Seattle Market Update – August 2014

Inventory is edging up. More sellers put their homes on the market last month compared to a year ago, but there is still less than two months of inventory in King County. And hot markets like Ballard, Green Lake and North Seattle have only about a month of inventory. Four to six months is considered to be balanced, so the market continues to favor sellers. The summer heat has put the brakes on somewhat, but we still are in a fast paced market.

This enormous demand for homes close to the city center has resulted in rising prices. The median home price in King County in July was up 8 percent over last year to $468,000. Seattle saw prices jump 17 percent to $543,500. On the Eastside, home prices were up 10 percent from a year ago to $624,900.

We continue to see multiple offers and bidding wars in highly desirable neighborhoods. A Seattle Times analysis shows that almost 40 percent of homes in King County sold for more than list price between April and June. There just isn’t enough inventory of the right homes in the right locations to satisfy demand. As I write this there are just 28 homes for sale in Green Lake, and 11 homes on the market in Laurelhurst.  Needless to say, whether you’re looking to move up or fly the empty nest, it’s a great time to sell a home.

Want to know what’s happening in your neighborhood? Check out our monthly Neighborhood Report for:

Laurelhurst

Windermere

View Ridge

Sand Point Country Club

Bryant

Wedgwood

Capitol Hill

Madison Park

Montlake

Portage Bay

Ask the Home Advisor – What Are Escalation Clauses?

Q: I’m a first-time buyer, and I hear that many offers in Seattle include escalation clauses. Can you explain to me how they work?

A: The phrase “multiple -offers” is every seller’s dream. Conversely, buyers lose sleep over it. In today’s market we are seeing multiple offers more often than not. Our office alone has experienced homes getting double-digit offers on several occasions in the last few months.

The bottom line is that the person who offers the most money for a property usually wins.  Of course there are other terms that matter, most notably financing and inspection contingencies.   However, it is natural for sellers to want to get the highest return that they can for their home.  In this fast and furious market, the escalation clause –  also known as an elevator clause –  is a tool that buyers can use.  An escalation clause is designed to edge out competing bids by automatically raising an offer when a competing bid comes in. When that competing bid is made, the escalation clause automatically increases the buyer’s offer by a preset amount. The clause limits (or “caps”) the buyer’s maximum bid. For the clause to be triggered, sellers need to prove there was another bona fide offer.  Typically, a copy of a competing offer serves as the proof needed to trigger an escalation clause.

We understand that this strategy is not for everyone.  We only recommend using this clause if the buyer is 100% committed to a property.  Since the person who offers the most will likely win, an escalation clause may be the way for you to get the home you really want in a highly competitive market.

Ask the Home Advisor – Navigating Multiple Offers

Q: I am looking to buy a house, but I keep hearing about all the multiple offers. What’s the best strategy for finding a home in today’s hot market?

It is amazing what a difference a year makes. The last few years have been tough on sellers. They needed to price their homes aggressively to attract buyers. Today inventory is at a historic low, and buyers are competing  to get the home they want. About 70% of the inventory we see is selling very quickly, and usually with 2 to 15 offers.

Here are  some tips for buyers on how to navigate the current real estate market:

Get to know the market and the houses in your price range.

As I mentioned, the market looks a lot different than a year ago.  Getting a feel for what homes in your price range and neighborhood of choice are selling for today will help you make the right offer when the home of your dreams comes on the market.  Take some time to tour properties that fit your criteria. Even though you might not be interested in a particular home, seeing it in person will help you to compare it to the home that you are interested in.

Know your budget and look accordingly.

Be prepared to look at homes +-10% of your budget.  We are seeing homes sell for 5, 10 and even 20% above the asking price right now.  We are also seeing some homes that don’t sell quickly go for 10% below asking price.

Think about how long you plan to stay in the home.

Will this be an interim home or a “forever” home?  If you plan to sell again in three to five years, you don’t want to overpay in a hot market and find yourself selling at a loss in a cooler market.  On the other hand, if you love the home and plan to live there for decades, you don’t need to worry about return on investment.

Talk to your lender and be ready to go.

Don’t wait to find the perfect home before you call your mortgage professional.  Sellers want to know that you are qualified when you make your offer.

Be prepared to make sacrifices.

It may be that the house you want, you cannot afford.  Have an open mind and consider a property’s potential.  A home in need of a bathroom redo or a kitchen remodel isn’t as appealing as a move-in ready home, but it’s usually more affordable.