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Old 02-12-2018, 01:06 AM
 
41 posts, read 20,776 times
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I was curious about escalation clauses in offers.
Escalation clauses basically allow escalation upto max amount x.
I understand that seller's agent has to show competing offers if escalation is used but can't the agent get someone else to put in a higher offer to put escalation in play? Does this often happen?
Can the accepted offer be lower than the max amount x (since the buyer has already shown that they are willing to pay upto x)?

The escalation clauses relies on honesty from seller/agent, not sure how often it is taken advantage of.

Last edited by Seattler123; 02-12-2018 at 01:35 AM..
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Old 02-12-2018, 02:24 AM
 
1,456 posts, read 550,811 times
Reputation: 2015
Quote:
Originally Posted by Seattler123 View Post
I was curious about escalation clauses in offers.
Escalation clauses basically allow escalation upto max amount x.
I understand that seller's agent has to show competing offers if escalation is used but can't the agent get someone else to put in a higher offer to put escalation in play? Does this often happen?
Can the accepted offer be lower than the max amount x (since the buyer has already shown that they are willing to pay upto x)?

The escalation clauses relies on honesty from seller/agent, not sure how often it is taken advantage of.
Total nonsense in my opinion. That's not how to negotiate.

Buyer beware and abuse can easily happen. You offer 350k but say your willing to pay 375k. What do you think you'll end up paying? $350k?

And it does not help you later in the process.

Let's say you get the house miraculously for $350k. Then you negotiate problems from the inspection. Seller already feels like he got a bad deal because he just left 25k on the table. Buyer tries to play hard ball and says he'll walk unless $5k for repairs are factored into the sale price. Well he's already told the seller he's willing to spend $375k. Yeah, that's going to be credible. Yeah, that's going to work.

Many reasons why this is a bad idea for everyone involved.
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Old 02-12-2018, 06:42 AM
 
723 posts, read 284,887 times
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I wouldn’t do it. If you have an escalation amount that is acceptable keep it private with your agent. That’s like showing your hand to the whole table in poker and then still trying a bluff.
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Old 02-12-2018, 06:45 AM
 
Location: Cary, NC
30,104 posts, read 52,818,547 times
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Quote:
Originally Posted by Schmooky View Post
I wouldn’t do it. If you have an escalation amount that is acceptable keep it private with your agent. That’s like showing your hand to the whole table in poker and then still trying a bluff.
Exactly.
If I was a seller and received it, I would counter at the escalation price.
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Old 02-12-2018, 08:56 AM
 
6,289 posts, read 6,786,957 times
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I would never recommend an escalation clause. But...like others, I don't like to show my hand in cards, either.
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Old 02-12-2018, 09:03 AM
 
Location: Rochester, WA
2,812 posts, read 1,378,927 times
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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:


https://www.youtube.com/watch?v=M4ut526soPo

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.

https://www.youtube.com/watch?v=tnAxLO0mJXE

Last edited by Diana Holbrook; 02-12-2018 at 09:17 AM..
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Old 02-12-2018, 09:23 AM
 
2,577 posts, read 1,017,193 times
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Bend over!
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Old 02-12-2018, 09:54 AM
 
Location: Salem, OR
13,534 posts, read 30,429,574 times
Reputation: 11501
Quote:
Originally Posted by Seattler123 View Post
I was curious about escalation clauses in offers.
Escalation clauses basically allow escalation upto max amount x.
I understand that seller's agent has to show competing offers if escalation is used but can't the agent get someone else to put in a higher offer to put escalation in play? Does this often happen?
Can the accepted offer be lower than the max amount x (since the buyer has already shown that they are willing to pay upto x)?

The escalation clauses relies on honesty from seller/agent, not sure how often it is taken advantage of.
We have a hot market here and I see them every so often. I've received them on my offers and they buyer always paid the maximum amount? Why? Because the seller rejects their offer and counters at the higher amount negating the escalation clause if it would have been less. If you are willing to pay X, any rational seller will counter at X if it fails to escalate to X based on other offers.

So in theory, it can be less than the max of x, but I've never seen a seller take a less than the max of x.
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Old 02-12-2018, 10:01 AM
 
1,947 posts, read 920,804 times
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We used escalation on two places.
We won on the place that we wanted. Beat out 15 offers.
The other we didn't win. Our cap was exceeded by 100k.
A third place (TH, new build) we offered at Ask, which was accepted. We were the first offer. One other competing offer also at Ask, they were slow.
A fourth place, we were the only offer. It was the slow season (Oct).
Seattle region.

If you want the place, Seattle, it is a good idea to put in an escalating clause with a cap. Be sure you are pre-approved mortgage for the cap.
YMMV
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Old 02-12-2018, 10:24 AM
 
Location: The Carolinas
1,966 posts, read 1,799,893 times
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Quote:
Originally Posted by Schmooky View Post
I wouldn’t do it. If you have an escalation amount that is acceptable keep it private with your agent. That’s like showing your hand to the whole table in poker and then still trying a bluff.
I would amend your statement as "keep it private TO YOURSELF". Your agent doesn't need to know.
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