note: All values are "per month"

Debts = P&I + Property Tax Reserve + HOA + Other Debts
Debt ratio = Debts / (Monthly Gross Income) <= 0.42
Debts <= 0.42*(Monthly Gross Income)

For now, let's ignore the "Other Debts":
P&I + Property Tax Reserve + HOA <= 0.42*(monthly gross income)

For those of you who are mathematically inclined, you may be starting to notice some inter-dependencies:

• For the same purchase price, a larger down payment results in a lower P&I, which means more margin for not exercising the debt ratio maximum

• Conversely, a lower down payment will result in a larger P&I and therefore a higher debt ratio

The second bullet point is the most important to understand. For less money upfront (your down payment), you could theoretically be approved for a larger loan if the resulting debt ratio is less than the debt ratio maximum. That is what you should optimize for.

Start the Process

At this point, you have decided on what kind of property type you'd like to buy, a general area/neighborhood that you'd like to buy in, and a realtor. You've also done some preliminary math to calculate your down payment and where the sources for those funds will come from. Lastly, you've submitted underwriting applications to one or more banks so you can rate shop.

Pat yourself on the back! This is a great start and you are well-positioned now to be an educated buyer.

Create a watchlist

Your realtor probably already has a sense of properties that would be of interest to you, but maybe after doing the math above, you now have an even better idea. Ask your realtor to put together some property recommendations for you to look at more seriously.

Aside: Mia had a personal client portal where she'd add in properties of interest. Using the portal, I could filter the properties on certain parameters and save them to a priority list for further research.

In addition to finding properties on Zillow, or through a client portal, a service you should be aware of is a Multiple Listing Service (MLS). MLS' are private databases used by realtors to list properties before they go onto Zillow.

And if your realtor is really well-connected, you may be presented with buying opportunities that are not even on MLS.

Aside: In my case, all 3 of the above were true: I was watching properties from Zillow, MLS, and even some that had not been added to MLS (Mia was very good at finding properties of interest!). So I found it very helpful to keep a spreadsheet of the properties I was considering.

Tour Properties

For each of the properties in your watchlist, you want to get as much info as you can before visiting. Look at as many pictures as possible, read the listing carefully, and see if your realtor can get the disclosures beforehand (more on this topic in the Disclosure Documents section). The reason why you want to research closely ahead of time is because it will allow you to really dial in on the fantastic properties. Those are the ones you will want to tour. And when you tour them, you will want to know ahead of time what to look for (do they have excellent views, are there any scratches on the flooring, etc.).

Once you have some properties you'd like to see (and it could even be just a couple), ask your realtor to set up a tour for you. Your realtor and/or his/her operations team will reach out to the listing agent to retrieve all necessary info and do the scheduling for you.

Continue the Process

In this section, I will talk about the repeated actions you will take as you keep searching, but before you decide to place an offer.

Market Research

Buying a home has both emotional and logical aspects. Emotion obviously because it's gonna be your home and you want to love it. But the logical aspect comes into play when you consider that owning a home is also an investment. Unless the primary purpose of the home is for investment, I would recommend you place more focus on how you feel about the properties you're looking at, rather than just investment value. That being said, it is always a good idea to understand more about the market you want to buy in, even if you are not considering purchasing a home solely as an investment. The reason why is because it will allow you to make competitive offers without overpaying.

Note: If you are looking at a popular property, you may get into a bidding war and then "overpay" (the definition of "overpay" is subject to your own market analysis). But there would likely still be info gleaned from doing market analysis beforehand.

Understanding the market is multi-faceted. There are factors to consider like presence of certain companies and whether or not that affects property values (for example, tech companies moving in and buying up land tends to be positively correlated with property value increases). Also, consider if there are price trends lasting more than a quarter due to some larger, multi-region event. Covid, for example, really hit SF real estate hard back in 2020 with a trough toward the latter part of the year.

Ask your realtor if he/she has any market research reports to provide to you and see if you can segment by the exact area you're looking in. For example, which neighborhoods/districts in SF (refer to Mia's SF District overview)? And within those districts, which buildings are at the top of your list?

The Compass group also has some great market reports for the Bay Area at https://www.bayareamarketreports.com.

Comparables Analysis

Whenever you are looking at properties, virtually or in person, one of the main questions running through your head will likely be "how does this property compare to others I've seen?". And a primary factor of that is value.

I found it fascinating to research properties and compare them to others of interest, as well as those that were recently sold, to see where value was derived from. The more data you see, the clearer a picture you'll get.

As you are looking at properties, it would be a good idea to keep a spreadsheet with sale history. Data in aggregate will show you how the market is reacting. For example, I noticed with the properties I was interested in, they were normally being sold for somewhere between 1.5-2% less than their listing price. Coincidentally, this happened to be still during recovery after Covid.

Disclosure Documents

Once you've found a property that you really like, it's time to do some more hardcore research about that property. You should do this before you place an offer. Ask your realtor to forward you disclosure documents, which can be obtained from the listing agent.

The disclosures are just a series of documents that give you info about the property you are looking at, which include potential flaws, natural hazard analysis, a previous appraisal, HOA information (budgets and meeting minutes), and more.

These disclosure packages are massive. All told, I probably reviewed more than a thousand pages of disclosure docs across the properties I was interested in. So definitely ask your realtor what to focus on. There are a few specific documents in that package that I would recommend prioritizing (this is from the set of SF real estate docs, but other regions would have similar forms with different names):

• Agent Visual Inspection Disclosure: Inspection notes from the listing agent (good stuff like new appliance installations, as well as deficiencies, like scuffs, scratches, stains, etc.)

• San Francisco Seller Disclosure: The seller disclosing to you all material aspects of the property that could affect its value

• Parking and Storage Disclosure: Describes where parking space(s) for the unit is/are, as well as any possible storage boxes, lockers, rooms, etc.

• Preliminary Title Report: Lot of info in this, but something to pay attention to is property taxes paid over the previous year, which is good to know.

• Natural Hazard Disclosures: A report of all the possible natural hazards near the property, as well as environmental hazards, like underground storage tanks, gas wells, etc.

• HOA financial docs: Explains the budget of the HOA, their reserves, cash flows, balance sheet, etc.

• HOA Bylaws and Covenants, Conditions, and Restrictions (CC&Rs): How does the HOA run itself and what are its rules for homeowners in the building (most of these are common sense, like not having a rave at 2 AM 🤣)?

• HOA Meeting Minutes: Summaries of meeting proceedings for the HOA over at least the previous year.

Note: The Mission Bay neighborhood in SF (within District 9) actually has a parent HOA organization called the Mission Bay Maintenance Corporation. So if you are looking to buy in that neighborhood, you will likely get both the HOA docs of the condo community, as well as the docs for the Mission Bay Maintenance Corporation.

This also means that you will be responsible for two HOA fees per month: one for your condo community, one for the parent HOA.

Making an Offer

By this point, you have toured the property and reviewed all the disclosure docs of significance to you. It's time to put together an offer letter to give to the seller.

Offer Components

The offer is made up of two important parts:

1. The purchase price (how much are you offering to buy the property for)

2. Contingencies

The purchase price simply being high is not good enough if you have a lot of contingencies. That also means that less contingencies with a lower purchase price can still be competitive. So you will have to work with your realtor a bit on these two components.

Note also that since real estate is an industry that is highly dependent on relationships, your agent may even know the listing agent, which can help you figure out what the seller's must-haves are within any offer he/she would take seriously.

I will explain some details regarding the purchase price and contingencies, before I go into additional topics like the escrow period and a buyer letter.

Purchase Price

Work with your realtor to come up with a purchase price that is competitive, while at the same time being reasonable. This is definitely a bit of an art, but it is a lot simpler if you have data. Because you've done a comparables analysis (and likely were continuing to add stuff to your spreadsheet while searching for properties), you will have an idea of how the market is performing, as well as how recent sales in the building look (were they above asking, at asking, below asking; by how much?).

Contingencies

Remember earlier in this post when I was talking about getting pre-underwritten by multiple banks so you can remove the financing contingency? Well now, we're going to talk a lot more about what contingencies are. As Mia told me, "contingencies are scary to sellers, but are attractive to buyers". That's a funny statement and is probably the shortest, but most succinct explanation, so I just had to copy it into my post.

Contingencies are conditions which, if not met, allow the buyer to walk away from the deal, with their earnest money deposit (normally 3% of purchase price). Basically the contract to buy is not binding unless all contingencies stipulated by the buyer, and agreed to by the seller, are actually met.

Sellers do not like contingencies because they want to just make the sale. Sellers will lean more toward offers with less contingencies, especially if they are relatively minor. What I mean by that is: both the number of contingencies, as well as what they are, are important.

Deciding on which contingencies you would like to have is a bit of a balancing act between making your offer compelling vs. de-risking the transaction. If you choose to walk away for a condition not covered by one of your contingencies (either because you didn't have the necessary contingency or because it expired), you forfeit the earnest money (which is not a trivial amount). So you would likely want to add some contingencies to protect your earnest money deposit should you choose to walk away. But you have to balance your contingency selection and the duration of each contingency with still making your offer attractive to the seller.

Standard Contingencies

• Financing contingency: If you are not paying with cash, then you are likely going to have a mortgage from a bank to pay for your property. A financing contingency basically says "If I do not have approval from a bank within <num> days, then I can walk away from the purchase agreement." So if you can provide a very short financing contingency, or none at all (if you have already been pre-underwritten), that makes sellers more confident in accepting your offer. Note that you do not have to remove this contingency, EVEN if you are already pre-underwritten. It's just one way to make your offer more competitive. So if there aren't other offers on the table, no need to start removing contingencies to be more attractive to the seller.

• Appraisal contingency: After an offer is accepted, your bank will want a third party to do an appraisal for the property. What that means is that an appraiser will come to inspect the property, take some pictures, and do some comparables analysis to come up with a value for the property. Most times, they match the offer price exactly, but if they find a deficiency, they could report a value lower than your offer price. In that case, you would be responsible for paying that delta between offer price and appraisal value back to your lending institution. So some buyers like to have an appraisal contingency in case appraisal comes in lower than offer price.

• Inspection contingency: This is kind of a catch-all, but it technically allows the buyer to cancel for any reason within the inspection contingency window. What the contingency was originally designed for was to provide time for the buyer to bring in a property inspector and cancel if there were issues found in the inspection.

In a condo, may make sense to either entirely waive, or have a very short duration for the inspection contingency because the HOA already controls everything outside your 4 walls. You can of course go into the unit yourself and test out appliances and electrical outlets, look for mold, check the flooring, investigate stains, etc. So if you still want to have an inspection contingency to give yourself time to inspect the property, try to make it a really short one to keep your offer competitive.

Escrow Period

Close of Escrow is basically when you get the keys and take over ownership of the property. So the escrow period is another part of the offer that you make. What this means is you are basically telling the seller "I will take ownership of the place by this date". Sellers want the period between an offer being accepted and close of escrow to be short so they make the deal faster.

This isn't a very strong component of your offer, but it can help you stand out a little if other offers are similar. Only do this if you're actually able to move faster. How quickly you can move is highly dependent on what other parties are involved. If you have a lender, their speed may be the slowest because they have to pass your file through final underwriting approval, order the appraisal, and share info with the title/escrow company. So check with your lender to see how fast he/she can move. A 14-21 day escrow is quite quick compared to a baseline market, but in a hot market, that might be expected.

Buyer Letter

A buyer letter can be a nice way to put a personal touch on your offer to the seller. You can talk a bit about yourself and why you love the property. This is an emotional connection you are trying to establish, so be sure to really show why you are the best buyer for the property.

Submitting the Offer

When you have decided on the offer you want to submit, your realtor will put together what's called a Purchase Agreement, which includes all the terms of your offer (purchase price, contingencies, escrow period, etc.). He/she will then construct an offer package for the listing agent, which is normally sent over email and contains:

• Purchase Agreement

• Lender commitment letter (shows that you have been pre-underwritten)

• High-level proof of assets for down payment (could be a redacted account statement)

• (optional) Buyer Letter

Seller Actions (and your response)

Upon receiving your offer, the seller has a few possible responses:

• Accept the offer

• Decline the offer

• Issue a counteroffer

  • Issue a multiple counteroffer

Accepting and declining are pretty clear, so I'll skip those. Counteroffers though, are a lot more interesting.

If the seller is interested in your offer, but there are some things he/she would like you to revise, then he/she will issue a counteroffer. The listing agent can deliver this counteroffer to your agent by either explicitly setting new target values for purchase price and/or contingencies, or by being a bit more vague. Especially when it comes to purchase price, the listing agent will likely be vague. Why? Because by putting a number on the table, he/she may have capped how much the property can be sold for (if you were willing to actually go higher). So it's better for the listing agent to just tell the buyer's agent that the seller would like a higher price (if the buyer then overbids in the next offer, that's good for the seller).

What gets more complicated is if there are multiple parties involved that the seller wants to continue negotiating with. Then the seller can issue a multiple counteroffer. The details of each counteroffer need not be the same for each buyer.

Even with an already compelling offer, you can still have multiple rounds of negotiation. You could also get into bidding wars if the market is hot. One thing your agent can do to show how serious you are to the seller is to put response time deadlines on your counteroffers back to the seller. What that means is the seller has to respond to your offer within the deadline set by your realtor.

Once you and the seller both accept (your signatures are on the purchase agreement) with the amended fields updated (purchase price, any contingencies which the seller requested to be made shorter or removed), then you have a ratified contract.

Immediate Steps After Ratified Contract

The ratified contract is essentially a Purchase Agreement, with both your signature and the seller(s) signatures that says you will buy the property, subject to the contingencies you put in and the escrow period. Now most of your work is done, but the other involved parties need to begin theirs.

First, your realtor will forward the purchase agreement to your lender and to the title/escrow officer (normally picked by the seller or listing agent). The lender wants to know as soon as you have a ratified contract because then he/she can order the appraisal (which can take a long time and can eat into the days you have allotted for the escrow period).

Second, the title/escrow officer will contact you to verify your identity info and to send you instructions on how to wire your earnest money deposit. The earnest money deposit is normally 3% of the purchase price (a couple days before Close of Escrow, you will wire the rest of the down payment; if you decided on a 20% down payment, then that means the remaining 17%).

Third, you will have to review all disclosures (and any new ones presented since the time of first review) and sign. This is the disclosure review period.

During Escrow Period

There are a lot of overlapping work streams that are happening at this point:

• Your realtor will continue working with the listing agent to pass any new documents your way.

• The appraiser will be researching the property and then visiting to inspect it and take pictures before writing an appraisal report (with the appraisal value).

• You will be chatting with an insurance company to line up a home insurance plan (which is normally required by lenders before close of escrow; there are different home insurance packages depending on the home type: condo, townhome, house, etc.).

• You will be doing your own property inspection too (with or without a property inspector) if you had an inspection contingency.

• Your lending institution will be going through final underwriting and approval for the specific property you are interested in (previously, their underwriting was just for your financials, but now they are approving your building).

• Your title/escrow officer and your lender will be computing all the costs necessary to make Closing Disclosures.

Closing Disclosures

The Closing Disclosures are a set of documents that indicate all the Closing Costs paid by the seller and those paid by the buyer. Closing Costs are line items to be paid at or a couple days before close of escrow. The exact costs paid by the buyer and the seller are somewhat dependent on where the purchase is being made, but I will provide some buyer/seller closing costs for the SF condo market. The buyer is normally paying for:

• Title Insurance (both for the buyer AND for the lender)

• The escrow fee

• A home insurance plan

• Any lender fees (including cost of appraisal)

• (If condo or townhome) Prepaid HOA fees for a couple months.

The seller is paying:

• The buying agent's commission

• The selling agent's commission

• Property Transfer Tax

• Property Tax Proration (remember, property taxes are only billed twice a year, so you may be buying during one of the tax periods, so the seller should reimburse you for the time you didn't own the property).

Note: Mission Bay also has a one-time transfer fee to be paid by the buyer, which is different from the property transfer tax paid by the seller. The transfer fee is called a Community Enhancement Fee and is worth 0.25% of the purchase price.

The lending institution and the title/escrow company will both compute closing costs. The sum of those costs may not be the same initially and that could be due to certain line items having different values, normally because they are making estimates. For example, prepaid interest on your mortgage varies based on when close of escrow is. Don't fret though: by or shortly after close of escrow, the closing costs calculated by the lending institution and by the title/escrow company will be exactly the same.

Note: Sometimes, at close of escrow, there is a slight discrepancy between the lending institution's calculation for closing costs and the title/escrow company's calculation for closing costs. That discrepancy will result in you getting a refund for the delta a couple days after close of escrow. This refund will be issued to you in the form of a wire transfer from the title/escrow company.

The reverse does not happen: you will not generally underpay and then owe more money after close of escrow.

At Close of Escrow

You're there! You did it! Just two teeny, tiny steps left:

1. Wiring the remaining part of your down payment to the title/escrow company

2. Signing your Closing Disclosures with a notary

Okay, maybe step 2 is not so tiny. You have to sign all those forms...BY HAND. A notary agent will come to your place with all the forms in hand, verify your identity (with a driver's license or equivalent), tell you what each form is that you'll be signing, and then you will get a ton of signature practice 🤣.

Once you have signed all the Closing Disclosures, the notary will deliver those forms to your title/escrow company who will make a copy for the lending institution. While you're not responsible for making copies and delivering to the relevant parties, you are technically paying for this service through the title/escrow company's fees (which will be reported on your Closing Costs).

Get your Keys and Move In

Once the Closing Disclosures have been signed and delivered to the title/escrow company + lending institution, you can pick up the keys from the listing agent or from your realtor!

Now, give yourself a pat on the back and take a moment to celebrate! This was quite the adventure and now the place is yours!

As you get situated, you're gonna find there are some action items that you should take care of immediately:

• Set up auto pay for anything that will be recurring:

  • Monthly P&I

  • HOA dues

• Set up an account for your property tax reserves (to be deposited into every month)

• Set up wifi and any utilities (water, gas, electricity)

• Set up access to your community's intranet