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By Joe Nabbefeld
May 26, 2016
Buying a home in an “extreme sellers' market” like ours is masochism. It's painful. It can suck.
Unless you live under a rock, you already know this because these extreme conditions have been with us for more than four years now.
But unless you are in the trenches you may not really understand what it feels like. Let's find out.
Jen and Bruce
Jen and Bruce lost their first home, an inexpensive condo on North Greenwood Avenue, to their lender during The Recession, but they didn't give up the dream.
Jen's a teacher on the Eastside. After losing the condo, they lived in inexpensive rentals and slowly rebuilt their credit scores. They have two small children now, and have come to like the Renton Highlands. That's fortunate because they won't be affording anything in Seattle. That foreclosure means all they can do for a loan is 3.5 percent down FHA — and that's with some help from parents.
Your heart goes out to them. They'll never say how humiliating it feels to be shoved out of Seattle, but it is.
In the past year, we've looked at every single home that has come on the market in The Highlands priced at $350,000 or below. They've paid to pre-inspect two of them. That's about $400 each time that they don't get back. Someone has outbid them each time.
“The wave” — this super-tight market with multiple offers — has washed down into Renton. It rolls out from Amazon.com in South Lake Union to Capitol Hill, Queen Anne, now North Beacon Hill, Mount Baker, Columbia City, Renton and Kent.
The main reason Jen and Bruce lose the bidding wars — even if they've offered the highest price — is that they're FHA (3.5 percent down). So far, no deal. They've quit trying to jump on new listings and slam down an offer at deadline with all the others. So much time, heartache and expense goes into each one.
Instead, they see a house online, drive by, determine they would love to have it. Then they wait. The asking price for one right now, for example, is $325,000 — the top of their range. They'd love to have it, so we put it on “the watch list.” If the home goes past its “offer review date” (usually about a week after it listed) with no offers, then maybe they'll make an offer. Other times they wait for the market to “beat up” the seller and force down the price. Maybe there's even another beating and another price drop. Maybe then Jen and Bruce can make a reasonable offer.
And every night they go home to their inexpensive apartment and look at listings online.
Millie and Kate
Kent? Well guess what, the darned wave didn't stop there. Try Tacoma! Yep, multiple offers, bids over the asking price, waive this contingency, pay for pre-inspections, lose and then lose again.
Millie and Kate live in a one-bedroom condo in Columbia City. It's no palace. Kate, a school music teacher, had to put her grand piano in storage three years ago. Millie and Kate are about 60 years old. They want a home big enough for the piano, with a yard for their cat.
The condo — and the mortgage — are in Millie's name. They have accepted the fact that they can't buy in Seattle. Or Renton. They thought about Olympia and Bellingham but both have teaching jobs and friends in Seattle. They will commute (argh!) until they can find jobs close to where they buy.
How about Tacoma?!?
So they've fashioned this plan: Kate tapped her retirement funds for the down payment so she can buy the home in her name, with the mortgage in her name, while the condo deed and mortgage remain in Millie's name. They will close on whatever home they can eventually manage to snag, move there, and then put the condo up for sale.
They see this as likely the last home in their lives.
We tracked down one southwest of Point Defiance Park — then poof, it was gone. Under contract before we could see it. Another was in terrible shape. Another was already taken by the time we arrived.
Time is passing. They'd like to avoid having to sell the condo in August, and Kate is getting ready for shoulder surgery while Millie is still recovering from chemo.
Aha! One just came “back on the market.” Some buyer won the bid but after an inspection contingency he hammered the seller so hard that the deal fell apart.
The home is in North Slope, near the Stadium District. It's more than 80 years old and plenty of things need fixing, but sellers hold all the cards these days. Take it now — as is — or someone else will.
Millie and Kate put together an offer. High earnest money. At the asking price. Short inspection period. Quickest close their lender can tolerate — one delay and we'll have to negotiate with someone who holds all the cards for some more time.
The listing broker lets us know that another offer is coming. Of course! What dutiful listing broker doesn't call every other interested party as soon as they can tell that the first buyers are getting serious? It would be listing broker malpractice not to do that.
Millie and Kate have no choice but to believe this rumor of a second bidder — if they don't and it's true, they've wasted all their time and resources. So they tighten and increase their terms.
They got it in contract. Gee, you'd think we won the lottery!
Henry and Patty
High prices drove Henry and Patty north. Their Madison Valley condo sold in a week. Henry bought it at the bottom of the recession, making him a certified real estate genius. Patty's job is near Mukilteo, so they started scouring listings for Lynnwood, inner Shoreline, Mountlake Terrace, South Everett.
We found one that might make you think of that joke about a one-eyed toothless dog with scabies and a crutch named “Lucky.” It came on the market without an “offer review date.” We got their offer in on the second day, a Friday: $30,000 (10 percent) ABOVE the asking price. The seller sat on it and sat on it. Why? To give others the chance to start a bidding war. What can we do? Either you blindly up your bid, or you wait. You don't come this far to just walk away.
We scheduled an inspector for the first chance we could get, which was the next Monday. Sure enough, the seller still hadn't responded by Monday. So Henry and Patty paid for the inspection. As the inspector left at about 5 p.m. we got on speaker phone at the dining room table and told the listing broker that Henry and Patty would waive the inspection contingency. The listing broker said other bids had come in over the weekend equal to Henry and Patty's and they won because they had “pre-inspected.”
The one bit of justice is that when the appraisal came in low a couple of weeks later, Henry and Patty went steely and insisted the seller come down in price or Henry and Patty would walk. The price came down $10,000.
Juan and Li
These tales aren't just about buyers at the lower end being pushed out. Take Juan and Li. Juan works at Google in Kirkland. Li will go back to work in finance, but not until she finds them a $1.5 million Kirkland home to buy. They can do more than 30 percent down at that price.
Sure enough, The Wave has also washed over $1.5 million homes.
We see about five homes a week with Li. Week in and week out. Anything fresh on the market. She's been looking for a year. She has lost bidding wars several times but this has not caused her to go crazy — as in be the one crazy enough to bid whatever just so you can stop looking and move in. Rather, it has motivated Li to get stealthier and more stubborn: “I'm definitely not going to overpay now!” We even analyze $2.2 million houses to see if the market has beat them down enough that Li can swoop in.
We've also made connections with a lot of listing brokers. They all know Li. We're going to see one soon before it goes onto the market, a preview. But here you go: We'll spend about 15 minutes there. When it goes on the market, the review offers deadline will be three or four days later. That's right. It will come live on a Friday and take offers on either the next Monday or Tuesday. It will list at $1.9 million.
Who can't make a $1.9 million decision in 15 minutes?
As a Puget Sound Business Journal headline said last year: Home Is Where The Highest Bidder Lives.
It's a great time to be a seller. And a lousy time to be a buyer.
Joe Nabbefeld is a Realtor with Windermere Capitol Hill. You can reach him at www.RealSolutions.biz. He was the DJC's commercial real estate editor back in the late 1990s and early 2000s.