With battles for homes leading to a sharp increase in bidding wars in Spokane’s fiercely competitive real estate market, buyers are finding they need to be creative with the offer for the home of their dreams.
Seattle-based real estate technology company Redfin found nearly 64% of single-family home offers written by their agents nationwide in March faced multiple bidders.
The company indicated in a study that prospective homebuyers who offer cash nearly quadruple their chances of winning a bidding war, making it the most effective strategy to come out on top in a competitive situation.
For buyers who may not have the option to pay cash for homes, it’s essential to work with an agent who can help make their offers more attractive – sometimes it’s increasing the down payment, waiving contingencies or figuring out what sellers want, Spokane-based Redfin agent Rachel Wilson said.
“We are seeing multiple offers on pretty much everything. We have so many buyers that don’t have that cash to put down, so it’s important to find other ways that are as successful as cash,” Wilson said. “I had one (instance) where we didn’t compete with other offers, but otherwise we’re up against one to 30 possibly, depending on the house.”
Wilson said clients should set aside some cash as a cushion in case they must increase their bid and look at listings that have been on the market for a while.
In the past, a “stale listing” in Spokane would have been a home on the market for about a month, but now it’s a property that didn’t sell within the first weekend of listing, Wilson said.
“Homes that don’t sell on first weekend – those are huge if you keep an eye on them,” she said, adding she encourages buyers to save listings and revisit them midweek to see if they are still active.
In the instance in which Wilson’s clients weren’t up against competing offers, photos in the listing were dimly lit and the home had green carpet.
“Come to find out, the seller was taking out the carpet and installed hardwood floors, so the buyer ended up with a good house,” she said.
Considering rural listings is also a great option – if broadband internet is available, she added.
“In addition to that, I try to plan out offers accordingly,” she said. “‘What can we do to make it more strong and appealing to sellers? I like to reach out to agents before making an offer to see if there’s anything important (that) sellers want.
“Some just really want someone who will love and cherish the home like they did. I had one couple that beat out two other offers because they had the intention to close and loved the property.”
Jodi Mouchett, a Spokane-based broker for John L. Scott Real Estate, had clients who were up against more than two dozen offers for a home in the Garland District in the $350,000 price range. Her clients’ offer was approved as a backup offer because they agreed to an appraisal gap addendum.
In an appraisal gap addendum – also known as a Form 22AD – buyers agree to pay the difference between a lender’s appraised value of the property and the offer price.
“Buyers are having to be a little more creative with offers by not asking for things from sellers and limiting contingencies as far as financing goes,” Mouchett said. “If you can put down more, it makes you a stronger buyer … if it’s a financed purchase, we are seeing more of the 22AD when the appraisal comes in low. In the last year, (a Form 22AD) has become more common, but in the past three to six months, it’s become a necessity.”
The second-most effective bidding strategy is to waive the financing contingency, boosting buyers’ odds of winning by 66%, according to Redfin. A financing contingency is a clause in a real estate contract that specifies that a buyer’s offer is dependent on financing approval for the home.
It’s important to note, however, there is risk involved with waiving the financing contingency. If the lender doesn’t approve the mortgage loan for the asking price, buyers have to either make up the difference in cash or lose their earnest money deposit if they walk away from the deal.
Other strategies that buyers can use to make an offer more competitive are to waive inspection or appraisal contingencies, or include an escalation clause, which allows them to increase their suggested purchase price incrementally to avoid getting outbid for homes.
In a fast-paced market like Spokane, communication is imperative between lenders and agents, Mouchett said.
Mouchett said buyers should work with agents who keep in contact with the listing agent to inquire what sellers are looking for in an offer, among other things.
Wilson echoes that an appraisal gap addendum is “huge on the contract side of things” because it helps buyers remain competitive.
Most of all, Wilson advises buyers to be patient when encountering a bidding wars on homes.
“It gets less difficult every single time, and when you do win one, it’s an awesome celebration,” she said. “We are seeing multiple offers on pretty much everything. We have so many buyers that don’t have that cash to put down, so it’s important to find other ways that are as successful as cash.”
“We are seeing multiple offers on pretty much everything. We have so many buyers that don’t have that cash to put down, so it’s important to find other ways that are as successful as cash.” Rachel Wilson Spokane-based Redfin agent
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