| body"> | | | | home? Isn't this awfully open ended?" |
| Today we discuss escalation clauses because much | | | | Yes, it is. So let's fine tune the escalation clause idea a |
| of the country is experiencing an extreme "sellers' | | | | bit. |
| market." By that, I mean there are more buyers than | | | | First, make the escalation offer such that it will |
| there are sellers, and that results in sellers' getting more | | | | increase the sellers' net proceeds (not gross |
| than one offer to buy their property. The seller can be | | | | proceeds) by $500, $1,000 or whatever. That way, |
| picky about the terms under which he is willing to sell. | | | | your price is not artificially increased by a higher offer |
| A potential buyer is apt to make one or more offers | | | | that includes a provision for the sellers to pay some of |
| which are rejected before making a successful offer. | | | | the costs that are normally born by the buyer. |
| If you are a buyer, how do you increase the chances | | | | Secondly, name an upper limit to which your offer can |
| that your offer will be the acceptable one? | | | | be carried. For example, your offer could state that |
| The obvious things a buyer can do is to have a strong | | | | you will pay the sellers an amount that will increase |
| "pre-approval" lender letter, and make an offer that is | | | | their net proceeds by $10,000 above any other |
| full price and is as "clean" (has as few contingencies) | | | | acceptable offer up to a total price of $1,500,000. That |
| as possible. Is there anything a buyer can do beyond | | | | puts a cap on how high you're willing to go. |
| that? You bet your bippy! | | | | Prior to making an offer like this, be sure to have a |
| Escalation Clauses | | | | conference with your lender to be sure you qualify for |
| A buyer who really wants to buy a property can do | | | | the highest amount required by your offer. Obviously, |
| the above, plus add an "escalation clause." An | | | | you also need to be sure you know and can pay the |
| escalation clause simply states that the basic offer is | | | | mortgage payments on that amount. It's also a good |
| full price, but if the seller receives one or more other | | | | idea to get a lender letter for this higher amount, so |
| offers at full price or higher before this offer is | | | | that the sellers will be confident you can do what your |
| accepted, then this offer is increased by $500, $1,000, | | | | offer says you're willing to do. |
| $5,000 (or whatever figure you choose) above the | | | | The third bit of fine tuning is to require that the seller |
| other acceptable offer. Of course, you choose the | | | | provide you with a copy of the acceptable competing |
| amount of the incremental increase based on what | | | | contract as signed by the other potential buyer. Make |
| you think it'll take to get the sellers' attention given the | | | | sure the "buyer" isn't a relative of the seller! With the |
| original asking price of the home. | | | | written offer on hand, you can be sure everything is on |
| Now, I can hear you thinking, "That's all very well. I can | | | | the up and up. |
| see where that'll get me the winning bid, but how do I | | | | In this hot sellers market, escalation clauses can be the |
| make sure there really is another contract? More | | | | key to closing a deal on your dream home. If a seller is |
| importantly, how do I make sure I can afford the | | | | motivated by greed, you will have them dead to rights. |