A Beginner’s Guide to Buying a Home in San Francisco

Sharon Petrowsky, Relationship Manager, First Republic Bank
March 2, 2022

It’s not just San Francisco’s views that are jaw-dropping. Many first-time homebuyers in the city—undeniably one of the most beautiful cities in the world—are surprised by the high prices and competitiveness of this market.

Beyond having to put down at least 20 percent on a home that easily may cost $1 million or more, many first-time buyers face other hurdles. In the San Francisco housing market, it's common for homes to sell above their list price—meaning borrowers must be ready for bidding wars and winning sellers' approval.

Here are some of the key aspects of buying a home in San Francisco that new buyers should prepare themselves for:

Competing With All-Cash Buyers

Due to the prevalence of all-cash buyers in San Francisco, a buyer must consider ways to make their offers more attractive to prospective sellers—such as ensuring they can close on the home efficiently, which means providing all financial information to the bank before making an offer. Buyers should work with a lender who can process transactions in a timely fashion, so there’s no concern that the deal will fall through. Many sellers would prefer to close in 10 to 14 days while banks may need closer to 18 to 21 days to close, so buyers should ensure there are no unexpected financial hurdles or surprises that could prevent a quick closing.


TICs vs. Co-ops vs. Condos

Buyers in the San Francisco market might encounter some unfamiliar options while they’re out house hunting. Tenancy in Common properties, or TICs, are generally older multi-unit properties that are jointly owned by all the individual unit owners.

While the price of a TIC may be 10 or 15 percent less than a comparable condo, they also carry risks. Many lenders will not provide fractional loans to TIC buyers, meaning all owners are listed on the same mortgage. If one owner can’t pay his or her share of the mortgage one month, the other owners are obligated to pay it. In addition, the city of San Francisco holds a lottery each year to allow a certain number of TIC owners to convert their buildings to condos and, as a result, raise the value of their properties.

Co-ops are similar to condos in that they both collect homeowner association dues for common areas and sometimes require approval on individual unit changes. However, co-ops have boards that approve buyers and financing, and buyers are given shares of stock, not outright ownership, in the co-op. This means that buyers who want the flexibility of owning their own property outright without the limitations and potential risks that come with TICs and co-ops will probably want to stick with condos or an even less complicated option, single-family homes.

Being Financially Ready

Given the high costs and ultra-competitiveness of buying in San Francisco, it’s essential to have all your financial ducks in a row. Having your 20 percent down payment and at least one percent of the total expected purchase price for closing costs set aside, for example, can ensure you’re ready when the right home comes along. Also try to keep at least 12 months’ worth of expenses, including your mortgage payment, payments for property taxes and homeowners insurance, in a separate account so you know you have the financial resources to pay for your home no matter what happens.

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