What it Takes to Win a Bidding War on a Home - Competitive Home Buying

Note from the Editor / Legal Disclaimer: The information provided in this blog post is intended for general informational purposes only, especially regarding crafting stronger offers in the Greater Seattle area's home-buying process. This should not be taken as legal advice. Aaron Morrow is a professional Realtor, not a Real Estate Attorney. Therefore, this content is not provided as legal guidance. It is highly recommended to seek specific representation, such as a Buyer's Agent/Realtor, when you are preparing to buy a home, or consider hiring a Real Estate Attorney for legal advice, or both! That being said, please feel free to reach out to me, Aaron Morrow, when you are ready to buy or sell a home in the Greater Seattle area, including King, Pierce, and Snohomish Counties. You have been duly informed – now enjoy the read!

You can check out the Episode in the Podcast form Here

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You can also check it out as a YouTube Live/Podcast right Here!

Master the Art of Crafting a Winning Offer in Seattle’s Fierce Real Estate Market

March 22nd 2024

Hey there, Greater Seattle area peeps and my LinkedIn professionals!

Aaron Morrow here, bringing you the blueprint to crafting a winning offer in our dynamic real estate landscape. This week's edition is going to be a great read for anyone interested in learning about what it takes to craft the best offer possible if you ever find yourself in a bloodbath of a crazy bidding war! These tips are also good for any type of multiple-offer situation and feel free to incorporate however many into your offer-making strategy. Just be certain to use the ones that are right for you because some of these strategies are riskier than others, and it is always best to talk through all of these with a real estate professional!

That being said, I am always happy to discuss with you how to do this for your particular situation because everyone's situation is different, and not everyone can do all or most of what I am going over in this edition's newsletter. However, rest assured that this is something I do with every home buyer that I work with. I go over every facet of the offer and figure out what you, the buyer, can and cannot do, or what you are willing to do to make your offer stand out if you find yourself in a multiple offer situation. I then make sure we have thoroughly talked through the pros and cons and make sure you understand what you are signing and what you are agreeing to, including sending clients personalized video walkthroughs to walk them through their specific offers. And then finally, it comes down to how well I clearly communicate all the strengths of my client's unique offer when presenting that to the listing agent when the seller has a pile of offers to choose from.

*Also, keep in mind that these contracts and forms are constantly changing and there are always new crafty ways to come up with to stand out as a home buyer so again make sure to reach out when you are ready so we can make sure you are actually making a great offer and not just relying on my random newsletter from who knows how long ago by the time you write an offer from the time you read this... :)*

Now, of course, my favorite thing to do when representing my buyers is finding houses that we can get good deals on so that we do not have to get into bidding wars, BUT that's a different news article altogether. And if you find a house that you fell in love with and you want to know what you had to do to get that house if you are going up against a ton of other buyers... You came to the right news article! :)

Before we get started if you missed the YouTube Live/LinkedIn Live and would rather watch this in video form you can check that video out here:

Ok! Let's dive right into the details of every facet of what you can do as a home buyer to write a strong offer!

Understanding Forms and Your Offer

Form 17 - Seller's Disclosure Form - Waiving the Right to Back Out Upon Review:

In strategizing your offer, consider the implications of waiving the right to back out based on the Seller's Disclosure Form (Form 17). It’s critical to understand that signing only the first two lines indicates you waive the right to back out after reviewing the disclosed information, which can make your offer more appealing by showing earnest commitment. However, steer clear of signing line three; doing so means you waive the right to receive a fully completed form, a move that could leave you without crucial property details. This waiver is a bold move, highlighting your serious intent but also assuming significant risk. Before making this decision, ensure a thorough review and consult with your real estate professional to navigate the risks and benefits effectively.

Form 21 Insights (The Purchase and Sale Agreement:

• Included Items: Only include the items that the seller mentioned on the MLS that they were willing to leave with the property as far as appliances go. For instance, some sellers want to take the washer and dryer.

• Earnest Money: Let me be CLEAR There is no standard Earnest money amount... That being said I have seen over the years 1% be the lower end on a lot of transactions with a few here or there lower than 1% of the purchase price when not in a multiple offer situation. Buyers who find themselves in multiple offer situations are more commonly offering higher amounts such as 2%, 5%, or sometimes 10% or more earnest money to be held by Escrow. Also, keep in mind how quickly you deposit earnest money is now negotiable as well. It used to be set in the form that it was 2 business days but now you can input into the form how many days you want to give yourself to deposit said earnest money. Buyers who are ready and able and want to stand out could elect to make it 1 day.

• Title and Escrow Preferences: Aligning with the seller’s recommended services eases their process, making your offer more appealing.

• Speedy Closing: Show you’re ready to move quickly by committing to a 30-day close or sooner, backed by your lender’s confirmation. Before figuring out your closing date it's a good idea to have your buyer's agent ask the listing agent what sort of closing the seller would prefer. In most cases, a seller is going to prefer a quicker close unless they also are looking for a house to buy, and in that case, they either are going to prefer a longer close if you are not offering a "rent-back" See "Post-Closure Possession below". Closing is negotiable and sometimes closing quicker gives you a competitive edge. industry standard is around 30 days now for most loan types. That being said I work with plenty of lenders that can close a loan between 14 to 25 days easily. Who you work with matters.

• Post-Closure Possession: Offering the seller possession after closing can sweeten the deal, especially if they need transition time. The safest way to offer this to the seller is using an additional form which is a rent-back form that turns the seller into a renter and you into a landlord temporarily. Please note that you are only allowed to offer the seller a maximum of 60 days to stay in the property after closing or else it goes against the buyer's loan type if the buyer indeed purchased the property with a loan and that loan indeed was for a primary residence use. This is because you as a buyer sign a document stating that you intend to occupy the property within 60 days of closing if you are obtaining a primary residence loan vs an investment loan. The seller will be paying for the utilities while they are staying in the property. You can either offer free rent-back to be the most desirable to the seller or if you want to try and see if a fairer option of having the seller pay some sort of rent while they stay in the property is also negotiable. This is all on the "Form 65B RENTAL AGREEMENT Seller Occupancy After Closing"

Advanced Strategies and Considerations

Finance-Related Forms:

• Form 22A (Financing Addendum): There is a common misconception in our industry that a conventional home loan is the golden standard due to appraisers being lenient on calling out work orders which are whenever an appraiser calls out something that needs to be fixed on the property it becomes something that is now a condition to be remedied prior to the loan going through. This narrative keeps getting pushed in the industry by enough listing agents. I am not blaming the industry as a whole and a lot of Realtors have stepped up and are properly educated. That's sad, one thing a buyer can do if they are in a competitive situation and are preapproved with multiple different loan types is to write in their offers that they have the ability to switch to another loan type if they run into trouble with financing or appraisal with the loan type they start out with. This would allow the buyer to present a strong offer while being able to obtain FHA, VA, and USDA financing. ANOTHER thing to note is that often someone who presents a larger down payment will look more favorable to a seller because it is seen as less of a risk for something to go wrong with the buyer loan and overall a stronger buyer.
• Seller Contributions: In a market where every edge counts, avoiding requests for the seller to contribute to closing costs can make your offer more competitive.
• Appraisal Safety Nets: Utilize Form 22AD (Additional Down Payment). Another facet of a compelling offer that a buyer could consider if said buyer has financing conditions upon an appraisal is either waiving your appraisal contingency (I do not recommend this option since it basically puts you on the hook as the buyer to pay for any out of pocket difference if the appraisal comes in lower) or what is a better option is to use an addition down payment form where you pre-agree to pay UP TO a certain amount more out of pocket in the even if the appraisal comes in less than. This will definitely make your offer appear strong in the eyes of the seller especially if your offer is above the list price because you are backing up that amount with a certain amount of money reassuring the seller that they are getting a certain amount of money no matter what. I like this form because it puts a limit on what you are agreeing on so you as the buyer control exactly what you want to offer.

Tactical Moves for the Informed Buyer:

• Waiving HOA Review Period (Form 22D): If you're comfortable, skipping this can speed up the process, but always weigh the risks. And believe me, there are risks to this! it will help your offer but do not do this if you do not understand what you could be risking! Rich out if you want to weigh the pros and cons :)
• Proof of Funds (Form 22EF): If you are buying the home with cash or a large down payment, providing proof of funds with your offer will make your offer stronger because instead of the seller having to rely on just trusting the buyer that they are being honest about said funds, they buyer is showing the seller proof of said funds for either down payment or all of the fund needed to buy the home. A good rule of thumb is if you are a cash offer provide proof of funds and if you are an offer with a home loan provide a full preapproval letter from the lender and proof of funds for the down payment and show proof of enough funds for all your upfront costs and any necessary additional funds to close the loan including what you may have agreed to pay if the appraisal comes in lower.

Form 34’s Strategic Play: Releasing earnest money early or making it non-refundable through Form 34 (Bland Addendum) Can be a very "Baller Move" should I say! I have seen a lot of very competitive home buyers put this language in their contracts where they are releasing their earnest money early before closing or sometimes right when they go under contract to allow the seller to have those funds to use right now versus waiting for closing. This can be a benefit to many sellers seeing just how confident and strong the buyer is on closing the deal and the seller loves the idea of using those funds right now vs later but it can come at a huge risk since if the buyer does not close on the house when they were supposed to, that money is gone and the seller can just sell to somebody else. Again there are a ton of pros and cons to talk through with this one and should be saved as one of those top 3 nuclear options to chat about when putting a strong offer together especially if it's a very large sum of money you have agreed to release as earnest money. I have seen some home buyers just give away 100 THOUSAND dollars to a seller without even blinking so everything is a matter of perspective. You also want to make sure that since there isn't a specific form that covers this and it's your realtor creating this language on a blank addendum, make sure you trust that your realtor has written it the right way so it can not be misinterpreted.

Inspection Nuances and Form 35 Mastery:

• Short Inspection Periods: Opt for expedience but remain thorough. It’s a balance between agility and due diligence.
• Neighborhood Review Waivers: Any serious home buyer who is in a multiple offer situation is not including a neighborhood review as part of their inspection. It's best to check out the neighborhood ahead of time prior to making your offer.
• Pre-Offer Inspections: Pre-inspections are a great choice for buys who want to make their offer not condition upon a home inspection (great for the seller) and still gives the home buyer peace of mind to know the condition of the property (also GREAT for the seller + less liability). Whenever I am coaching sellers on which offers to accept, accepting an offer from a buyer who has done a pre-inspection vs who has WAIVED their home inspection is a better option because it takes less liability off the home seller that the buyer did indeed get a home inspection conducted before making an offer.

• Waiving Inspections: I mentioned this option above. Some homebuyers don't want to pay for the home inspections or risk paying for multiple pre-inspections and get tired of losing multiple offer situations by keeping an inspection contingency in their offers so they elect to waive their home inspection. Just be aware of the risk because there indeed are risks!

• Seller Repair Waivers: Another good option for a home buyer who insists on keeping a home inspection contingency in their offer but wants to appear stronger than other buyers who are submitting offers with inspection contingencies is to make your inspection contingency a "pass/fail" contingency which communicates to the seller that you as a buyer just wants to get the inspection done to make sure the house is safe for you to live in and you are not going to come back to the seller after the inspection is conducted asking for any repair work to be done. You will essentially "take it or leave it" after your home inspection.

Form 35E - The Escalation Advantage: Rather than offering an arbitrary amount above the list price just to get the home, I am a huge proponent of a buyer using an escalation clause to let the market prove where the price should land. Deploying an escalation clause with significant increments can catapult your offer to the forefront, demonstrating readiness to surpass competing bids, yet ensuring you don't overshoot your budget unnecessarily. The escalation clause lets you choose the incremental amounts that you are willing to beat the other offers buy and a max walk away price. Suppose you are the winning offer and the escalation clause was activated. In that case, the listing agent/seller will fill out some information to show you where the final price landed and will provide to you as the winning buyer a copy of the contract of the other person's offer that you beat proving to you where the escalation was supposed to land. It allows you to bid confidently on a home without leaving money on the table.

Empower Your Offer with Knowledge and Precision: This comprehensive approach, from tactical form usage to strategic contingencies, empowers your offer to stand out amongst a pile of other offers. Just be sure your business agent is clearly communicating the strengths of your offer and what sets it apart. great listing agent will be coming through these offers to make sure they don't miss anything but I like to leave nothing to chance. This is why whenever I submit an offer for a client I both communicate the strengths of the offer to the listing agent once submitted over the phone and I make sure to highlight in bullet points the things about our offer that make it stand out.

Connect with Me: Are you looking to buy or sell a home in the Greater Seattle area? Connect with me today, and let's turn this year into a milestone of success and smart investing! I'm here to guide you every step of the way. Schedule a personal consultation to discuss your specific real estate goals.

Schedule a Consultation with me here!

Also, did I mention that I a

m great at helping you relocate over here!? If you need any help with tips to relocate to Seattle, WA please reach out!

👉 Case Studies and More: Discover real success stories and get inspired by other Home Buyers here! Check out our YouTube playlist for client journeys in the Seattle real estate market.

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👉 Check Out Matt & Kristine's story of winning a bidding war and getting into an amazing home on the very first offer we wrote for them with using some of these strategies!

You can check out the Episode in the Podcast form Here

AND

You can also check it out as a YouTube Live/Podcast right Here!

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