If you’ve been searching for a new home in the West Seattle area in the last two years you know it’s a hot seller’s market. The number of available homes is low and the demand is high - and still growing. The competition among buyers can be aggressive and Seattle sellers are loving it.

 

In a normal, balanced market buyers can make an offer with standard contingencies such as a home inspection, financial approval, review of the preliminary title report, approval of the seller disclosure statement, etc. In a seller’s market, the seller is in a better negotiating position and their main goal, in addition to getting the best price possible, is to reduce their risk of the sale falling apart due to a buyer contingency.

 

So if you want to appeal to the owner of that Alki Beach home you have your eye on, here are a few tips that can help:

 

  1. Be Financially Ready - If you are planning on mortgaging your home purchase have your loan pre-approval done before your start looking. You need to be ready to move on a property quickly when the right one comes along. 
  2. Loan Type - Loan types run different risks to sellers. FHA and VA have more conditions in the appraisal process. VA can cost the seller more in closing costs due to VA requirements. Using a traditional Conventional loan can improve your odds with a seller against buyers using FHA and VA loan packages.
  3. Shorten Your Loan Approval Process Time - Ask your lender to start the actual approval process and move your application into the underwriting phase. The further along you can get in this process the shorter you can make your closing time needed by the your lender. 
  4. Cash is King - If you have the ability to pay all cash it may be worth it to you do to so. An all cash offer greatly reduces the risk a seller faces compared to a mortgaged purchase because it eliminates the need for a financial contingency all together. Some buyers are borrowing funds from non-institutional sources (like family members) and then financing into a mortgage once they own the home paying back the temporary cash loan.
  5. Pre-Inspection - If the seller will allow it, ask to do a pre-inspection of the home before writing your offer. This way you do not need to include an inspection contingency making your offer much more competitive against one that includes the request. 
  6. Preliminary Title Report - have your agent ask the seller if they have a preliminary title commitment report available to view prior to writing an offer. Reviewing this information early will allow you to comfortably exclude a title review period contingency with your offer
  7. Seller Disclosure Statement - Every seller in the State of Washington is required to provide a Seller Disclosure Statement at the time of sale. This document is a series of questions the sellers must answer about the known condition of the home. Have you agent ask the seller if they have one ready to review prior to writing your offer. Like the title report, reviewing this information ahead of time allow you the possibility of removing this review period contingency from your offer.
  8. Appraisal Contingency - Your lender will require an appraisal of the home to make sure they are not over lending on the property. If your lender is willing to mortgage 90% of the purchase what they are really offering is to mortgage 90% of the appraisal value regardless of the agreed upon price. Any buyer using a Financial Contingency has an appraisal contingency built into their offer. Some buyers in this hot seller’s market are removing the appraisal part of this contingency - basically stating that should the appraisal value come in low they will pay the difference in cash at closing.
  9. Earnest Money - earnest money shows “good faith” to the seller that you truly wish to purchase the home and in the event that you decide to back out of the transaction for a reason not covered under a contingency then you will forfeit the funds to the seller as compensation for taking the home off the market and passing up other offers. Should you purchase the home then your earnest money becomes part of your down payment. The amount of earnest money you are willing to put up as “good faith” can be used to impress the seller and show how serious you are regarding the purchase of the home. 
  10. Non-Refundable Funds - Some buyers are going as far as making some or all of their earnest money non-refundable and payable directly to the seller at mutual acceptance. The idea is to entice the seller that may be in need of immediate funds. The risk is that once the funds are made non-refundable they are the sellers to keep even if you need to back out under a contingency. 
  11. The New Love Letter - Many buyers write Love Letters to sellers explaining how much they “love” the home and hope the seller will pick them over a competing offer. In the hi-tech world of Seattle, buyer’s Love Letters have become Love Videos. Buyers are shooting short 1 minute videos on their mobile devices to introduce themselves to the seller and say a few quick words about why they love the home. A link to the video is then sent along with the offer.

 

If you’d like to learn more about buying in a Seller’s Market please contact me.

 

David Warren

Managing Broker

Metropolist Real Estate

425-760-8285

 

david@metropolistgroup.com