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 real estate sales are all-cash.

Add to the high percentage of cash sales, a historically low supply of waterfront property 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, reach out to Washington Waterfronts today.

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 Seattle waterfront properties and Bellevue waterfront properties). 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 waterfront property market is much more challenging for buyers.

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 Puget Sound waterfront homes for sale 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:

1. Increase your down payment and/or increase the “earnest money” deposit.
2. Obtain a pre-underwriting approval letter from a local mortgage lender.
3. 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.
4. 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.
5. Proactively review everything about the property before making an offer so you can waive all contingencies within reason.
6. 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.
7. Work with an experienced waterfront real estate agent in Washington State.

Whether you’re interested in purchasing or selling a waterfront home in Washington State, we can help. Contact Washington Waterfronts today.