In this current market where inventory is low and the buying pool is large, Buyers are being “run ragged” – despite their best efforts and their multiple offers they still don’t have a home.  They are growing frustrated and, are heartbroken almost weekly. It is common for a home to have upwards of 10 offers within 24 hours of going “active”. AND all of these offers will be written in the most aggressive way possible .  As soon as a  home hits the market buyers have to get to it ASAP and quickly determine if it is the right home for them (or close to the right home) and then submit an offer.   Often, it’s a process that is repeated over and over to no avail. Some listing agents will postpone reviewing offers for a several day period – that gives everyone a chance to see it and fully determine if it is the home for them – I prefer this approach because while there still can be a “frenzy” it’s not quite so frenetic and I think wiser decisions are made and often higher proceeds are achieved.  However, many agents don’t postpone offers, they state “will review offers as received” in their listings and that means not only do you have to be super qualified, you have to be super fast.  I think the second method is a bit riskier in that, sometimes the frenzy can create a situation where the buyer who “wins” starts to rethink the house and often times (probably 30% of the time) they will back out of the agreement.

Many buyers are having to compete with others that offers that several years ago would have been unimaginable:

  1. Offers above asking price – It is not uncommon for offers to be coming in well above asking price ($10,000 or more).  Last week, a North Tacoma home was listed at $265 (which in my opinion was way low), my clients loved it and made an offer of $300,000 – the listing agent was pleased with our offer and led us to believe it was going to be accepted.  In the next 12 hours that agent was flooded with more offers and eventually a cash offer of $325 “won” that home.

Best advice:  shop at a price point that is $20-$30,000 below your budget maximum.

2. Cash offers – while so many buyers are highly qualified, they are having to compete with cash buyers, especially in the under $450 range.  Cash is typically “king” because no appraisal is necessary, closing can happen quickly and a seller can be fairly confident that this transaction will reach the finish line.  In some cases I’m seeing relatives purchase the home and then the “kids” purchase it from the parents and obtain their loan at that time.

Best advice:  Have as much money squirreled away as possible as larger down payments show strength AND keep buying lottery tickets.

3. Waiving the inspection – I don’t like to see anyone waive an inspection contingency unless the house is a complete fixer and/or the buyer has the skills and financing backing to take on any “project”.    Fortunately, most sellers are still allowing for an inspection period to take place as “normal”, but I have seen a couple of instances where we have become more “Seattle Like”.

Up north buyers have been conducting pre-inspections prior to submitting an offer.  This might seem really wise and unique, but often you’ll have 10-20 inspectors crawling over a house at once.  Then if the buyer’s offer is not the one accepted they just wasted $1,000.  I spoke to a Seattle agent recently whose clients had spent $20,000 in inspections and still didn’t have a home.  There are definitely some “kinder” ways for a seller to handle this situation.  An example my clients recently experienced, the Seller had conducted an inspection and then had repairs made accordingly.   They provided the full inspection report and the receipts for the repairs made .  In doing this they showed their integrity and their respect for the people who would be interested in their home.  They also allowed for a quicker close because the inspection period often takes 5-10 days to get through and typically, the appraisal is not ordered until after this time.

Best advice:  Don’t agree to anything that is outside of your comfort zone or budget.

4. Waiving a low appraisal – a part of any financing contingency is the appraisal.  Buyers can “waive” a low appraisal – this means that if the appraisal comes in low, the buyers will “bridge the gap” with cash.  For example, if a purchase price of $350,000 is agreed upon and the appraisal comes in at $340,000 the bank will only lend on that $340,000.  Thus a $10,000 gap is produced – buyers will then agree to pay that gap in cash.  Again, tough to do if you don’t have a lot of money in reserves.  The risk here is the unknown of what that “gap” might be – $10,000?  $20,000?  There is an addendum I typically will add to punctuate the gap a bit.  Fortunately, appraisers are aware of what’s happening in our market and are responding to it favorably.  I haven’t seen a low appraisal so far this year – but there’s never a guarantee in that process.

Best advice:  The more money you have squirreled away, the larger the gap that can be bridged.  Include language with your offer that establishes a limit on that “gap”.

5. Allowing sellers to remain in the home – Buyers are so wanting a home that they are allowing sellers dictate closing and possession rather than the lending process.  I listed a home in March that quickly sold but my clients don’t have to move out until the end of July.

Best Advice:  Allow the sellers as much flexibility with closing/possession dates as possible.

The bulk of this frenzy is in the under $500 price points – as this represents a large portion of our buying pool.  But there is good news for sellers at all price ranges – homes are selling at every price point.   Many ask me if  this trend will continue and I honestly have serious concern that it will – 60,000 or more people move into the Puget Sound region every year, there are jobs, a climate that people typically like (not this year), and the Seattle market has gotten too expensive.   As buyers are priced out of certain neighborhoods, they will begin to consider other locales that turn out to be just what they were looking for (but didn’t know it).  I also have a dream that someday downtown Tacoma will be filled with affordable condos – that’s where we should have some high density living!   I always say we all end up where we are supposed to “be”.

If you’re a buyer – hang in there (I will too) .  . . if you’re a seller, enjoy the ride!  Just so you know we’re not alone I recently saw this article about the difficulty of being a millennial buyer:

http://money.cnn.com/2017/04/03/real_estate/millennial-homebuying/index.html?iid=ob_homepage_deskrecommended_pool