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Escalation Clauses in Real Estate Contracts
The first thing I remember learning in real estate licensing school was that no matter who an agent works for --- buyer or seller --- all parties to the contract must be treated fairly. We don't think much of that on the face of it because most of us think we always treat clients fairly.  But very recently I was confronted with a practice I've never encountered in my almost-25 years in real estate:  the Escalation Clause.
An escalation clause says something like "my clients will beat all offers by $2,000 up to $750,000."  It might be worded more gracefully, but the impact is the same: in a bidding war, no one but this client has a chance, particularly since these clauses aren't disclosed to the other potential buyers.  I'm left wondering how this could possibly be construed as "fair treatment."
Since the Bergen County, NJ market has heated up, and there is very little in the way of inventory on the market (I'm not talking about homes that have been overpriced and on the market for more than a year), some companies have told their agents to insert an escalation clause to avoid losing in a potential bidding war.  While ... more

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