We’ve just closed a hot June market — with many properties still receiving multiple offers and selling above the asking price.
While we’re seeing some homes in the range of $2 million and above stay on the market a little longer than they had in previous months, homes are still selling simply because the supply is limited.
Even in the hottest sellers’ market, not every home will move quickly or net several offers. But the right broker, with proven experience in your neighborhood, can help you determine if your home has what it takes.
Will my house get multiple bids?
Your broker will show you comparable listings and have the right data to predict how your home will fare. While anyone can get a list of similar properties in general terms of price or number of bedrooms, you really want someone who has been in those homes and knows the details of the sales themselves. The right broker will also have experience in setting your sale up for success. It’s more complicated than merely planting the “For Sale” sign and entering it into the multiple listing service.
The June sales data reflects that homes priced from $500,000 to $1.1 million are selling 104 percent listing price to sale price. Creating the environment for a final price higher than asking price involves getting competitive bids, analyzing them and accepting the most valuable offer. This takes a comprehensive strategy.
How will it work?
When I look at a house I feel will fetch multiple bids, I set a date for reviewing offers. For example: If the property goes live for showings on a Monday, we stipulate in the listing details that the offer review date will take place the following Monday — that gives us seven days of active market time including a full weekend of activity. That tells experienced brokers that this is a hot property and they’d better get their buyers in ASAP.
We’ve added seven days onto the home’s market time, but we’ve also created a foundation to get my seller their highest and best sale price. If your property is in the competitive sweet spot, a broker who’s only concerned with selling your home quickly may not build in time to receive, review and respond to multiple bids. This can lead the seller to take the first offer to come in, which may not be the best one possible. Knowing the data will dictate how to price the home to be competitive and create an auction-like outcome.
When I list a house and see multiple showings by the same broker and get requests for buyers to perform pre-inspections during that first week, I know we’ve set our seller up for success.
It’s not just price
After the week of buyer activity, we review the offers. This is where it can get tricky for a seller who’s never had to review multiple bids. The first instinct is to accept the highest offer and start celebrating. But it’s usually not that simple.
The offer contracts you’ll get contain details that will vary from bid to bid. And you’ve got to make sense of them. We’ve developed a method that tracks and compares the variable elements for our clients, so they can clearly make the best and most informed choice.
We also look at how much earnest money buyers put down immediately, and if they’ve submitted a financial disclosure document. We look to see if there’s an escalator clause in the offers — an indication of how much more a buyer may be willing to pay, and in what incremental amounts they’re willing to raise their bids. After that, it’s time to look at contingencies.
How will they pay?
How a buyer is funding the purchase of the home you’re selling can be big factor in your decision. An all-cash offer, for example, is the strongest payment option for the seller.
An offer contingent on a buyer securing financing for the purchase can add time and complications. Financing questions include:
Getting the financing also depends on an appraisal of your home. The lender will send an independent licensed appraiser to assess the property and assign a monetary value to it based on comparable properties and its condition. It’s unusual that a property won’t appraise for the amount a buyer needs in our market, but it can happen. Even if the home sails through the appraisal, lenders do need time — usually 30 days for a conventional mortgage — to get all the approvals done.
Other details
Remember those pre-inspections? Those allow buyers to waive the inspection contingency in the standard contract — which eliminates another hurdle in getting to the settlement table quickly and easily. To make their offers more attractive, many buyers will also waive contingencies for title review, neighborhood review, or the Form 17 seller’s disclosure. Waiving these contingencies means no renegotiation based on findings and also smooths the way to the final sale.
The closing and possession dates are also variables that may sway the sellers’ decision. A seller may need time to find their next home, and need the proceeds from the sale to buy it. So look carefully at the dates.
Shaking it all out
This is where escalation clauses become important. Your broker will convey the sellers’ needs to the buyers’ brokers. The buyers may choose to increase their bids, and you may have multiple buyers increasing their offers. But even in this case, the highest price may not be the best deal. A smart seller, working with their broker, will again look at all the relevant details.
In one case this past month, my clients received 11 competitive bids on their home. I compiled all the data and we reviewed all the offers — considering cash versus mortgage, all contingencies and other details — and we watched the price rise in a bidding war among buyers.
After reviewing all the information in hand, my sellers made a choice they were most comfortable with. The offer they selected was the ninth on the list out of 11 in terms of price. But the other terms of the winning offer were so favorable — there were no “out” contingencies — that it put that offer well above the rest. It was a clean and easy transaction — and ultimately the final price was still 116 percent above their original listing price.
CHRIS SUDORE is the founder of King County Estates.