Buying my first property without contingencies in Milpitas

[Kenley Law]

My wife and I just moved to San Jose and we are trying to buy our first primary residence in Milpitas, to start a family. We earn a bit more than $225K combined and we only have about $120K in cash. Therefore, we are only able to put down 10%. We qualify for a loan of about $820K. We are finding it extremely difficult to buy anything, not even a townhouse. 

The market here is insanely hot and our agent is telling us that we pretty much have to put in an offer without any contingencies at all AND offer free rent back to the seller. The costs just pile up and up. 

I am most concerned about the appraisal contingency. Our agent is saying that there is pretty much no data to estimate what the appraisal will come in at, so it is completely gambling without this contingency in. I always analyze our finances in detail to value the property and calculate what we can afford to offer. Without the appraisal contingency, my affordability analysis is pretty much useless.

Is it advisable to remove the appraisal contingency? I am concerned that if I don't, I'll never be able to purchase a home, but I really can't get past the risk of opening ourselves up to a cash shortfall. I feel like I am already strapped for cash as it is. 

thank you for any advice!

[Yousif Abudra]

@Kenley Law  Get a new agent.  Now.  I don't care if they are your friend, aunt, cousin, relative, etc.  They are not fulfilling their fiduciary responsibility towards you.  I live in San Ramon and grew up in Santa Clara.  I know this market better than the back of my hand.  

Yes, people are doing very risky things in making offers today.  They are desperate to get into a house.  They will write offers with no contingencies, 3 day closes, free rent to sellers, all while maxing out their spending to get into a home.  Does that mean you need to do the same?  

Ask yourself this - if your offer of no contingencies gets accepted and you are unable to close, can you afford the hit? I assume you are putting in 3% EMD, which on that home is roughly $24k. Are you willing to risk 20% of your savings on this offer?  If you lose it, how much home will you qualify for if you now have a $96k down payment?  And how much harder will it be for you to compete?

If you need to buy a home today, you can do it by writing offers that retain your contingencies.  It is just harder and takes a bit longer.  But based on what you have written, your downside risk on this is high, so it had better be one you are willing to absorb if you are going to pursue it.

My advice: Get an agent that fulfills their duties to you as a client.  Write offers that you are comfortable with.  Getting an offer accepted looks like the finish line to you now - it is the starting line.  Structure your approach so that you get to the finish line intact - and happy.