Seattle is truly a seller’s market right now whereby buyers often compete against two to ten other buyers for one house!
The consoling factor is that not all home listings receive multiple offers. Most of these bidding wars occur with homes that are newly listed and priced slightly lower than what they would be expected to appraise for. Many of these “new listings” will specify a time and day when the seller will review any or all offers on their home. Many of the buyers, in preparation, will pay to do a pre-inspection of the home they plan to make an offer on. The Seattle sellers are even starting to provide free pre-inspections for interested buyers. They do this in order to prevent excessive wear and tear associated with each buyer’s pre-inspection of a home. It’s also not uncommon for sellers to provide sewer scope inspections to interested parties.
Now comes the challenging part of making an offer. Sellers normally look for two things when reviewing multiple offers. They want 1. assurance that the transaction will close quickly and 2. the highest price they can possibly get for their property. Offers that are “all cash” normally get preference in multiple offer situations, thus the term “Cash is King”. However, offers that offer the highest dollar amount and entail financing can win if they offer enough assurance to the seller that the transaction will close on time. There are four assurances that buyers with financing can provide to sellers:
1. Buyers can offer to pay cash for the difference between the sales price and appraised price of the home. The buyer’s lender often performs an appraisal of the property 5-15 days after an offer is accepted by the seller.
2. Buyers can provide a non-refundable earnest money amount. That is, if the buyers are ultimately unable to obtain financing for the deal, the seller is entitled to keep the buyer’s earnest money whether the deal closes or not.
3. Buyers can provide the seller with substantial earnest money amount – $10,000 or more seems to be common practice in this crazy Seattle market.
4. Buyers can provide a down payment amount of 20% or more.
In short, buyers should come up with a substantial amount of cash if they choose to complete for the shiny new home listings. They should also discuss the ramifications of these factors with their lender and real estate broker. They could also avoid making offers on new listings or wait until November and December, when the market has slowed down, to make an offer on a home.
Happy Home Hunting!