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Escalation Clauses - A Home Buyers Secret Weapon
Today we discuss escalation clauses because much of the country is experiencing an extreme "sellers' market." By that, I mean there are more buyers than there are sellers, and that results in sellers' getting more than one offer to buy their property. The seller can be picky about the terms under which he is willing to sell. A potential buyer is apt to make one or more offers which are rejected before making a successful offer. If you are a buyer, how do you increase the chances that your offer will be the acceptable one? The obvious things a buyer can do is to have a strong "pre-approval" lender letter, and make an offer that is full price and is as "clean" (has as few contingencies) as possible. Is there anything a buyer can do beyond that? You bet your bippy! Escalation Clauses A buyer who really wants to buy a property can do the above, plus add an "escalation clause." An escalation clause simply states that the basic offer is full price, but if the seller receives one or more other offers at full price or higher before this offer is accepted, then this offer is increased by $500, $1,000, $5,000 (or whatever figure you choose) above the other acceptable offer. Of course, you choose the amount of the incremental increase based on what you think it'll take to get the sellers' attention given the original asking price of the home. Now, I can hear you thinking, "That's all very well. I can see where that'll get me the winning bid, but how do I make sure there really is another contract? More importantly, how do I make sure I can afford the home? Isn't this awfully open ended?" Yes, it is. So let's fine tune the escalation clause idea a bit. First, make the escalation offer such that it will increase the sellers' net proceeds (not gross proceeds) by $500, $1,000 or whatever. That way, your price is not artificially increased by a higher offer that includes a provision for the sellers to pay some of the costs that are normally born by the buyer. Secondly, name an upper limit to which your offer can be carried. For example, your offer could state that you will pay the sellers an amount that will increase their net proceeds by $10,000 above any other acceptable offer up to a total price of $1,500,000. That puts a cap on how high you're willing to go. Prior to making an offer like this, be sure to have a conference with your lender to be sure you qualify for the highest amount required by your offer. Obviously, you also need to be sure you know and can pay the mortgage payments on that amount. It's also a good idea to get a lender letter for this higher amount, so that the sellers will be confident you can do what your offer says you're willing to do. The third bit of fine tuning is to require that the seller provide you with a copy of the acceptable competing contract as signed by the other potential buyer. Make sure the "buyer" isn't a relative of the seller! With the written offer on hand, you can be sure everything is on the up and up. In this hot sellers market, escalation clauses can be the key to closing a deal on your dream home. If a seller is motivated by greed, you will have them dead to rights. Raynor James is with http://www.fsboamerica.org - providing homes for sale by owner, "FSBO", properties. Are you thinking, "Should I sell my home?" Visit http://www.fsboamerica.org/seller.cfm to sell your home sale for free for one month.
MORE RESOURCES: Experts predicted Minnesota real estate agents would quit, 5 INVESTIGATES found a different reality 5 EYEWITNESS NEWS Altadena’s rough real estate market: Slower sales, lower prices, lottery winner plucking up properties Los Angeles Times Real estate expert warns socialist mayoral candidate could trigger massive NYC exodus - Fox Business Real estate magazine reports Les Wexner as Blue Heron buyer The Martha's Vineyard Times Canadian psychologist Jordan Peterson sets up shop in the Valley, records show The Business Journals Bedrock flexes its real estate portfolio to grow Detroit's tech ecosystem - Crain's Detroit Business Bedrock flexes its real estate portfolio to grow Detroit's tech ecosystem Crain's Detroit Business Office real estate wide open in Denver as vacancy rate hits 36 percent Colorado Public Radio Vail Valley real estate inventory is on the rise VailDaily.com NAR Real Estate Forecast Summit National Association of REALTORS® Real Estate Partners Dollar Tree Let's Talk Business: June residential real estate sales lagging, heritage grants and more Pueblo Chieftain A New Perspective: Here Comes the Groom | Real Estate Insights Piedmont Exedra Boston Real Estate Times Unveils 2025 Excellence Award Winners: Honoring the Visionaries Shaping New England’s Future Boston Real Estate Times State lawmaker joins Westport commercial real estate brokerage as vice president Hartford Business Journal Dawson County weekly real estate transactions, July 18 Central Nebraska Today Private Credit Surges in 2025 as Real Estate Developers Bypass Banks The World Property Journal Real estate news: Senior apartments in Tustin sell for $83M; Fullerton Metrocenter snares $118M Orange County Register New York Housing Market Trends 2025: Is the Tide Turning for Buyers? Norada Real Estate Investments 5 Essential Tech Tools for Real Estate Agents National Association of REALTORS® Los Angeles Water & Power commits $100 to real estate debt Pensions & Investments Property management with an owner’s mindset J.P. Morgan Today’s Mortgage Rates: The States Offering Lowest Rates – July 18, 2025 Norada Real Estate Investments SRS Real Estate Partners Arranges $4.53 Million Ground Lease Sale of Walmart Property in Deltona, FL citybiz Real Estate Market Report (June) highlandscurrent.org Corcoran McEnearney Announces Evan Lacopo to Lead the Number One Real Estate Office in Alexandria, Virginia Alexandria Living Magazine Licking County real estate transfers for June 30-July 4 range from $200,000-$14.6 million The Newark Advocate Banner Real Estate Group Breaks Ground on 334-Unit The Faywell Multifamily Development in The Heart MultifamilyBiz Bridgemarq Real Estate Services® Declares Dividend Yahoo Finance CBRE Announces Strategic Leadership Appointments Across U.S. & Canada Advisory Business Boston Real Estate Times Moon Becomes Next Real Estate Frontier, NAR Reports Higher Foreign Investment In US Huntsville Business Journal Gravelle advises on current real estate market in Grant County Columbia Basin Herald Bard College hires real estate advisor and broker to sell Simon’s Rock campus - The Berkshire Edge GenesisM Breaks Ground on 154,000-Square-Foot Biomanufacturing Facility in Bedford, MA Boston Real Estate Times Mapletree Sells Sun Belt Warehouse Portfolio to EQT Real Estate for $241M Commercial Observer AGC MA Announces 5th Annual Building Advancement Externship to Bridge Educators with STEM Construction Careers Boston Real Estate Times Operation Pawssible: Greenbrier Humane Society gets a boost from local real estate company Mountain Messenger What's the most expensive property sold in Rhode Island? July 18 real estate transactions The Providence Journal The Pipeline: Commercial real estate roundup for 7.18.25 Richmond BizSense LOCAL REAL ESTATE TODAY 7.18.25 KQEN News Radio Home Buyers: Stop Freaking Out After the Home Inspection National Association of REALTORS® Miami-Dade’s self-storage surge a boom for real estate IslanderNews.com SRS Real Estate Negotiates $4.5 Million Sale of Walmart-Anchored Property in Metro Orlando Shopping Center Business Home Buyers May Have Accepted a New Norm on Rates National Association of REALTORS® Tips on spotting real estate investment opportunities and avoiding risks, from experts at GR Property Group Community Impact Frederick Ford, real estate executive and first Black Union League Club president, dies at 98 Chicago Tribune Stage Point Europe Launches Its RWA Token $SPET, Setting it up as a Bridge Between Crypto and Real Estate Morningstar Hunt Companies Acquires Controlling Interest in Carter, Strengthening Real Estate Development Platform Business Wire New plans unveiled for Water Street’s second phase Tampa Bay Times Top Stocks for Real Estate Investment Elite AI Stock Forecasts - Massive wealth growth Jammu Links News July Economist Snapshot: What Will the Big Beautiful Bill Mean for Commercial Real Estate and Housing? Urban Land Magazine Vend Leans Into Verticalisation As Real Estate Revenue Grows 11% In Q2 onlinemarketplaces.com Is Apollo Commercial Real Estate Finance Inc. a good long term investment - Explosive market performance Jammu Links News Wood County Recorder reports on second quarter real estate activity BG Independent News Real estate sales in Jefferson, Bullitt and Oldham counties for Jan. 2-5, 2025 - The Courier-Journal Real estate sales in Jefferson, Bullitt and Oldham counties for Jan. 2-5, 2025 The Courier-Journal Vendor & Real Estate Partners Dollar Tree Development Services Offers Online Early Assistance for Commercial Real Estate Projects Prince William County Government (.gov) Choice Properties Real Estate Investment Trust 2025 Q2 - Results - Earnings Call Presentation (OTCMKTS:PPRQF) Seeking Alpha Manitowoc's real estate transfers include a sale of nearly $1 million to Riverside Dairy Herald Times Reporter Real estate transfers: Lake Township condominium complex sells for $5.61 million - Canton Repository Drake Real Estate Partners closes largest fund yet after pivoting to institutions Private Equity Real Estate | PERE Real Estate Transfers ~ June 25, 2025 The Bedford Citizen Stonelake Capital sells dozens of industrial buildings across US for $920 million The Business Journals |
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