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Escalation clauses, to me, seem to invite manipulation. You're basically laying all of your cards on the table and saying "THIS is really my highest and best, but I'm not going there, because I don't want to pay any more than I have to." I've seen negotiations for H&B that had FOUR offers with different escalation clauses. SMH. "Let's see, Buyer A said $400K, with a $2K escalation up to $420K. Buyer B is $402, but with escalation of $1,000 up to $425, Buyer C is $415, but with only 1 $5K escalation, and Buyer D is $412K, but will beat highest offer by $5K, up to $425K. If we start in the order received . . . (which time? The first time? The second time?)" Gah . . . ! (Not exact numbers, but you get the gist . . )
there you go, a listing agent scared of multiple offers because of the potentially confusing math.
Do the boards have a particular article in one of their brochures that explicitly says, "We, [such and such], strongly discourage the use of escalation clauses."?
I gotta wonder where you sometimes come up with this stuff
I had the attorney who's been head of the Forms committee, and a very well-versed residential contract issues guy to boot, tell us the NCREC says we're not supposed to use escalation clauses. And given his reasoning, it was good enough for me.
Because we have no right to demand to see the offer we "beat".
So, we CAN use them - nothing prohibits us from following the lawful direction of our client, which is "I want to include an escalation clause, and here's the verbiage I want to use". But we'd still open ourselves to real and significant liability if, through no fault of our own, it was determined they were essentially conned into paying more than they had to.
I had the attorney who's been head of the Forms committee, and a very well-versed residential contract issues guy to boot, tell us the NCREC says we're not supposed to use escalation clauses. And given his reasoning, it was good enough for me.
Because we have no right to demand to see the offer we "beat".
So, we CAN use them - nothing prohibits us from following the lawful direction of our client, which is "I want to include an escalation clause, and here's the verbiage I want to use". But we'd still open ourselves to real and significant liability if, through no fault of our own, it was determined they were essentially conned into paying more than they had to.
I wonder then if Mike had to use this same attorney
the "confusing math" was pure sarcasm. I added an emoji so I thought it would be obvious to anyone with reading skills.
Yeah, I got it. FYI too, the "valued resource" was also pure sarcasm. I added an emoji as well, but I guess my grin just wasn't big enough for you to get it.
Escalation clauses, to me, seem to invite manipulation. You're basically laying all of your cards on the table and saying "THIS is really my highest and best, but I'm not going there, because I don't want to pay any more than I have to." I've seen negotiations for H&B that had FOUR offers with different escalation clauses. SMH. "Let's see, Buyer A said $400K, with a $2K escalation up to $420K. Buyer B is $402, but with escalation of $1,000 up to $425, Buyer C is $415, but with only 1 $5K escalation, and Buyer D is $412K, but will beat highest offer by $5K, up to $425K. If we start in the order received . . . (which time? The first time? The second time?)" Gah . . . ! (Not exact numbers, but you get the gist . . )
They can definitely be difficult to sort out & keep track of on the seller's side, and some sellers & their agents state openly that they won't entertain them. But in our (rapidly rising) market of the past couple of years, some agents have used them as a way to keep their buyer clients from blindly shooting in an upward trajectory to guess how high above asking the price will go. Usually there's a mix of offers, some with & some without, so you use the highest 'base' price as your starting point & go from there. I would imagine that there are some next day (or next month) regrets from buyers using this tactic, but in my experience most are people who have lost on MANY prior bids and are well schooled by that time at the potential consequences.
We are not prohibited from providing documentation that substantiates competing offers--privacy protected, of course, and with seller's permission. The biggest challenge is sometimes making sure that all the details are buttoned up, and that the buyers are fully qualified.
It has definitely yielded higher final prices for sellers if they're willing to deal with it, from what I've seen, but also some very long nights for them & the agents sorting it all out!
then you get the Buyer who makes an offer with an escalation to a higher price than you actually accept. and they complain long and loud, believing that since their price would have been highest, you were required to accept it.
I can imagine that happening definitely, since you would be looking at more than just price and I guess would have been disclosing competing offers throughout the process. In some way it goes back to the original post, in an auction where everyone is aware of what the other parties are bidding. But there are sooo many more fine points to a typical home purchase offer--I'd like to hear an auctioneer try & rattle those off!!
then you get the Buyer who makes an offer with an escalation to a higher price than you actually accept. and they complain long and loud, believing that since their price would have been highest, you were required to accept it.
that has happened to me as a listing agent.
Greed readily discounts the value of terms and professionalism.
For some folks, the dollar is the only focus....
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