It is a familiar scenario: After exploring nearly a dozen homes with your realtor, you finally find the Northeast Seattle real estate of your dreams. It has the perfect number of bedrooms and bathrooms. Its views are second-to-none. It is located in a top-notch neighborhood that suits your lifestyle and is near terrific restaurants, shops, parks, and schools. It’s also within your means and has that inexplicable warmth and energy you have been eager to discover. But then you realize that you’re not the only interested buyer contending for the property, and a bidding war is brewing. Read on for Ryan Rockwell’s expert answers to the most crucial questions about bidding wars on Belltown, South Lake Union, and Bellevue real estate.
What is a bidding war?
An escalation in bidding wars dominated the headlines in the last two years as the real estate market heated up to historical temperatures. In 2021, the
Puget Sound Business Journal reported that Seattle’s rate of bidding wars was the fourth highest in the nation — a result of falling inventory and increased demand. A 2022 survey conducted by the Realtors Confidence Index found a median of
4.8 offers per home sold. While there is an edge of excitement to the very words “bidding war,” it may be daunting and disappointing for homebuyers, particularly those who are working with a constrained financial strategy and in places as desirable as Seattle, where the average home price is
$959,229 as of November 2022.
A
bidding war is when multiple prospective buyers bid for the same home or commercial building. This competition is usually driven by fewer properties than there are buyers; oftentimes, they occur in exclusive, coveted areas (although the
pandemic triggered a rise in bidding wars for affordable homes) and/or places where the real estate market is deemed “
tight.” During a bidding war, buyers will raise their offer and may ask for fewer terms with the hope of obtaining ownership of a home. This may push some prospective buyers out of the competition and lead to home sales that are well above their original asking price. Indeed, a 2020 survey found that
42% of homebuyers engaged in a bidding war in the first five months of that year.
How do you recognize that a bidding war may be afoot? Let’s answer a few key questions.
What are the average days on the market (DOM) in your desired area?
If homes are selling quickly in the region you’ve chosen, there may be a chance that sellers are receiving multiple offers. Your realtor should have the DOM for your desired area — whether it’s Belltown or South Lake Union real estate — which can help you both assess if you’ll need to plump up your purchase offer.
Are properties in the region selling above their asking price?
Homes that are selling above their asking price are a solid indicator that you may be working in an environment in which bidding wars are common. You may have to mentally, psychologically, and
financially prepare to up your purchase offer. In fact, the Realtors Confidence Index survey mentioned earlier found that
48% of homes sold above their asking price — a 2% increase from the previous year. Logically, this makes perfect sense. Rarely would there be a need for a hopeful buyer to bolster their purchase offer unless they were vying against others for a property.
Is the inventory low?
If housing inventory is low in the city or neighborhood you have selected, there’s an increased chance that you may be competing against other buyers to attain your desired Northeast Seattle home for sale.
How can I navigate a bidding war?
Bidding wars are fairly commonplace and can be navigated successfully with the right counsel.
As the statistics above demonstrate, bidding wars were practically a fact of life in the last two years. As the real estate market continues to change amid
rising mortgage loan interest rates, this may lead to a cool down in bidding wars, which began declining in Seattle in
March 2022. Nonetheless, they are still a possibility, especially in “hot,” desirable areas. If you find yourself in one,
experts suggest that now is not the time to put in a “low-ball” purchase offer. They also indicate that you may want to waive mortgage contingencies and sweeten the deal by offering to cover
appraisal gaps and closing costs.
Additionally, you might include an escalation clause. With
this clause, your purchase offer automatically increases — up to a limit — to outbid others. You might also want to determine precisely what the seller desires, whether it’s a rapid closing or the opportunity to stay in the home longer to find a new residence. Lastly, if it’s viable, consider putting in a
cash offer or increasing your down payment.
Above all, work with a seasoned, dedicated real estate agent. An excellent local realtor will have profound insights into the enclave you’ve determined as the best place to purchase a home. They will also advise on which homes are worth going into a bidding war for and when it’s time to walk away from a bidding war altogether.
With over 25 years of experience in the real estate industry, Ryan Rockwell is one of the leading brokers in Puget Sound. Specializing in Northeast Seattle real estate, he has helped countless buyers and sellers navigate bidding wars with confidence. Book a consultation with him today and start building a satisfying, lifelong relationship with one of Seattle’s most acclaimed professionals.
*Header photo courtesy of Ryan Rockwell
