San Francisco Purchase Agreement (Contract)
We’re here to read the SF Purchase Agreement together. So let’s get to it.
Click here to see the full San Francisco Purchase Agreement (sample).
There’s no need to read a purchase agreement in its entirety every single time. Items marked by two asterisks (**) indicate sections most of our buyers and sellers pay most attention to once an offer is presented. This may vary on a case by case basis.
Page 1 - (open purchase agreement here)
All About the $$
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This is the heart of the Purchase Agreement: the Financials $$$. Here, the contract states your initial deposit (3% of the purchase price) must be made within 2 business days (unless otherwise specified). This information is followed by your loan (if any), the amount you’re paying in cash (your down payment, or more), and the total purchase price. In San Francisco, it is strongly advised your financing is non-contingent, especially in a multiple offer situation, which is more common than not.
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This is where buyers set a proposed time limit for the transaction, which can be negotiated and involves your lender if you’re getting a loan. Generally, the fewer the days, the better. Your escrow officer is also named here.
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This section specifies the number of days the buyer has to remove a financing contingency.
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The buyer also has an option to choose an appraisal contingency. If this section is not checked, the buyer waives the contingency and understands they will make up the difference in cash if an appraisal comes back less the purchase price.
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Here we specify who represents whom. If both agents are from the same brokerage (such as a Compass agent representing the seller and another Compass agent representing the buyer), the buyer acknowledges a dual agency (in addition to another disclosure form created for this purpose).
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By default, the buyer receives the keys to their home when the deed is recorded and intends to live there as their residence, unless otherwise noted.
Page 2
What’s Included + Property Inspection
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A title report is a document that outlines the legal status of a property and related information on its ownership. Typically the listing agent will include the preliminary title report in the disclosures.
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Anything that is affixed to the property (such as chandeliers or curtain rods) are included in the sale (unless otherwise specified), and while appliances typically remain as well, this section clarifies what stays and what doesn’t. Agents can also specify what other items are included/excluded in Additional Terms.
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This section specifies what fees and costs both the buyer and seller are responsible for in San Francisco. The buyer may also ask for a closing disclosure from his or her lender to fully understand what these costs entail. You may read more about these in our “Closing Costs Explained” article.
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As one of the most important contingencies, a property inspection contingency offers the buyer an opportunity to step away from a contract for any reason. Whether a buyer wants to leverage this contingency to perform his or her own inspection, examine the disclosures a little more closely, or any other reason, the earnest money deposit will be returned if the contract is cancelled within this contingency period. Keeping it short is ideal—our buyers usually request a 3 day inspection period. The default 15 days is too long.
Page 3
Regarding Condos and Rentals
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Please refer to the previous page for more information about the inspection contingency. If the buyer waives their inspection, this section will contain their initials.
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Buyer should be privy to all condo/co-op specific documents. Just like other disclosures in San Francisco, all information relating to the condo/co-op/TIC are ideally made available ahead of time (HOA docs, CC&Rs, etc.) to allow the buyer enough time to review. If the property is not a condo, such as a TIC, an additional addendum will be included in the offer.
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If a buyer purchases a property with tenants, they must abide by the present lease and tenant protection laws in place. Multiple additional documents would be included given there is a tenant present: rent rolls, all agreements with tenants , claims made by sellers against tenants or vice versa, etc. Whether or not the unit(s) will be delivered vacant, it is advised to consult a lawyer.
Page 4
More Disclosure Items
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California is all about consumer protection, and the seller is required to provide a multitude of documents. Here, the seller also specifies whether the contract will be contingent on them acquiring another property successfully.
A couple important docs from the seller:
•Transfer Disclosure Statement
•SF Seller Disclosure
These two documents are property specific and contain revealing details about the home, per the seller.
The Building Permit History, or 3R Report, also shows whether the seller made improvements with permits.
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The sellers need to meet certain requirements mandated by San Francisco. This includes the Water and Energy Certificate of Compliance, which is obtained after the inspection and approval of items listed 20A-D
Page 5
More Information for the Buyer
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The language here is important if this pertains to the buyer. Rent control laws may apply.
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More laws and government mandates are written here and are self-explanatory.
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While not a contingency, the buyer and their agent are permitted to do a final walk-through the property to make sure expected conditions are met. It is unlikely the state of the property has changed to an extent that the contract can no longer be enforced. Minor defects, such as holes in walls from staging, are overlooked.
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A home warranty may be purchased from a third-party for discounted repair and replacement service on a home's major components, such as the furnace, HVAC, plumbing, and electrical systems. Sometimes a buyer’s agent may negotiate that the seller pay for this. Other times, we will have the buyer waive the warranty here and we as their agents purchase a one-year warranty as a closing gift. Aww.
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Still reading? There’s more kitchen sink items that you only need to read once pertaining to the SF Purchase Agreement.
Page 6
What if There’s a Dispute?
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If something goes wrong, this section says there are ways to resolve disputes. If negotiations don’t get you anywhere, the contract lays out a mediation procedure, where people try to talk it out and reach a solution together. If this doesn’t work, the next process is arbitration, which involves a third party. You agree to this by initialing here.
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Liquidated Damages —> Initial Deposit
By initialing here, the buyer and seller agree that liquid damages won’t exceed 3% of the purchase price should the buyer fall out of contract (this is the earnest money deposit). If both parties do not initial this line and the buyer does not perform under the terms of the contract, then the seller may seek unlimited damages. Yikes.
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In other words, the party that wins obtains its attorney’s fees.
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The contract goes into effect when the seller signs the buyer’s offer and delivers the acceptance.
In the case the buyer wants to submit a clean offer with all contingencies waived, an additional signed document needs to be included with the purchase agreement.
Page 7
The Finale
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It’s not an immediate termination if a deadline is missed, despite this being a breach of contract. There is a built-in grace period of two days and a procedure (and form) that has to be followed before a contract is torn apart. A Notice to Perform document will be prepared and sent to the non-performing party informing them that they have 48 hours to cure the non-performance.
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No modifications will be enforceable unless both seller and buyer agree and provide written consent.
The agents will also be compensated, as agreed in the original listing agreement, at close of escrow.
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Representative capacity means for and on behalf of a corporation, partnership, trust or other entity, as an authorized officer, agent, partner, trustee or other representative. If required, this form confirms that the person signing the purchase agreement is authorized to act and sign on behalf of the entity.
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This items are here to remind buyer and seller to avoid and be aware of potential fraud.
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This is confirmation that a seller has received an offer.
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This is where the agent makes any special requests, for example, this could be “outdoor grill to be included in sale” or “seller to purchase buyer’s home warranty not to exceed $600.”
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The response deadline is usually 24 hours but that may be changed based on the circumstances.
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This is where the buyer and seller sign, often via DocuSign. Congrats!