Join Summit Properties NW’s Sean Reynolds and Fairway Independent Mortgage’s Dan Chapman as they give you the inside scoop on how to compete with cash offers when buying a home.
I’m Sean Reynolds from Summit Properties Northwest and Reynolds and Kline Appraisal, and today I have with me Mr Dan Chapman from Fairway Independent Mortgage. I’m going to talk with Dan about what are some things you can do on the buyers and to make an offer with financing more competitive with a cash offer. So Dan is a mortgage broker with Fairway Independent Mortgage. He works with buyers all day long and we’re going to talk about some tips that he can give both the real estate broker and their buyers in this super competitive market where a lot of times cash is what’s winning these, these bidding wars. So Dan, tell us what, what kind of real estate broker and their buyer, what kind of game plan can they put together to make their offer? If they’re, if they’re having to do a down payment and having to do financing, how can they make their offer more competitive with an all cash offer?
Ok, well there’s a number of things and obviously price is real important and that’s one. Um coming in strong on your price. The other thing is they can do is there’s a few things that they can waive as you know, and some of, um, you know, maybe I don’t recommend, but you can do it, you know, like you can waive the inspection contingency, and not get an inspection. Or, if you don’t want to waive it, maybe you do a pre-inspection and you pay for the inspection before you make the offer and get that done to see if you want to make the offer and how aggressive you want to be. Um, so basically have your ducks lined up. Yeah. Yeah, because if you’re doing the pre-inspection you’re saying, hey, I’m not going to ask for, maybe I’m not going to ask or anything done. I’m gonna come in real strong on the offer because I’ve already done my inspection.
And so you can then waive the inspection contingency technically because you had done it first. Um, the next thing would be, um, you know, you, do you want to wave your appraisal contingency, do you want to wave. Um, do you want to risk the chance of it maybe not appraising, which can happen every now and then. And so if the appraisal comes in low, maybe tell us about the risks there. Yeah, for first off, if you have a low down payment, it’s not a good idea to waive your appraisal inspections, um contingency I should say, but if you have, if you’re putting 10 to 20 percent down in that range right there, it might work. So you run the numbers with me, talk to your realtor to see what they think about the value. Is it going to be an issue? Um, we don’t always know ahead of time, but sometimes you have ideas if it will and make sure if it, if it appraises for say $25,000 less and it’s a $700,000 home, is that going to affect your financing?
And I’ll give you the answer on that and run the numbers. So you’d kind of make a judgement call. OK, we think the values here, but if it comes in here, this is what we’re going to have to make up. Does this make sense for us? And that’s something you want to get your mortgage advisers opinion on. Yeah exactly, like I had one the other day, uh, $850,000 purchase, guy was putting 30 percent down. Um, you know, they were, they were concerned that it might appraise for roughly 800. They’re going to be fine. That’s not going to change anything with that down payment. So those, that’s an easy one. But if you’re putting say 10 or 15 percent down, you know, you really got to run the numbers to make sure it’s going to work. So then you might be able to waive that appraisal contingency.
The next one I’m seeing is big and it’s the, it’s the most risky one is waiving your financing contingency. Yeah, which I am not a fan of. Yeah. Tell us what happens. You wave your financing contingency and you get declined for a loan. What’s that look like? You might have $25,000 on earnest money down. You might have $50,000 earnest money down. That’s being risky right there because if it’s not approved. That’s in play, you’re going to lose that if you can’t get financing because you don’t have that as an out anymore. So what we’ll do is we’ll turn our standard pre-approval, which is like under conventional loan, automated underwriting findings. That’s your standard pre-approval. We’ll turn that into a full, we’ll submit to underwriting like it’s live loan on a TBD property. So to be determined property at x purchase price and we’ll submit it to underwriting and get a conditional approval.
So we get a conditional approval. We’ve gotten everything we need from the borrower signed off on. The only thing that’s not signed off on is the remaining items like the appraisal, title, insurance. Um, and so in that case, if they want to waive financing, we explain to them them, hey, you’re good at as a borrower borrower, as long as nothing changes and your, and this is your approval. So as long as through the end of closing, everything stays the same. Better, equal to or better than, then you’d be OK. Yep. Then, then you can go ahead and if they want to waive it, they can, they can waive it. OK. How often do you see people wave their financing contingency? I’ve had a few this year. Um, it is not very. It’s pretty rare. So did they waive their financing contingency and their building inspection? Did they just kind of go for it?
You know, I, I haven’t seen them wave all of them, but I’ve, I’ve seen the appraisal and the finance contingency be waived on a couple of my client’s transactions this year. So if you had to pick whether you are waiving your financing contingency or you’re building inspection, which one would you take? Oh that’s a tough one. Um, because each have their own inherent risks and it depends on the house. If it’s a newer home, you’re feeling a lot more comfortable. If it’s a home that’s built in 1925 in Seattle, I’m not waiving the finance. That could have any kind of unknown conditions. I’m not waving the inspection personally. But financing, if you’re all signed off on and you’re approved, boom. And, and, um, you know, you got 780 credit scores and 20 percent down and you’re approved. That’s, it’s, it’s not risky if you’re approved. So know the risk, talk with your loan officer, get your game plan together.
So those are the things that, that you can do to help, you know, get your offer accepted in this tough market. It’s very competitive out there right now. We want to help everybody get their offer accepted, but, and we’ll do our part and the realtor, a good realtor will do their part, but um, you know, as a buyer, you’ve got it come in, you know, you to come in on a price. Yeah, you gotta be strong. That’s, that’s ultimately what we’re saying is, is winning the wars. And then if somebody’s got a cash offer, pretty tough to compete. Tough to compete on a cash offer, you know, if you’re coming in, if you’re approved on your loan and your offer is a little higher, maybe you slip into your seller letter, show a picture of your family, wife and kids. Yup. Um, that will, that can beat out cash offers at times because a lot of times, you know, it’s cash offers are in real estate investors and the homeowner, they may want a nice family to have that house. Or release party your earnest money to the seller right off the bat, showing that you’re all in.
I, that’s a good point. Very good point. Yup. So there’s a handful of things you can do, but it’s ultimately pretty tough in this market place, it’s just tough getting hold of a home. It’s as competitive as I’ve seen in my 17 years. Yeah, for sure. Again, I’m Sean Reynolds from Summit Properties Northwest. Thank you Dan for being with us today and answering some mortgage questions. Appreciate the Info and I’d love to have you like, subscribe or make comments. We make videos and we’ve made a handful of videos with you and we’ll continue doing that. So we’d love to have you put in comments indicating what videos you’d like to see from us in the future, whether it’s real estate or mortgage or we just shot a really cool one on Jimi Hendrix. We’ll put a link up on that and that’s kind of a series that we’re doing only in Seattle, so any comments you have, we’d love to have them. Again, thanks for watching the video. Thank you for taking the time to watch this video. If you like what you saw, be sure to check out our youtube channel. We create videos all the time and would love to have you subscribe.