TRIPS AND FALLS OF ESCALATION CLAUSES:
IS THIS A GOOD IDEA?
In my market a buyer has an option to offer more for a house with a escalation clause. . . .
This form allows the buyer to increase their offer against other competitive offers. .
Essentially bidding against an invisible buyer.. .while exposing the buyer to spend more money. .
Advising my agents this week about how to use ESCALATION CLAUSES
Guys,
Over the weekend I was pondering about the constant use of Escalation Clauses when buyers present offers. .
Escalation clauses in my opinion does not put your buyer in a good position. .
Yes, I know, you may want them to have the best chance in their offer being accepted. .
but lets analyze that. .
You know already is a seller market out there.. .
You and your buyer better bring your "A" game
When you are discussing escalation clauses with your buyer, there is a limit they want to pay
but at what point you say?
I know you want to pay $200 K for this house. . .
but in the strongest seller market in the last few years. ...
lets see if we can sneak in a LOWER PRICE?
That does not make any sense. .and you are setting the buyer for a disappointing outcome.
Buying houses is not a game. .
Your buyer is ready to pay X amount of dollars for a house and they should offer that
unless. .
you are willing to drop the appraisal contingency all together. .
HOW CRAZY WOULD THAT BE?
So in a way. ..you can offer a million dollars for a 200K home. .
knowing that it will never appraise and your buyer is just playing games. .
As a listing agent. ..that pisses me off!
Even if you are the only offer I receive. .I will make sure we counter your offer to the MAX OF WHAT YOU ALREADY WILLING TO PAY!!
If you must send a escalation clause, just know you are entering to an auction method in buying a house. .not a good position for your buyer to be in. .
Just find their their MAX they want to offer period and do it. .
If you lose it. . escalation or not . .you would have lost it anyway!
I would concentrate instead on validating the strength of your offer, your approval and how ready are the buyers to buy that house. .
You may even allow your buyers to write a letter to tell the sellers how much your buyers love their house.
Sellers love this and sometimes they get sentimental about this connection with the next person that will occupy their beloved home
There is also a lot of grey areas using Escalation clauses. .
You are bidding against someone invisible. .
what is the proof that there was an actual offer and not a made up from their cousin?
When to cap your offer?
Are you concerned about the appraisal?
Are you preparing your buyers that may be asked for their best and final offer ?
Why not go ahead and do that from the beginning?
you'll have the same chance . .
while you are protecting your buyer. .
Have a great week guys!
Fernando
Fernando Herboso
Broker - Solutions Finder
"Don't Pray For A Miracle. . .expect it!"
Herboso & Associates llc
Broker - Solutions Finder
"Don't Pray For A Miracle. . .expect it!"
Herboso & Associates llc
www.Herboso.com
Office 301.246.0001
Cell 240.426.5754
Fax 888.913.3535
My real estate knowledge is always up-to-date. For expertise you can depend on, call me when you have questions about the market or are ready to make a significant move. . .Quality representation is not expensive, its priceless!
Office 301.246.0001
Cell 240.426.5754
Fax 888.913.3535
My real estate knowledge is always up-to-date. For expertise you can depend on, call me when you have questions about the market or are ready to make a significant move. . .Quality representation is not expensive, its priceless!
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