We Just Bought a House in this Crazy Real Estate Market; This is What We Did
Submitted a cash offer with an escalation addendum, with zero contingencies, and set the maximum price (the limit) higher than any sane person would. That is how we got our offer accepted on a really nice house in a choice/upscale neighborhood. Although in our case, the maximum price in the escalation clause was a sane amount we believe, given the current market dynamics and what we have been through in our current living situation.
The only reason we bought now is because we have to move; otherwise there is no way I would attempt a home purchase in this market (it's because of a serious wood smoke issue that has put our health at risk and made our lives unbearable over the last year and a half).
Over the past 2 months we looked at several properties in Virginia, the state we live in. Most were about 75 to 100 miles away. We had a rough start. At the first place we looked at, DW caught her foot on a big crack in the owners' walkway and tripped and fell face first on the concrete and we spent 4 hours in the local hospital ER (she is doing fine now).
Our requirements were 3+ bedrooms, master on main level, 2+ car garage, 1/4 acre or larger yard, no more than 20 years old, public sewer and water and natural gas for heating.
Inventory while we were looking was a month or less of supply and all properties we looked at had multiple offers, except a house in a 55 plus community that was a maintenance nightmare (it was on the "deferred maintenance plan" as I call it). All but 2 of the houses had a general lack of maintenance, but were cleaned up to look good for listing pictures, but dirty if you looked beneath the surface. The two nice ones were the only two we made offers on. In each case we accessed the County real estate records and noted how many times each house in the immediate vicinity changed owners, including the one for sale. These two houses and neighborhoods passed our stability test. After visiting each house and seeing each one was well maintained I paid a home inspector $325 each for a pre-purchase inspection of each house. They were performed by booking a 2nd showing time slot. The inspections were to help us decide whether or not to make an offer, and for no other reason (other than to identify what I should fix if we were the successful bidder).
The house we were out offered on fit our requirements, was in an upscale neighborhood, and about 50 miles from a major city, so we were competing with commuters. The only negative was my research revealed the town had been attempting for about 20 years to build a parkway that would be within 200 feet of the house if approved (project kept getting tabled due to strong citizen opposition). We knew we were taking a chance on this item. The house also had fairly high taxes for its location ($5,500 per year) and an $80 monthly HOA fee. It listed for $600k and the owners put about $200k in upgrades, including a $75k gunnite pool. Our offer was presented as an "escalation addendum" attached to the standard realtor sales contract, which included an initial offer of $625k, cash. The only contingency was the termite inspection at seller's expense, with seller fixing any damage found (and possibly with seller option to void if damage was extensive). The escalation addendum had a price limit or cap of $685k, and would better any other offer by $10k, up to the cap. It also stipulated, if accepted, the next highest offer had to be shared with us to make sure we paid the correct amount. Our realtor thought we should have set a higher limit. This house sold to someone else for $700k per Zillow; I don't know the terms. This house had over 40 offers.
The house we had our offer accepted on was very well maintained and met our requirements, except it had a septic system and propane for heat (the furnace was the back up to an 18 SEER heat pump) and hot water. I decided I can't be too picky about the septic system and propane. The inspector found no major problems with the home.
We were at a decision point, because if this offer was not accepted, we were moving our search to North Carolina to try our luck there. Our son and grandson are in Virginia, about 70 miles from the house we were making an offer on. That, and taking into consideration we know very little about North Carolina, and considering what we have been through over the past two winters with the wood smoke problem (and feel an urgent need to resolve our living situation), we knew we were going to offer big.
To better our chances, we decided to forego the septic system inspection because the offer deadline was the next day, and we accepted the fact that we may have to replace it at some point (would be $15k to $30k). We also omitted the termite inspection. I did carefully inspect all areas of the house I could get to. (What I found odd was the inspector and I were the only people up to that point who visited the house that opened the crawl space door and inspected the crawl space. We knew this because we had to dig out around the small door to get it open). I also walked around the yard to look for septic system leakage and soft spots; I found none.
The list price on this house was $515k. I asked our realtor what our offer limit price should be. She said, $650,000, minimum. I said, "I won't do that, but will set the escalation limit at $725,000." She just gave me this surprised look. So we presented our offer with escalation clause to better any other offer by $5000, up to a maximum price of $725,000, cash, with supporting documentation, and with zero contengencies. Since the sellers wanted settlement in 45 days, we included a June 3 closing date. Our offer was accepted and the house cost us $622k. This was $5k over the next highest offer, which we received a copy of from the listing agent as proof we paid the correct amount. The next highest offer had a home inspection (with option to void contract), radon, septic, and termite inspection contingencies and settlement in 20 days.