I received the following question this morning from a frustrated home buyer:
We recently lost our second offer on a home to a all case buyer. I know that many other buyers have been at this longer than a year and spent far more than we have but before I get to that poverty point I would like to show everyone what is going on.
The first time we made many mistakes such as: inspection contingency upon acceptance of offer, financial contingency, asking for rent from the owner if they wanted to stay past closing. Our first realtor was not informed and we just used wisdom from previous house buying experiences on the East Coast. So, the second time we made an offer, we came in extremely strong.
Here are the facts that I would like to share with you to expose what we see as a scam.
- House: ~3,000 square foot 5-bedroom home Ballard in great condition with an asking price ~$850k
- We offered $10K over asking with an escalation clause up to $77K over asking.
- We gave $30K as earnest money and allowed the seller to talk half upon acceptance of our offer.
- We allowed the seller to stay in the property for 2 months after closing – rent free.
- We spent $430 for a partial inception and sewer scope.
- We dropped all contingencies – another words we would loose our 30K if our financing didn’t come thought or we changed our minds.
So tell me – how is our offer not as good as cash? So what is the short answer? Listing agent and real estate agencies in general are uses financing offers to drive up the amount for cash buyers – thus making the seller’s agent’s commission higher and they will get it 2 weeks sooner.
How can a hard working person, smart with their money, buy a home. Currently Seattle is on sale to China or the super wealthy for the highest cost at the middle classes expense.
It’s super frustrating out there right now for buyers. Unfortunately it’s a lot more difficult to predict the likely outcome of the frenzy this time around. Back in 2005 when I started Seattle Bubble the market was very similar, but it was obviously being propped up by a bunch of dangerous, unsustainable stuff like risky mortgages and financial derivatives.
This time around, as the reader points out, all-cash buyers are driving much of the frenzy. It’s very difficult to compete with, and also highly unlikely to collapse in a spectacular bursting bubble like last time.
What’s your advice for this reader? Sit it out for a year or two? Keep trying until maybe, two dozen offers later, they finally land a house? Lower their standards?
If you’ve got a question you’d like to get thoughts on from me and the community here, drop me a line.