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Old 02-12-2018, 10:56 AM
 
1,451 posts, read 543,288 times
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Quote:
Originally Posted by Diana Holbrook View Post
I have heard they're being used in the Seattle area, where the market is crazy. Our OP may come from there, according to his name. If I were a buyer I would definitely NOT use one with an agent who isn't very well versed with them, who can also explain them to me!

On this one, I'll defer to Annie, our local ASSN legal hotline lawyer, with her opinion on the subject:




I am really glad to live in the slower, quieter market outside King County.


On edit: Here is another video on the subject where she speaks even more strongly about the risk of using it.

OMG I could spend hours, days, months watching these videos.
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Old 02-12-2018, 11:07 AM
 
6,288 posts, read 6,780,477 times
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Originally Posted by just_because View Post
OMG I could spend hours, days, months watching these videos.
Report back.
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Old 02-12-2018, 12:10 PM
 
Location: Boise, ID
7,917 posts, read 21,444,133 times
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I have seen them used sometimes. We had a buyer in my office that was getting outbid on every offer they made, even though they were at or over full price, cash offers. They finally decided they wanted to include an escalation clause. We explained how that process works, and what the negatives are. They still wanted to do it, so we wrote them up that way, and still got outbid on 9 additional houses before they were the "winning bidder" on one. I hate real estate by ebay tactics, but the market was so crazy, it was the only way they could buy anything, and it was several years ago, with the market heading back up, so it was still a good price compared to today.

The buyer's philosophy was that if the house was on the market for $300k and they offered $310k, they would get beat (it had already happened several times). If they were willing to go to $325k, and just offered $325k, they would end up paying $325k. But if they had an escalation clause, there was at least a chance that the next highest offer could be $315k and they could end up paying $316k instead of being guaranteed $325k, plus they were more likely to actually be the buyer. As I said, it took 10 more offers before it worked. Crazy seller's market at that time. If I remember correctly, the listing agent came back and said something along the lines of "we only have 2 other offers right now, and yours is the best but rather than getting into a bidding war, if you just make it $315k without the escalation clause, we'll sign it." We interpreted that to mean that the other offers weren't over asking price, so the escalation clause wouldn't have been triggered, but offers were coming in left and right on everything, and this was a "first day on the market", so rather than risk a better offer coming in while we were countering back and forth, the buyer jumped on the deal.

We also had a listing where we got more than a dozen offers. I think 8 or 10 of them included an escalation clause. One of them had no cap on the escalation. Just $500 more than the highest offer. We actually had to make a chart of which offers had which caps and what terms. The seller didn't like that the no cap buyer was going to tear the house down, and actually ended up taking the 3rd highest offer, because it was cash (the 2nd highest was financed, and we knew it wouldn't appraise). They closed in a week.
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Old 02-12-2018, 12:15 PM
 
Location: Rochester, WA
2,796 posts, read 1,363,207 times
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Quote:
Originally Posted by just_because View Post
OMG I could spend hours, days, months watching these videos.
Time well spent, we love Annie's videos.

See you when you get done!
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