Puget Sound and Washington State Waterfront Real Estate BlogRecently posted or modified blog posts in the category - Buying a Waterfront Homehttps://www.washingtonwaterfronts.com/blog/Copyright WashingtonWaterfronts.com2021-09-09T07:11:56-07:00tag:washingtonwaterfronts.com,2012-09-20:6068Financing Trends for Waterfront Homes on Puget Sound<img src="https://assets.site-static.com/userfiles/628/image/Buying-a-waterfront-home.jpg" width="1200" height="799" alt="Buying a waterfront home in Washington State" />
Financing Trends for Waterfront Single Family Homes on Puget Sound
Slightly more than 57% of Puget Sound waterfront homes for sale were sold to cash buyers in Q1, 2021. In larger cities like Seattle and Bellevue, the number is even higher — 64% for Seattle and 100% for Bellevue, although both Seattle and Bellevue cash purchases have historically been higher than other parts of Puget Sound. For context, 36 percent of national <a href="https://www.cnbc.com/2020/12/11/buying-a-house-heres-where-all-cash-deals-are-most-competitive.html">real estate sales are all-cash</a>.
Add to the high percentage of cash sales, <a href="https://www.washingtonwaterfronts.com/blog/2020-waterfront-market-in-review/">a historically low supply of waterfront property</a> on Puget Sound and around Washington state, and many would-be waterfront property owners are finding themselves priced out of the market or unable to compete with cash buyers.
In this article, we uncover historical and recent financing trends for waterfront single-family homes on Puget Sound. If you’re interested in purchasing or selling a waterfront home in Washington State, <a href="https://www.washingtonwaterfronts.com/contact/">reach out to Washington Waterfronts today</a>.
Puget Sound Waterfront Homes For Sale — Financing Trends
We’ve analyzed tens of thousands of real estate transactions on Puget Sound in the last five years (2016 – 2021). Here’s what we learned:
The percentage of all-cash waterfront property sales on Puget Sound stayed roughly the same from 2016 – 2020. However, the first quarter of 2021 showed an increase of 17% in overall cash sales.
The average median sale price (based on sale prices from 2016 – 2020) of waterfront properties on Puget Sound increased by 43%.
The median number of days on the market decreased from 32 days to 12 days from 2016 to 2020.
The annual median of the total number of homes for sale throughout the Puget Sound area declined significantly from an average annual monthly median of 15 waterfront properties for sale to six.
Most waterfront property sales on Puget Sound are financed with conventional home mortgages or they are purchased with cash (especially <a href="https://www.washingtonwaterfronts.com/seattle/">Seattle waterfront properties</a> and <a href="https://www.washingtonwaterfronts.com/bellevue/">Bellevue waterfront properties</a>). However, a small percentage are financed with FHA, VA, and other types of loans.
Though limited, our 2021 waterfront property sales data suggests that prices for homes on the water on Puget Sound continue to be on the rise (much like the rest of the market), and availability is sparse.
Financing Homes on The Water in Washington State — Key Takeaways
The percentage of all-cash waterfront property sales has slightly increased in the last five years. However, the number of waterfront homes for sale is down considerably.
At the same time, the average sale price of a waterfront home in Puget Sound is up from $818,800 in 2016 to $1,212,00 in the first quarter of 2021.
There are more all-cash buyers, fewer waterfront properties for sale, increased demand, and higher prices. That’s a significant squeeze for homebuyers with conventional mortgages interested in waterfront homes for sale. In other words, the current waterfront property market in Washington favors sellers, which means the <a href="https://www.washingtonwaterfronts.com/blog/what-a-tight-waterfront-housing-market-means-for-buyers/">waterfront property market is much more challenging for buyers</a>.
Continue reading to learn more about how all-cash real estate transactions can affect your ability to close waterfront properties for sale in Washington state.
Cash Vs. Financing Waterfront Properties in Washington State — What Do Sellers Prefer?
There are fewer <a href="https://www.washingtonwaterfronts.com/puget-sound/">Puget Sound waterfront homes for sale</a> and higher demand — a classic seller’s market. With that in mind, waterfront property sellers are more inclined to accept an all-cash offer vs. a conventional mortgage-based offer because:
An all-cash offer on a waterfront property is almost guaranteed to close faster than a traditionally financed option.
All-cash offers for homes on the water can be less complicated than conventionally financed offers.
Individuals with Puget Sound waterfront homes for sale prefer not to worry about financing issues that can hold up a sale.
Almost always, waterfront property owners can bypass the appraisal process and subsequent issues by accepting an all-cash offer.
Overall, home sellers want security, expediency, and the highest price when putting their waterfront property on the market. Since there is nothing more secure than immediate cash, homeowners are more likely to accept an all-cash offer.
However, that doesn’t mean that you can’t get the waterfront property of your dreams with a conventional mortgage. It just means that you’ll have to be a bit more assertive and creative. Continue reading to learn how to compete with cash buyers for homes on the water.
Strategies to Combat Cash Offers on Puget Sound Waterfront Homes For Sale
Here are a few strategies to compete against cash offers on waterfront properties in Washington State:
Increase your down payment and/or increase the “earnest money” deposit.
Obtain a pre-underwriting approval letter from a <a href="https://www.washingtonwaterfronts.com/buyers/mortgage-pre-approval/">local mortgage lender</a>.
Conduct a pre-inspection with a licensed home inspector before the offer review date so you can waive the home inspection contingency with your formal offer.
Offer a substantially higher purchase price than what you assume a cash offer might be to incentivize the Seller to assume a longer closing period and more potential volatility with your financed offer.
Proactively review everything about the property before making an offer so you can waive all contingencies within reason.
When you make an offer, include an appraisal gap guarantee. How does an appraisal gap guarantee work? If the buyer’s lender’s appraised value of the property is less than the contractual purchase price, an appraisal gap guarantee is a commitment from the buyer that they will pay a specific amount in additional down payment to close the sale. In other words, the buyer will use cash to make up the gap between the appraised value and the contractual purchase price, up to a certain amount. This is an important demonstration made by the buyer that they don’t care if the property appraises less than the contract price, within reason, and that they have liquid non-contingent funds to pay for the difference without requiring further negotiation between the parties. An appraisal gap guarantee generally includes language that sets out a path forward if the difference between the appraised value and the purchase price exceeds the cash commitment made by the buyer.
Work with an experienced <a href="https://www.washingtonwaterfronts.com/about/">waterfront real estate agent</a> in Washington State.
Whether you’re interested in purchasing or selling a waterfront home in Washington State, we can help. <a href="https://www.washingtonwaterfronts.com/">Contact Washington Waterfronts</a> today.
2021-09-09T06:55:00-07:002021-09-09T07:11:56-07:00Chris Murphytag:washingtonwaterfronts.com,2012-09-20:6044What A Tight Waterfront Housing Market Means for Buyers<img src="https://assets.site-static.com/userfiles/628/image/MLS_30.jpg" width="1800" height="1200" alt="What a Tight Waterfront Housing Market Means for Buyers" />
A Tight Waterfront Housing Market Gets Tighter: What it Means for Buyers
Nationwide, the real estate market is in an unprecedented territory — that’s especially true for waterfront properties for sale in Washington State.
The recent real estate boom is mostly favorable for waterfront property sellers making it more difficult for buyers to find and close on their dream home on the water.
In this guide, we discuss:
Historical Washington state waterfront home sale trends
The current market for homes on the water in Washington
Why buyers are feeling the pinch
Best options for buyers in the current market
How to win a bidding war for a home on the water
If you’re in the market to buy a waterfront property in the state of Washington, we can help. Our team of waterfront specialists has more than a decade of experience helping clients buy their ideal home on the water.
<a href="https://www.washingtonwaterfronts.com/">Search our interactive waterfront property finder</a> or <a href="https://www.washingtonwaterfronts.com/contact/">contact us</a> to speak with a Washington Waterfront real estate specialist today.
Waterfront Property Buyers Are Feeling The Pain — Here’s Why
Homes on the water in Washington are not the only type of real estate experiencing a boom. It’s happening all over the nation, regardless of location or property type. Waterfront real estate experts say that it is more challenging than ever to close on a waterfront property because:
Prices for newly constructed and existing homes on the water are on the rise
Record low inventory levels
The effects of COVID-19
There are more cash buyers than ever before
Continue reading to learn what a tighter waterfront real estate market means for buyers in Washington.
Waterfront Real Estate is in High Demand
Right now, prices for single-family residences on the water are at an all-time high. When inventory is low and demand is high — as it is right now with waterfront homes in Washington state — it increases any type of asset’s value. For perspective, look at examples of historical price trends below for waterfront residences in popular areas of Washington.
2016 Median<br />Sold Price
2018 Median<br />Sold Price
Q1 2021 Median<br />Sold Price
King County
$855,000
$1,000,000
$1,247,250
Pierce County
$580,000
$675,000
$950,000
Island County
$595,000
$675,000
$919,000
Jefferson County
$440,000
$574,235
$829,500
Snohomish County
$417,050
$550,000
$680,000
In some cases, Washington waterfront real estate prices have surged by more than 60% within five years.
Historically Low Inventory Levels
Record <a href="https://www.fool.com/the-ascent/mortgages/articles/housing-inventory-hits-a-record-low-what-it-means-for-buyers/">low inventory levels</a> are impacting both waterfront and traditional single-family residence buyers. Low waterfront property inventory in Washington creates an environment with fewer choices and more competition for available properties.
Compare historical and present median monthly waterfront inventory levels in the table below.
2016 Median<br />Inventory
2018 Median<br />Inventory
Q1 2021 Median<br />Inventory
King County
185.5
155
54
Pierce County
167
117
26
Island County
109
63
10
Jefferson County
63
32.5
11
Snohomish County
99
72.5
12
In addition to the examples provided above, inventory levels for homes on the water in Washington have experienced a significant decline in just about every county.
The Effects of The Pandemic
Many factors have helped create and accelerate the current waterfront property buying environment. However, COVID-19 has played a particularly prominent role in the recent surge in demand for single-family residences on the water in Washington.
More people are working from home. As a result, families want more space — which often requires purchasing a new, larger property. In addition, interest rates are at an all-time low. So, homebuyers are scrambling to lock in a mortgage rate with favorable terms before things change.
These two factors have accelerated the homebuying timeline of many seeking a home on the water.
More Cash Buyers on The Market
In 2016, about 37% of all waterfront home sales in Washington were made by cash buyers. The numbers from Q1 2021 illustrate that about 45% of waterfront property sales are cash offers. However, in certain areas, well over 50% of waterfront property purchases are cash offers.
While the increase in cash sales might not seem like much at first glance, it can have a major effect when there is already low inventory and high demand. (Learn more about how cash buyers are affecting the Washington waterfront landscape.)
Should I Wait to Buy a Waterfront Property?
It depends. At Washington Waterfronts, our waterfront specialists encourage our clients to move fast but wait patiently. That means that you should be prepared to move on a property with your best offer at any moment. Still, you should also wait for a waterfront property for sale that you are comfortable with aesthetically and financially.
Further, <a href="https://www.cnbc.com/2021/06/17/why-experts-say-you-might-want-to-wait-to-buy-a-new-house.html">mortgage rates are at historically low levels</a>. If you plan on buying a waterfront home in Washington with a conventional mortgage, many experts suggest that there may never be a better time.
Lastly, and potentially most importantly, property values for homes on the water in Washington State have increased year-over-year for the last five years. If this historical precedent continues to hold true, the longer you wait to purchase a home on the water, the more you will likely have to pay.
Tips For Winning Bidding Wars For Homes on The Water
Low inventory plus high demand equals bidding wars. With so much competition for luxury waterfront property in cities like Seattle, Bellevue, Kirkland, Hansville, etc., you can expect a healthy amount of competition.
Listed below are a few tips to help you win a bidding war for your dream waterfront property.
Move Fast
Five years ago, the median days on the market (DOM) for Washington waterfront properties for sale was 43 days. In the first quarter of 2021, Washington waterfront properties stayed on the market for just 10 days. In the hottest markets, homes can sell even faster.
In other words, you have to act quickly with your best offer for a home on the water — especially if you are making an offer with a conventional mortgage.
Offer More Money
Obviously, the easiest way to win a bidding war is to offer more money. However, it does come with some complications. If you plan on offering more money for your dream waterfront property, our Washington Waterfront real estate specialists recommend:
Keep your offer within reason
Double-check your finances to be sure you can afford a larger mortgage
Have enough cash to make up for the gap in appraisal value and approved mortgage amount (if any)
Offering more money for a waterfront property can be an excellent strategy unless you are up against a similar cash offer. Learn more below.
Make a Cash Offer
If you’re in the midst of a bidding war, nothing speaks louder than cash. Generally, homeowners are more likely to accept reasonable cash offers over higher priced conventionally financed offers.
However, if you don’t have enough liquidity to make an all-cash offer, you can still offer to increase your down payment. Depending on the situation, it can help sweeten the deal a bit to entice the seller to accept your offer.
A few ways you can make your waterfront property offer more attractive include, but is not limited to:
Propose a sooner closing date (i.e., instead of 30 days, you propose 10 or 15)
Remove home inspection contingencies
Remove the home appraisal contingencies
Offer a higher down payment than the next highest bidder
There’s perhaps only one thing that can compete with a reasonable cash offer, that’s a buyer who builds a personal relationship with the seller. Continue reading to learn more.
Get a Mortgage Pre-Approval
A <a href="https://www.washingtonwaterfronts.com/buyers/mortgage-pre-approval/">mortgage pre-approval</a> doesn’t always result in mortgage approval. However, it does offer many potential advantages. Waterfront property buyers who have a mortgage pre-approval can confidently search for their dream home on the water.
Additionally, a mortgage pre-approval also decreases closing time while enhancing your credibility as a viable waterfront homebuyer.
Build a Relationship With the Seller
Many home sellers don’t want to sell their homes to just anybody. They want to know that they are selling it to people who will take care of the home and benefit the neighborhood.
Taking steps to build a relationship with the seller can help to differentiate you from others who make similar offers on the home.
Some ways that can help you build a better relationship with waterfront property owners include:
Writing a personable offer letter
Offering to rent the property back to the sellers while they search for a new home
Having your waterfront real estate agent schedule a one-on-one meeting with the seller
Washington Waterfronts — Your Dream Home on the Water
The waterfront property real estate market in Washington State is competitive, investor-friendly, and unique. With that in mind, it pays dividends to work with an experienced real estate agent for homes on the water.
Our real estate specialists at Washington Waterfronts are creative solution finders who work tirelessly to help you achieve your goal of owning a Washington waterfront home. <a href="https://www.washingtonwaterfronts.com/about/">Contact us today</a> to begin your journey to waterfront property ownership.
2021-09-02T09:55:00-07:002021-09-02T11:08:12-07:00Chris Murphytag:washingtonwaterfronts.com,2012-09-20:6042Should You Pay Above the Appraised Value of a House<img src="https://assets.site-static.com/userfiles/628/image/MLS-51.jpg" width="5153" height="3433" />
In today’s highly competitive housing market with scarce supply, buyers around the country are finding that the only way to win a bid on a house is to go all out, often paying well above the home’s appraised value.
On the surface, this might seem like a risky move. You’re essentially starting with negative equity, which slows your ability to build equity in the house that can be used to refinance your mortgage or get a home equity line of credit (HELOC) down the road—not to mention selling the house without taking a hit to your wallet. But, there can be some instances where paying above the appraised value makes sense.
To help you decide whether paying above an appraised value is really worth it, we’ll dig into what appraisals are based on; when you should back away if a house is selling above its value; and when it’s OK to pay more than what it’s deemed “worth.”
How Appraisers Determine Market Value
What the seller, buyer and appraiser consider the “value” of a house can be vastly different. The seller is likely to focus on all of the benefits of the house to drive a higher sales price. The buyer is more likely to pick out the problems to negotiate a lower price. And the appraiser is meant to be the neutral party to determine the actual market value of the home.
The appraiser’s job is critical as it protects both buyers and lenders from paying more than the market value, and they must comply with regulatory standards. To determine the market value, appraisers typically follow the Uniform Standards of Professional Appraisal Practice (USPAP) guidelines. These guidelines include evaluating the house itself, such as checking out the general condition and evaluating any upgrades, the neighborhood and comparable sales.
Appraisers usually refer to sales within the past few months, but with home prices rising so quickly this past year, they’re looking at more recent sales to get a real-time picture of the market.
“Traditionally, we looked at homes that sold three to four months ago. That always worked well. But now, we have to look at what’s going on today, what’s under contract (and) what sold last week,” says Mary Davis, a licensed appraiser at C. Howard Davis Appraisals in Memphis, Tennessee.
The appraiser can change the appraised value of the property if the market changes. The type of changes that affect the real estate market could be anything from mortgage rates spiking to a natural disaster.
To change an appraisal based on outside influences, appraisers have to create a detailed analysis of why there’s been a material change and what caused it.
Because the appraisal is so integral to securing financing, real estate agents, sellers and buyers can get frustrated if the appraisal comes in low, especially if an equivalent home in the surrounding area has sold for what your home is listed at.
However, just because one buyer paid over the appraised value for a home in your area doesn’t prove that the market value has gone up. This sale could be an outlier, which is why appraisers have to look at several comps to establish value, says Karen Mann, an appraiser at Mann and Associates in Discovery Bay, California.
Another issue appraisers run into is renovated houses that have “over improvements,” which means that the home’s upgrades are excessive for the neighborhood. This is also known as functional obsolescence.
Usually, upgrades that fall into this category don’t count toward the value of the home. A good example is a home with a pool; if it’s the only pool home in a 5-mile radius, then that feature probably won’t be included in the appraised value.
Signs That You Shouldn’t Spend More Than Appraised Value
In a competitive housing market, it can be easy to get caught up in bidding wars and even the fear that you’ll somehow miss out on owning a house. And if you keep putting in offers that are rejected, it might feel like you have to push even harder to snag a home.
Pressure to get a house in today’s market has led people to surrender necessary contingencies designed to protect them and pay more than the appraised value. These can be risky tactics to make an offer stand out. It’s critical that you consider your budget and goals carefully, so you can avoid making a very expensive long-term mistake.
There are several factors you should consider before you pay over the value of the home.
Actual affordability. The first, and perhaps most obvious one, is can you afford it? If the appraisal comes in low, then you’ll have to make up the difference out of pocket. If that leaves you with an empty savings account and no safety net, this is not the healthiest for you financially.
Consider when you plan to sell the home. The other affordability issue comes in if you have to pony up the cash to sell your home sooner than expected. The closing costs to sell a home can run into the thousands of dollars. So if you pay more than the value, this could make it expensive to sell if you’re not in the home long enough to gain sufficient equity. If you sell the house in less than five years, you’re taking a significant risk since the value might not catch up with what you paid.
Is it true love? Finally, be honest with yourself about how much you like this home. If this is not your dream home and you’re buying out of fear or desperation, you could quickly find yourself with a case of buyer’s remorse. And selling a house that costs more than it’s worth takes time and money.
“Even if you do make up the amount in equity, the selling costs will quickly erode any gains, and you may be left with a loss,” says Nikki Gonzales, partner at Adeline Homes LLC, in Waco, Texas.
When to Pay More Than the Appraised Value
Housing inventory is at record-low levels and many homeowners are not as willing to sell, so buyers are left with slim pickings. What is available is often very expensive, and coveted by many other eager buyers.
So what happens when your dream home comes up for sale, and the price is above the appraised value? Some experts say it’s OK to pay above the market price if the following boxes are ticked:
First, make sure you can afford the monthly payments.
Make sure the gap you have to pay between the mortgage amount and the cost of the home does not leave you empty-handed in case of an emergency.
Next, make sure you can afford to sell if you have to. If you sell before the equity builds, you’ll have to put money on the table to offload it.
And finally, determine how long you plan on staying in the house. The more you pay over the appraisal, the longer you should plan to stay for the equity to catch up.
“The advice that I like to share with my clients is that you are paying the prices for that house that you would have normally paid about 18 to 24 months from now,” says Yawar Charlie,<br />director of estates division for the Aaron Kirman Group at Compass Real Estate. “Therefore, the calculation is you have to stay in that house approximately two years longer than you normally would have to turn around and regain the equity that you paid at the original purchase price.”
This article originally appeared in <a href="https://www.forbes.com/advisor/mortgages/should-you-pay-above-the-appraised-value/">Forbes Advisor</a>.2021-09-02T08:37:00-07:002021-09-02T14:54:19-07:00Chris Murphy