Brokers explain how to win the cheese in the Eastside’s home-buying rat race
With a booming economy and a surge of tech jobs, our region is experiencing a housing demand that is far outpacing supply. And it’s a trend that shows no signs of slowing.
In a forecast for 2017, for example, our area came in fourth in the country for total real estate prospects, behind Austin, Dallas-Fort Worth, and Portland, according to the Emerging Trends in Real Estate report by the Urban Land Institute and PricewaterhouseCoopers. Moreover, the report also states that our region’s population growth is expected to remain at twice the national rate.
So what can homebuyers do to set themselves apart and land a winning bid when there are more of them than there is inventory? To solve this conundrum, we sought out some local real estate brokers and asked them.
Of course, the first thing brokers suggested was to seek out a time-tested agent. Then, they suggested buyers do due diligence and research endlessly. The old adage that real estate is all about “location, location, location” may be alive and well, but possibly more important is “research, research, research.” Research the climate of the local economy and home market. Research real estate firms and their brokers. Research each neighborhood, school district, homeowners association, and property tax table. Research home title histories to find out how many owners the home has had and what those owners paid. Research the listing agent. Research the listing agent’s firm.
This diligence also can help save money. Knowing how much a home previously has sold for, and how much nearby homes are selling for, will give buyers a good indication of the true value of the home rather than putting trust in a possibly inaccurate listing price, according to Kamal Jain, CEO of Faira, a Bellevue-based online real estate marketplace.
“Often the list price is significantly lower than the value of the home,” Jain said. “If a property is worth $800,000, by listing at $700,000 the listing agent can boast: ‘Oh, I got $100,000 more for my client.’ So buyers basically need to be a step ahead by ignoring the listing price and having their own value judgement of the property.”
With this value in mind, many buyers will obtain an initial pre-approval letter from their lender and call it a day. Unfortunately, this is not a true representation of how much a lender will actually loan to a client. The pre-approval process is only a preliminary glance at financial records and does not necessarily guarantee a loan. Once a buyer is ready to bid on a property, that individual or family will get thrust under the proverbial microscope; every financial transaction is scrutinized.
Instead of simply obtaining a pre-approval letter, most brokers suggest taking an application as far through underwriting as possible right from the start and bypassing the pre-approval process.
“Buyers should have a firm approval showing that the buying strength is just absolutely rock solid, and there won’t be any questions of the buyers’ financial qualifications,” said broker Karl Lindor of Kritsonis & Lindor, which operates under the Windermere umbrella.
Second to underwriting, Lindor suggests a show of good faith by putting forth as much earnest cash as possible, up to (or exceeding) the state maximum of 5 percent of the purchase price that a seller can request from a buyer.
“I’m a huge fan of a strong 5 percent range, and more often than not, I’m always the highest earnest money (in multiple-offer situations), and many agents and sellers look at that as buyer strength,” Lindor said.
Faira assists buyers who may have found a home via open houses or listings on sites like Redfin and Zillow in submitting an offer. Since the buyer has done all the work of finding the home, Faira returns the 3 percent buyer’s agent commission back to the buyer, thereby allowing that buyer to potentially boost their offer by 3 percent. Alternatively, Jain said, Faira will cut a check for $20,000 to be used as earnest cash for the transaction.
“Rather than giving you your 3 percent after the fact, we can give you 3 percent before the deal is even closed. That reduces your risk and increases your chance of getting the home significantly,” Jain said.
Once a buyer has secured financing and decided on terms, it’s time for the broker to present that offer to the seller. Thadine Bak, principal managing broker at Coldwell Banker Bain in Bellevue, teaches a continuing education course to her employees entitled Presenting and Receiving Offers. Throughout the class, Bak teaches her brokers how to write what she calls an offer summary statement.
“It is a summarized list of bullet points highlighting the key points to an offer, trying to make that listing agent’s job easier,” Bak said. “If she is receiving five, 10, even 20 offers, (our summary is) all highlighted and bulleted explaining what the basic terms of the offer are.”
Bak said these bulleted lists should include things like the buyer’s name, listing price, offer, escalation, earnest money, close date, financing, closing costs, and the loan officer, and should be presented in person whenever possible.
“I think that high-touch is really important to sellers because this is a big, important transaction for them,” Bak said. “I had one seller who commented that the buyer must really want (their) house, they made their agent present their offer in person, and nobody else did.”
Coldwell Banker Bain’s Allison Trull adds a fun flare to her offer presentations. She’s presented with picture frames, bottles of wine, and lottery tickets with a note proclaiming, “I may not be the highest (offer) but we could be if you are the winner!” And one of Trull’s presentations will be a talking point at CB Bain for years to come.
“I joked (with the listing agent), ‘What is your seller looking for so I can deliver it on a silver platter?’” Trull said. “So it started as a running joke, and I ended up buying a silver platter and delivering it.”
“Allison with the silver platter; she won that, but when she went in, her offer wasn’t the highest,” Bak said. “And that is what she wanted; she just wanted to get their attention enough that if her first try in the offer that they wrote wasn’t good enough, they would be curious enough to give her a second stab at it.”
In addition to presenting in person, Bak suggests including a personalized cover letter, also known as an offer letter.
“I like to call them love letters, because I think a love letter kind of sets you apart as a buyer in a seller’s market, and it actually puts a face to a contract,” she said.
These letters should be less than one page and should include the story of the buyer and possibly a family photo. Lindor of Kritsonis & Lindor suggests talking about the family and the future memories to be made in the home. Trull’s clients routinely talk about how much they love the home, property, or interior design. Bak suggests finding common interests with the sellers and using that to build a bridge between the two families.
“I’ll look at everything from diplomas on the wall — did they go to the same university, do they work in the same industry?” Bak said. “Do they have the same passions or hobbies? Do they have lots of kids? Does it look like they raised their whole family here, and I have a young (couple) wanting to raise their family here?”
Sometimes, unknown commonalities present themselves in an offer letter. This was the case for a family Trull recently helped win a multiple-offer bid. Rob and Kristin Blasko fell in love with a large home positioned on a 2.5-acre parcel of land in Sammamish, complete with a backyard pond.
“We were completely honest and truthful in our letter; we could see that it was the right place for our animals,” Kristin said. “And I kind of knew that they would probably have some feelings about moving.”
When it came time to write the letter, Kristin suggested a few subjects for inclusion, including their black Lab, Bruce, then Rob typed it up. Little did the Blaskos realize that the sellers recently had lost their own black Lab, Pepper.
“Bruce was the reason we got the house,” Trull said, although she admits that the Blaskos’ offer also was very clean. The Blaskos’ Lab received a steak dinner as a reward.
While not every home-buying transaction is steeped in emotion, Trull explains that real estate isn’t completely black and white either.
“It’s your home at the end of the day: It is where you find solace; it is where you rebuild your soul, it is where your memories are made; and, for the most part, people want to feel good about the transaction,” she said. “I think certainly you have an opportunity whenever you construct an offer to make sure your details are correct, make sure you’ve done your due diligence … and then put a little bit of your soul into the transaction to show commitment.”