2017 was a year marked by low inventory, high demand, and buyers flooding to Seattle from around the world. From January through April of 2017, 65% of condos that sold in downtown Seattle were cash buyers. For those that can’t pay cash, however, your chances of success may feel bleak. So, we’ve compiled a list of 7 ways to compete with cash and win those bidding wars in the year to come:
1. Working with the right agent. In this market, one of the most important decisions is the agent you work with. Finding a local agent who understands the market and your area of interest are of paramount importance. Remember, this person will be going to bat for you with every offer you make, so, the relationships they have curated, their ability to negotiate, and their overall knowledge & experience are all key factors to consider before you decide who to work with. Ask your agents about their recent transactions, the nature of each transaction, etc., and make an informed decision based on their history and expertise.
2. Make Your Offer As Close to Non–Contingent as You Can. In this market, buyers are waiving the contingencies typically used to protect them. Remember that a seller wants to minimize the risk of the winning offer falling through while under contract, so help them to minimize that risk. Even if you can’t waive your financing contingency, there are several tricks that can be used to achieve this end:
- Pre-Inspection: Conduct an inspection before making your offer so you know exactly what you’re buying. In this market, when sellers are receiving multiple offers, most aren’t jumping at the chance to make repairs and modifications. Conducting a pre-inspection gives you the peace of mind that you need, but allows you to waive the inspection contingency.
- Pre–Underwriting: We can’t stress enough the importance of working with a strong local lender. Some lenders are willing to go a few steps beyond your standard pre-approval and issue a pre-underwriting. Again, this helps to minimize the seller’s risk and provide certainty that your loan will be funded.
- Non–Refundable Deposit: Often, buyers are converting part or all of their earnest money to a non-refundable deposit, meaning the seller can keep the cash if the transaction falls through. This helps to show a buyer’s seriousness and willingness to see a deal through.
- Low Appraisal: If you can’t completely waive your financing contingency, consider using an appraisal addendum, which states that you will make up the difference (up to an amount of your choosing) if the property doesn’t appraise for the full purchase price.
- Shortened Contingencies: Can’t waive your contingencies? Consider shortening the standard timeframes. For example, the Financing Addendum gives you 5 days from mutual acceptance to apply for financing. Perhaps shorten that period to 1 or 2 days
3. Have Your Agent Present In-person. Presenting your offer in-person, and having an opportunity to develop a relationship with the listing agent can make all the difference in whether or not your offer is accepted. While this doesn’t mean they’ll accept a low-ball offer, the listing agent may be more likely to give you and your agent an opportunity to change the terms or price of your offer.
4. Get to Know the Seller. Long before you decide to make an offer, your agent should be in contact with the listing agent to try and gauge interest from other prospective buyers, but also to try and understand what it is the seller is looking for. Highest price? Shortest closing? Delayed possession? Perhaps all of the above. While your agent most likely won’t have an opportunity to talk to the sellers directly, these conversations with the listing agent can be a huge help in deciding how to structure an offer.
5. Backup Offers. For buyers whose offers don’t get accepted the first time around, getting yourself in a backup offer position could make all the difference. This can be done formally or informally, but with 17% of homes coming back on the market, it’s worth having your agent talk to the listing agent about being in a backup offer position, so they know who to call if something falls through.
6. Time is of the Essence. With most listings setting offer review dates (a request that offers be submitted at a specific date and time), giving yourself and your agent time to conduct a pre-inspection, review a resale certificate (if available), and write the offer can make a difference in making sure your offer is clean and tight. If you see a house you like, get out there and see it!
7. Market Time. Another route to consider if you have a low down payment or little cash to spare is to focus on homes that have been on the market for 14+ days. These sellers are often likely to be more flexible with price and offer terms.
Despite these strategies, buyers still may have to make several offers before finally getting one accepted in a market as competitive as Seattle’s. But, with persistence and savvy, we’ll find you your next home.