Bob Melvey

Managing BrokerWindermere Real Estate

How Buyers Compete in a Seller's Market

The past few years presented quite a challenge for people trying to buy a home in Seattle. Low interest rates and an influx of people moving to the area have created an atmosphere of heavy competition. It is not uncommon for five or more offers to be presented on one home the day that it is listed for sale. If a buyer is not successful in getting their offer accepted, they can count on competing against the other unsuccessful bidders on the next house, along with new buyers who have since entered the fray. Successful buyers in today's market are pulling out all the stops to get their offers accepted. Below are some techniques that I have witnessed or used with my clients:

Accelerator Clauses

The accelerator clause (or escalator clause) states that the buyer will pay a set amount over the highest bona fide offer up to a maximum price. The seller is required to present a copy of the bona fide offer to the buyer. This can be very effective, but can also backfire depending on the sophistication and personality of the seller.

Waiving Financing Condition

Most offers are written subject to the buyer's ability to obtain financing. Some buyers who are confident that they will not have a problem obtaining a loan will write the offer as if it is all cash, waiving the financing contingency. If they get the financing it is not a problem, but if they run in to difficulties their earnest money deposit could be at risk. Before using this approach it is important for a buyer to look at the condition of the house as well as their financial strength. If the appraiser calls for work orders, correcting the situation becomes the buyer's responsibility.

Increasing the Earnest Money

A typical earnest money is between 2% and 3% of the purchase price. To make their offer stand out from the crowd, buyers have been increasing the amount of their earnest money to 5% of the purchase price. This is most effective when combined with a waiver of the financing contingency.

Pre-Inspecting Homes

Knowing an offer that is not subject to a buyer,s home inspection will be more attractive than one that is, buyers will pay for and complete an inspection in advance, gambling that their offer will be accepted. If it isn,t, they will not be reimbursed for their inspection costs. Although there is some financial risk, the effectiveness of the tool can easily make it worthwhile, especially when combined with a waiver of the financing contingency.

Why are buyers willing to put up with such an aggressive seller's market? The main reason is rising prices. Waiting a year could mean getting less house for even more money.