Offer Etiquette (Seattle: for sale, real estate market, loan)

[SouthSeasLifestyler]

This is probably a strange question, but I realise that different places have different practices regarding making offers to buy property. For example, one country I know of, you never bargain. Another, the listed price almost always has built into it a 10% buffer to bargain off. What is the practice in Seattle/Eastside?

I have noticed for example, a property listed below the valuation, but the sold price ending up over 100K the asking price (which is more or less the estimated market value), I'm guessing they listed at the low price to attract buyer attention?

If you offer over asking price, how much? What is this escalation clause thing I hear about?

The other thing about offer etiquette ... what sort of contingency clauses are "normal"? Most people are pre-approved, but I suppose unless you have cash you are always going to have a finance contingency clause. What about building inspections? Title searches by lawyers? etc. What else?

Also, regarding real estate agents ... are they only used when selling a property? Or buying? I'm guessing the seller pays his agent based on commission, but what about a buying agent? How does the buyer pay him, or does he split the commission with the selling agent (this was a common practice here). Or do buyers just turn up and make an offer on their own (most common practice here).

Sorry, I know these questions must seem SO basic to you, but as you can tell, I come from a different real estate landscape, and I am aware I can't make assumptions.

SSLifestyler

[Hemlock140]

You can use a buyer's agent or not, and if you do, the commission does get split between the selling and buyer's agents.

There is no limit to what you write into the offer, as long as it's legal. The seller can always change it or turn you down if they don't like it. The escalation clause is like automatic bidding at EBay, you give the realtor a maximum and bid over the others until your maximum has been exceeded. In a bidding war it helps get you the house if you can afford it without offering more than you have to. It's common for a listing to be too low to encourage a bidding war, but lately, in our area, that's not what's happening. Listings are based on recent comps, to ensure it will appraise, but then several people with big down payments or cash come in and make higher offers because inventory is low, and their agents tell them when there are multiple offers. We normally see contingencies on the loan approval and on an inspection, but lately even those are being dropped to get in a better position with the seller.

We have seen people bid on 2-3 homes in the hope iof getting one of them. If they are accepted on more than 1, use the inspection to get out. In a recent case the inspection showed that the furnace was "near the end of it's life." The buyers did not ask for a new furnace, or reduced price, but just optioned out and went for another house they liked better.

[mkarch]

Using a buyers agent is common here, and if you have a good one they'll be able to answer a lot of these questions and guide you through the process. The different phases of the transaction have a lot of little nuances that someone who hasn't bought a home here recently may not be aware of.

How much you offer is going to depend on the property and how it's priced. Due to the lack of inventory, sellers with desirable properties are pricing low as a way to generate competing offers and get a better price. It's not normal to see this many home sellers using this strategy. You probably want to avoid making an offer on one of these places because the 'bidding wars' aren't really conducive to the buyer getting a good deal.

As for bargaining - yes, it's common. IIRC we went through about 6 offers and counter offers before settling on final terms. However your bargaining may be limited if the owner has other strong offers.

[sll3454]

The seller pays the commissions for both agents. Some buyers might go without an agent, thinking that the seller will give them a better deal if they don't have to pay the agent - but for most people this would not be a good idea. You'd lose more than you'd gain, if you gained anything at all.

A good agent will be able to explain the process to you.

[Ira500]

Yes, the title contingency, financing contingency, and inspection contingencies are normal.
In much of the Seattle area right now, The inventory of homes for sale is very low, so multiple offers for the same property are not that unusual. And that's one of the reasons for offers over asking price. It's not so much etiquette or local tradition as it is the current real estate market.
A real estate agent representing you as a buyer will know the local market and be able to give you a realistic estimate of what price a house is likely to sell for. If you don't use an agent to represent you, what will most likely happen is that the seller's agent will represent you and collect two commissions. It's not a good idea, because the seller's agent's best interests may not be the same as yours.
The typical listing around here will designate a certain amount for commission, and the seller will pay both the listing agent and the buyer's agent. But really: Where is the seller getting the money to pay both of these commissions?

[Kayela]

I would definitely get your own agent. They can save you a lot of time, money and confusion. So worth it - esp coming from out of the country. They know the local market and can recommend neighborhoods that you might not have thought of. They're also on top of all the listings the second they hit the market.

[CarawayDJ]

Before I purchased my home I missed out on a couple of homes because I didn't offer enough. The 2nd time was a cash offer at list price. I just sold my home and watched a lot of nice people miss out on the home they wanted because they misjudged the market. One couple had 2 purchase attempts fall through over the past year. They made their first offer their best offer and they got my house. That's exactly what I will do the next time I am looking for a home. If it is a seller's market I will make my best offer right up front and not screw around trying to save a few grand. Heck, even in a buyer's market I'll make sure my offer is the best. It just isn't worth losing the home you really like over that amount. My first Realtor didn't have a clue about the market and advised me poorly.

So how do you know how much over the list price you should ask? I don't think it's as hard as it seems. It does require that your Realtor do a little homework though. My listing agent for the home I just sold was providing me with email alerts almost daily anytime a house similar to mine in my area was being listed, changed status, or sold. Every sold house has a listing price and a sold price. One need not be a rocket scientist to look at this and get a feel for the market. In my area, similar houses were selling for 5-10K over list price. I don't see why a good agent can't look at recent sales and give you a feel for the market. They can narrow it down to the area and price range you are looking at. Of course, this also requires that you trust your Realtor. I can easily imagine some buyers being suspicious, thinking the Realtor just wanted to make more on the purchase.

[SouthSeasLifestyler]

Thanks so much everyone for your insights. Yes, I'm just "studying up" as best I can (on paper) to get a feel of things, but all your insights are useful. Yes, being out of town, I think an agent can help navigate some of the nuances. However, I do know that agents do want there to be a deal as that is how they get paid (no insult intended to anyone here), so in a sense, I do need to know something so I'm not just giving away contingency clauses or paying more than I should because someone is telling me to. Having said that, I find that when you find "the one", the house you REALLY want, that's when you cough up a little more! I've offered on houses where "if I got it for this price, it would be a good deal" but when I find "the one", I'm like, let's make a strong offer. And many years down the track, when you are still in love with the property you live in, the extra 10k doesn't seem so bad (in fact, you continue to congratulate yourself for securing the house). Happy seller, happy buyer, and I guess, happy agents.

SSLifestyler

[SouthSeasLifestyler]

I've run across something novel ... what is a Short Sale (why is it significant that they would put it in the listing?) and are there particular mine fields associated with it? They don't seem to be as popular ... (on Redfin for hundreds of days), just wondering why.

SSLifestyler

[RVD90277]

short sales take a long time...not only do you have to agree to a price but the banks (all lenders), etc. have to agree because they will be getting paid less than what is owed to them.