When bidding $100,000 over asking price isn't enough

Exterior of 6116 Kirkwood Place N. Exterior of 6116 Kirkwood Place N. Photo: Robert Brittingham, Courtesy Kevin Broveleit And Joe Nye/Windermere Real Estate Photo: Robert Brittingham, Courtesy Kevin Broveleit And Joe Nye/Windermere Real Estate Image 1 of / 23 Caption Close When bidding $100,000 over asking price isn't enough 1 / 23 Back to Gallery

When Dr. Wayne Akeson decided to sell the house his father-in-law had built in Seattle's Green Lake neighborhood in 1955, he, his daughter and their real estate agents had a hard time figuring out what to ask for the place.

The house is pretty small, 1,740 square feet, with just two bedrooms and one bathroom.

"Most buyers don't fit in a two-bedroom home," said Kevin Broveleit, who represents Akeson with fellow Windermere Real Estate agent Joe Nye.

The house is also dated. Mid-century modern architecture has gained popularity in recent years, so the stone fireplace and wood-paneled dining room are now retro cool. But, while some aficionados dig the original cabinets, tile counters and pink bathroom fixtures, appreciation is less universal. And it really takes a period geek to love the old-school range, funky kitchen wallpaper and lack of a dishwasher.

Arguing for a high price is the home's location, 6116 Kirkwood Place N., a block from Green Lake, and the aforementioned increased love for mid-century homes. And this isn't just any mid-century. It's a notable home, custom built, with a distinctive panoramic living room window in front. The kind of place people walk by and say, "If that ever hits the market ..."

The sellers got an inspection of the home, including the sewer line, to head off any issues. They replaced an old electrical panel and were getting an underground oil tank properly decommissioned.

Finally, although home inventory has been increasing in recent months, it's still historically low. Seattle had just 1.26 months' worth of homes for sale in May, based on that month's sales pace, according to the Northwest Multiple Listing Service. That's up from 1.18 months of inventory a year earlier, but well below the four to six months considered the balance point between buyers and sellers. The area that takes in Green Lake (and everywhere else in Seattle north of the Ship Canal and west of Interstate 5) was even tighter, with 0.81 months of inventory.

Seattle-based online real estate company Redfin said in its most-recent "Bidding Wars" report that 62.1 percent of its offers in the Seattle area faced competition in March, down from 71.9 percent a year earlier, and 41.9 percent of homes sold for more than asking price. Looking at Redfin's winning offers, 37.2 percent had a cover letter (in which hopeful buyers often write about how much they love a home and how well they'll take care of it), 23.3 percent waived the right to back out of a sale if an inspection uncovered an issue the owners wouldn't fix, 14 percent were all-cash and 11.6 percent waived the right to bail if financing fell through.

For decades, Akeson and his wife had used the Green Lake house just a couple of times a year, when they came up to visit from San Diego. In March, he decided it was time to sell, and he wanted to get it on the market before July 4, when summer vacations compete for potential buyers' attention.

Cheri Akeson Corneil, who was handing the sale for her dad, thought the price should be at least $700,000. But Broveleit brought in three agents with expertise in the area, and they all advised staying below that.

"The thing that everybody says right now is the only mistake you can make is overpricing," he said.

Price a home too low, and buyers will bid it up. But people often won't ever bother to put in an offer below an asking price they feel is set too high. Then buyers have to lower the price, which makes a home look undesirable.

They ended up at $675,000, which drew plenty of interest.

Traditionally, sellers consider offers as they come in. But when the market is hot, they often set a deadline for buyers to submit offers, so they can be sure to get as many as possible.

For this house, that deadline was Thursday. Broveleit and Nye gathered in a conference room in Windermere's West Seattle office shortly before 9 a.m. The agents weren't exactly sure how many bids to expect.

"When you set an offer review date, everybody keeps their cards really close to the chest until the deadline," Broveleit said. "So we could have four offers. We could have 10."

As it turned out, four agents showed up to deliver bids in person. That's another tactic in a competitive market, allowing agents to sell the quality of their offers -- how solid their financing is, how much earnest money they'll put down, how quickly they're willing to close, etc. -- while also making an emotional appeal about the prospective buyers and their love of the house and neighborhood.

The first agent in was also the hopeful buyer (she asked not to be named in this story). She said she had been looking for a long time, but no place struck her like this one did.

"I came back with my entire family, and we're all obsessed with the house," she said.

She waived every contingency except financing and would give up the commission the seller would normally pay to the buyer's agent. That added 3 percent to her offer.

She wanted to make sure the agent and sellers knew she planned to make "zero changes" to the house, and that it was her birthday.

The next agent preferred not to have a reporter sit in on her presentation.

The third agent, Robin McCue, of Redfin, reported that her clients lived just a couple of blocks away.

"This house has always caught their eye," she said. "They will not make any changes to the property. They love it as is."

Next came Tim Lenihan, of Windermere.

"Not very often do you get a house that has as much history," he said. "It's exciting."

Lenihan said his buyers were a couple that live in Mill Creek, but wanted to be closer to their sons, who are in Green Lake, and turn their new home into a center for holiday dinners.

"That dining room is fantastic for that whole purpose," he said.

They were putting 45 percent down but "could pay cash if they wanted to," Lenihan said. "If we're not the highest offer, I hope we're one of the better offers out there, because it's not always about price."

While the agents presented, Nye wrote down the key points on individual sheets of paper, allowing him to quickly review and sort bids later.

Meanwhile, three more offers arrived via email, including one from a neighbor who reported desiring the house for 30 years. Another agent was promising to submit one more cash bid, also for himself. Broveleit called him to say time was almost up, and mention that the bids were all north of $700,000.

It was time for Corneil to come in and review the bids with the agents.

In some ways, deciding among bids can be easy. You just pick the highest price. But there can be complications even with that. In this case, the first agent's offer to waive her commission boosted her bid from third place to second.

Also, buyers had bid the price up largely for emotional reasons. They loved the house. But love is hard to appraise. In fact, the agents know an appraiser was unlikely to find the home was worth as much as the winning bid.

"There are no comparables for this house based on square footage, based on two bedrooms, one bath," Nye said.

Traditionally, offers have a contingency that allows buyers to negotiate down the price or back out of the deal if the appraisal comes in low. An offer with that contingency was a no-go in this situation. One bidder offered to pay up to $50,000 more than the appraised value, if it came in low. That was a mark against it, compared with offers that had no such restriction.

The amount of the down payment also related to the appraisal issue. If buyers agreed to pay, say $750,000 for a house that appraised at $700,000, they would have to cover the extra $50,000 and still have enough cash for 20 percent of the loan amount, or pay for mortgage insurance.

Even if buyers waived appraisal and financing contingencies, bidders who can pay cash generally are more attractive, because they don't need a lender, and lenders have gotten pickier since the real estate crash. Bidders with larger down payments, more earnest money (money they lose if they back out of a sale without a contractually allowed reason) and reputable lenders also look better.

Beyond these financial issues, buyers waived various other contingencies, such as the right to back out if information the seller or agents provided about the house turned out to be inaccurate.

Sellers often will give preference to buyers willing to close more quickly. Given that this doesn't cost anything, it's something many buyers put out as a carrot. Indeed, pretty much all the bids on the Kirkwood house offered a quick closing date, and said they could more that forward or back, at the seller's preference.

"We're not in any rush to close," Corneil said.

Given how competitive the market has become for buyers, agents are looking for new ways to boost their chances, Broveleit said. One, for instance, offered in a recent sale to let the owners leave stuff in the house, rather than having to clear out unwanted items.

Finally, there are emotional considerations. That was in play here, given that the house was still in the family that built it.

"There were lots of clues about the fact that the sellers liked the house and wanted somebody to kind of carry the torch, be stewards," Broveleit said.

Of course, once the house was sold, the new owners could do whatever they wanted, regardless of their promises.

In this case, Broveleit said, "nobody seemed insincere."

Sellers may also be swayed by buyers' personal stories, spelled out by their agents and in bid cover letters. This can be tricky, because sellers cannot choose or eliminate bidders based on such factors as age, race, gender, religion or family status.

None of the offers seemed to stand out in a good or bad way for non-financial reasons. The top bid (submitted by the agent who didn't want a reporter in the room) was all-cash, starting at $705,000 but including an "escalator" clause that would beat any other offer by $5,000, up to $830,000.

"They're not going to make any changes," Nye said. "They wife wants to buy a roll-around dishwasher so they don't have to change any of the cabinets."

The second-place offer was from the agent bidding for herself. Adding in the lack of a buyer's agent commission, her offer topped out at $787,950, pushing the top bid to $792,950. The final agent's bid finally came in, but was well below the top offers.

The agents and Corneil called Akeson.

"That sounds very impressive," Akeson said when told of the best offer.

At this point, Akeson could have just gone with the highest offer and called it good, or tried to get a little more. Broveleit and Nye offered two options for the more-money route: ask the top two bidders to come back with their best and final offers, or give the top one a chance to seal the deal by going up to $800,000.

Akeson asked Corneil what she thought. She asked the agents what they thought. Eventually, Akeson opted for the latter approach. Broveleit contacted the agent, who interrupted a haircut to take the call and then check with her clients. A few minutes later, she called back. It was a go at $800,000.

When Corneil finally looked at the winning bidders' full names, she realized the wife was the woman a neighbor had brought by.

"I really liked her a lot," she said.

Corneil called her dad to give him the news.

Broveleit wrote up a new contract at $800,000. Nye had Corneil sign a note on the other offers saying they were "respectfully declined."

Later that day the agents marked the listing as pending in the Multiple Listing Service system. Now, it's on to closing.

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