How to Win in Real Estate Bidding Wars

Question:

We are looking for a home in the greater Seattle area. How can a home buyer compete in this hot housing market?

Answer:

We are currently in a seller's market in many neighborhoods in the greater Seattle area, and it’s common to see multiple offers for real estate transactions. Home buyers are competing against multiple motivated and highly-qualified buyers, many with the ability to pay cash.

In addition to offering more than asking price, buyers can make concessions by waiving some standard contingencies in hopes that the seller will pick their offer.

Here are several of the terms we see in local offers.

Note that it’s important to know the risks as well as the benefits when considering any of these actions to boost your chances of getting the nod in multiple buyer situations.

Waiver of Inspection Contingency:

Many homeowners will allow a pre-inspection before going under contract, providing buyer assurances of no major system defects. By waiving the inspection contingency, the buyer may miss the opportunity to negotiate for repairs, or the ability to back out of the deal.

Waiver of Financing Contingency:

A financing contingency means that that the purchase of a home is dependent on securing funding within an agreed upon period. A buyer may choose to waive the financing contingency. This waiver could put the buyer's earnest money at risk if the funding doesn’t come through.

Waiver of Appraisal:

The appraisal contingency allows the buyer to decline or renegotiate the deal if the appraisal comes back lower than the stated price. A home buyer may offer to waive or make up the difference between appraisal and purchase price.

Releasing Earnest Money:

A buyer typically puts down earnest money, a 1-3% deposit showing the seller serious interest in buying the property. By releasing the earnest money, the buyer demonstrates a vested interest in the sale moving forward. In this case, if the buyer backs out of the deal, the earnest money goes to the seller.

Large Earnest Money Deposit:

A buyer can provide a larger earnest money deposit, up to 5% (a standard amount of earnest money is typically 1-3% of the value of the house). By offering a larger deposit, the home buyer demonstrates serious intent to buy.

Escalation Clause:

A buyer may choose to include a significant escalation clause with the potential of going over asking by 15% or more. The escalation clause states that the buyer is willing to pay a stated price, but if the owner gets a higher offer, the buyer will increase their offer up to a certain percentage.

Waiving Title Review:

The title is the record of all items such as easements of agreements registered against a property. A buyer may choose to waive the title review based on a preview of the preliminary title.

Waiving Standard Evaluation Period:

Material facts are those facts about a property that if disclosed might cause a buyer to make a different decision. Typically, if the contract allows for an inspection period, as long as the buyer is still within the ten-day period from the time the contract is executed, the buyer can cancel the contract. The buyer can opt to waive the standard ten-day review period of material facts offered by the homeowner and listing broker.

Waiver of the Seller Disclosure Statement:

In Washington State, the Seller Disclosure Statement or Form 17 is filled out by the seller about the condition of the property. Typically, once the seller makes disclosures of existing material facts or material defects about the property on Form 17, the buyer has three business days to rescind the purchase agreement. In this case, the buyer will waive the right to receive the disclosures.

Timeline Flexibility:

A buyer can offer to be flexible with closing dates, move-in dates to accommodate the homeowner. Flexibility can provide relief to the owner, who may need time to work out details on their end.