If you’ve been keeping an eye on the housing market or have read the blog then you know that there is a shortage of homes for sale. The housing supply has continued to decline and competition from other buyers is contributing to the rise of housing prices.

What is not talked about enough is what buyers are willing to do to get their offer accepted.

As both a listing and buyer’s brokers, I have unique insight on how buyer’s broker’s and their buyers are writing offers to appeal to sellers. In this newsletter, I am going to share this unique insight with you.

Recently, I listed three different homes in Snohomish County ranging from $419,950 to $509,950. Each home was in a neighborhood, varied in size and bed/bath count, and all had a fenced yard. Each home had the exact same marketing plan: professional photography, drone video, postings to socials as well as a listing on the NWMLS. In addition, each home was listed publicly for sale on a Thursday and had an offer review date for the following Monday. Using this strategy allowed the sellers to have a full showing schedule to yield the most attractive offers.

Here are the offer themes on the three homes and why the seller selected the offer they did:

Home No. 1 - Arlington

  • Had 52 showings
  • Received 11 offers

Notable findings of the offers submitted:

  • 91% offered over list price
  • 73% contained an Escalation Clause
  • 36% waived their Home Inspection
  • 18% had Additional Down Payment in the event of a Low Appraisal

The seller selected an offer that had an escalation clause (not the highest escalation clause), had additional funds to close in the event of a low appraisal, and waived their home inspection. That offer had the least amount of risk and yielded almost the highest net proceeds.

Home No. 2 - Stanwood

Had 36 showings Received 8 offers

Notable findings of the offers submitted:

  • 88% offered over list price
  • 75% contained an Escalation Clause
  • 50% waived their Home Inspection
  • 25% had Additional Down Payment in the event of a Low Appraisal
  • 13% asked for Closing Costs

The seller selected an offer with the highest escalation clause because that offer had a large amount to bring in to close in the event of a low appraisal. The offer also waived home inspection and had the highest amount down payment associated with their loan.

Home No. 3 - Marysville

  • Had 35 showings (during the last snow storm)
  • Received 12 offers

Notable findings of the offers submitted:

  • 100% offered over list price
  • 58% contained an Escalation Clause
  • 67% waived their Home Inspection
  • 17% had Additional Down Payment in the event of a Low Appraisal
  • 8% asked for Closing Costs
  • 8% had a Contingent Property Sale

As with Home No. 1, the seller selected an offer that had an escalation clause (not the highest escalation clause), but because the selected escalation was more in-line with the neighborhood. The offer had additional funds to close in the event of a low appraisal and waived their home inspection. That offer had the least amount of risk and yielded almost the highest net proceeds.

TAKE-AWAYS

  • Buyers offered over list price
  • Waived home inspection
  • Had additional funds to close

When working for buyers, I use my listing experience to give insight on why my sellers are selecting the offers they are. However, being armed with this knowledge doesn’t make the experience cut and dry.

Buyer No. 1

Is looking for homes in the million plus price range. They are experiencing multiple offer situations, competing escalation clauses, competing buyers who waive all contingencies (including financing), and bringing in a few hundred thousand for an additional down payment or just purchasing the home with cash.

Buyer No. 2

Is looking for homes from $700k to $850k and is experiencing the same scenario as Buyer No. 1 with high offer prices, even higher escalation clauses, waiving inspection and/or most contingencies, and having to compete with higher additional down payments than they can afford.

Buyer No.3

Is trying to purchase a house off market to save some of the brutal competition in the housing industry.

If you’re buying a home right now, you’ll need to ask yourself some tough questions:

  1. Am I willing to waive contingencies, like home inspection and financing, to purchase a home right now?
  2. Am I willing to offer more than list price or offer an amount that is far outside the neighborhood just to own a home?
  3. Am I willing to pay an additional down payment if the home doesn’t appraise just to move forward with my purchase?
  4. What lengths am I willing to go to purchase a home?

These are not easy questions to answer and shouldn’t be taken lightly. Right now, I am having long, hard discussions with buyers who are ready to make the move because their life demands it.

Prepare yourself, ask lots of questions of your broker, and consult legal advice to make sure you fully understand the market conditions and what it takes to purchase.