Multiple offers from a home seller’s POV

If you haven’t sold your home recently, you might be interested to hear a bit about what that experience is like in the current Seattle market.

Once a home has been prepped for sale — which takes very little work in such a strong seller’s market — the agent and homeowner agree on a list price based on sales of comparable properties. This is easier said than done when homes are selling so quickly at ever-escalating prices.

If the agent and seller anticipate multiple offers, they often set an offer review date. That date is usually 5-7 days after the home goes on the market. This strategy typically nets a higher sale price for the seller than if they accept the first offer that comes in.

Appropriately priced homes in West Seattle currently receive anywhere from 3 to 15 offers that meet or exceed the list price and are not contingent on inspection. I.e., buyers have either pre-inspected the property or waived inspection. This essentially results in “As Is” sales.

It is not unusual to receive all-cash offers and/or offers with down payments of 30-50%.

The agent then prepares an analysis of all the offers to determine which are the strongest.You may be surprised to hear that the highest offer price doesn’t always constitute the strongest offer.

Each agent goes about this analysis in their own way. My process consists of creating a spreadsheet showing a side-by-side comparison of the offers on 24 separate criteria!  

A “strong” offer is one that has the best chance of closing quickly and without incident. For instance, if there is a loan involved, the lender should have a good track record for closing on time. The chosen offer will typically have a combination of a high purchase price, reliable financing, and a contract with few, if any, contingencies (i.e. “outs” for the buyer).

The seller also wants to ensure that the buyer will go through with the purchase even if the house does not appraise for the full amount of the offer price. This means that the buyer has the financial means to pay the difference between the appraised value and the offer price, in cash.

Once buyers and sellers have reached Mutual Acceptance — and disappointed the 2 to 14 other buyers — the sale will usually close in 30-45 days when a loan is involved, or as quickly as one week for an all cash sale.

After that, the seller often gets to experience the process in reverse, which is why many homeowners are reluctant to sell.

Any questions? Comments?

If you are ready to buy or sell, give me a call at 206-708-9800

Posted 4/1/16

Should homesellers shun requests for pre-inspections?

Now that homesellers are back in the driver’s seat, pre-inspections are re-emerging as a tactic for strengthening a buyer’s offer. This time around, however, some homeowners are refusing to allow them.

What is a pre-inspection? It’s a general structural inspection of a home (usually by a professional home inspector) that takes place before the seller has accepted an offer.  This generally only happens in multi-offer situations, but those, too, are becoming commonplace again as a result of low inventory.

Since nearly every offer these days is conditioned upon the results of a structural inspection, real estate brokers will sometimes suggest that their clients invest in a pre-inspection as a way of making their offer more attractive to the homeowner.

Few homeowners pay for an inspection of their property before putting it on the market, so they can be justifiably nervous about hearing the results of an inspection performed by a professional hired by a buyer. Having already negotiated a purchase price, the inspection results often trigger another round of negotiations involving requests for repairs which will further reduce the net proceeds to the seller. To eliminate this concern for the seller, a buyer can pay for a pre-inspection and then submit an offer for a purchase price that will not (theoretically) be further reduced because they already know the condition of the house.

This strategy was common practice a few short years ago when Seattle last experienced a  seller’s market. Like the song says, “Everything old is new again.”

This time around, however, some sellers are saying “No” to pre-inspections. Why? Mostly because it is a major inconvenience for owners to open their home to strangers multiple times for several hours at a time (inspections usually take 2-3 hours). Occasionally, some minor damage can result from the inspector’s poking and prodding as well.

One alternative to allowing pre-inspections is for the seller to pay for an inspection (an average of $400) and then make the results available to all buyers who write an offer. Most buyers, however, will not be satisfied to accept the results of an inspection performed by someone who has been hired by the seller.

It’s worth mentioning that a buyer who pays for a pre-inspection and then either decides against making an offer or submits an offer that is not accepted by the seller, is out the $400. That can get pretty costly if you are a buyer making offers on several multi-offer properties.

What’s a buyer to do?

Are you a frustrated buyer? This is a great place to vent.

Bye-Bye Buyers’ Market

Is it still a buyers’ market? Not so much.

Sometimes the local real estate market changes so quickly it can make your head spin! Now is one of those times.

You may think I’ve been sounding like a broken record the last 6 months or so, telling you that our biggest problem in West Seattle real estate is a lack of inventory. I wasn’t kidding, and it’s still true.

In January of 2012 there were 352 Active listings in West Seattle and 84 homes sold. In January of this year, there were 184 Active listings and 98 sold.  That translates into 24% sold in 2012 vs. 53% in 2013! That doesn’t leave much inventory to choose from. Try as you might, there is no way around the law of supply and demand. It will always be true that when supply is low and demand is high, prices will go up. How much and how quickly they will go up is difficult to predict. Until recently (just the past month), buyers were being fairly conservative, refusing to repeat the feeding frenzy of just a few years ago, so price increases have been moderate. Brokers often heard their buyers say, “We won’t be part of a bidding war.” Believe me, brokers don’t like to participate in bidding wars any more than buyers do; everyone emerges with a bad taste in their mouth.

For better or for worse, however, buyers have taken off their gloves and gone back to offering well over the asking price, paying for pre-inspections and anything else they can think of to give themselves an advantage over competitors’ offers. In the past 4-6 weeks, multiple offers on new (and some old) listings have become the norm again. The only saving grace for buyers is that interest rates remain low, which helps keep mortgage payments more manageable.

The good news for homeowners is that you are regaining some of the equity you lost during the downturn. And, of course, if you decide to sell now/soon, you stand a much better chance of getting a reasonable price for your home. Keep in mind, however, that appraisals can be a stumbling block to financing. E.g. a house that goes on the market listed at $300,000 might get bid up to $350,000 but if the bank’s appraiser can’t find other comparable sales to justify that price, the buyers won’t be able to obtain financing and the whole deal will fall apart. This is a very real danger since appraisers are under a much more watchful eye now than they were before the downturn.

Wondering how much your house is worth today? Call me for a free market analysis.

Know some buyers who have been waiting to buy? You might want to give them a nudge. The bottom of the market is waaaaaay behind us.

(Reprinted from my monthly newsletter. Statistics are from the Northwest Multiple Listing Service.)