How do you respond to an escalation clause as a seller?

"The answer isn't always in the answer; it's in the question." - Eugene Ionesco The decision on how to handle an escalation clause depends on various factors. ? Are you prepared to show evidence of other offers to prevent false escalations? ? Has the escalation clause been professionally drafted without ambiguity (e.g., “net offer”). ? Are there other terms (than price) to be considered? Contingencies (e.g., appraisal waiver)? Timeline flexibility? ? Is it a fast market with multiple offers, in which an escalation clause can streamline the process? ? Do you need to choose the strongest buyer (e.g., for co-op board approval), in which case an escalation clause may limit options? Tip: weigh the pros and cons with your rep before deciding.

Understand the escalation clause. Before making an offer, carefully review this clause. It typically includes a base price, increment, cap, and proof requirement. The base price is your initial offer. The increment is the amount you’ll increase your offer if there’s a higher bid. The cap is your maximum price. The seller may require proof of a higher offer (like a copy or affidavit).

So… silly question perhaps… but would such a clause not artificially drive up market values? If yes, can this “escalation” factor be an acceptable adjustment (+/-) when an appraisal is prepared? I completely understand the concept of “willing seller, willing buyer” however this concept, in my opinion, is artificially driving up market values. Thank you for reading.

Responding to an escalation clause as a seller requires careful consideration of the current market dynamics and the specifics of the offer. Firstly, evaluate the clause’s terms, like the escalation factor and the cap, to understand the potential maximum offer. Assess other aspects of the offer, such as contingencies, down payment, and closing timeline, to determine its overall attractiveness. If the market is competitive, use the escalation clause to your advantage by potentially drawing higher offers from other interested parties. Lastly, consult with your real estate agent to devise a strategic response, whether it's accepting the escalated offer, countering it, or encouraging other buyers to make their best offers.

You receive an offer with a $5,000 escalation clause capped at $400,000. The base price is attractive, but the market is hot. You could: Accept: If it meets your minimum price and the escalation clause promises a good outcome. Counter: Propose a $380,000 base price with the same escalation clause, potentially pushing the final price higher. Encourage more bids: Keep the clause and continue marketing, potentially attracting even higher offers.

Got an offer with an escalation clause? Great! But hold on, there might be more to the story. Here's the key: compare all offers carefully. Look beyond the headline price. Dig into the net price, what you actually pocket after deductions. Financing matters too. Is their offer backed by a solid lender? What type of loan are they using? Contingencies can make or break a deal. Review all the conditions, like inspections and appraisals, that could delay closing. Closing date- When does everyone need to be on the same page to finalize the sale? By comparing these factors across all offers, you can make an informed decision.

I have sold homes for quite some time and have cycled through various markets, this is the one thing I would never advise a buyer to do. Negotiating is an art, an escalation clause makes it seem like we’re bidding on eBay. Secondly, so many variables exist that may entice a seller to accept a lower offer… Buyer 1 wants to close in 30 days with no mortgage, Buyer 2 wants to close in 60 days with a mortgage contingency, when a mortgage contingency exists you can use the bank as a reason for buying time. You must factor in carrying costs when making your decision. Sometimes a lower offer with the right terms is the deal you move forward with. In NYC the contract of sale offers a lot of room for interpretation of the law and delay tactics.

Auction day jitters? Don't sweat it! Here's the lowdown on snagging the sweetest deal when selling your property. Escalation clause got you worried? You've got options! Accept the offer as-is, a clean break. Reject it and propose new terms, maybe a higher price? You can also modify it – think more money, fewer hassles for the buyer. Remember, you have the upper hand! Got a better offer? Show it off! Don't be afraid to counteroffer or walk away if needed. Negotiation is all about finding the sweet spot, a win-win for everyone. So, stay confident, play your cards right, and this deal will be a slam dunk!

This depends on how the escalation clause is written. It may be $X over the highest offer not to exceed $V or it may be offering a max of $G if the initial offer is not the highest and best. Either way it allows you to have an idea of the maximum a buyer is willing to pay. This could place the seller at an advantage allowing them to push the buyer towards their maximum regardless of clause or other offers.

No need to reject it. Compare all offers regarding terms, value/net return and timing. With multiple offers, counter the offer you find easiest to work with and has the most solid offer to close. It's a negotiation and the escalation calms the nerves of risk with a buyer that there must be proof of a competitor to push the price. However, the seller can counter with the terms and price/net they choose regardless of the esclation. Honestly, it makes it easier to see where the most competitive will go without too much back and forth.

Receiving an escalation clause from a buyer is the equivalent of saying: “we are offering $X, but we’re actually willing to pay up to $Y…but we don’t want to offer $Y from the get go.” I advise sellers to then either ask all buyers to present their “highest and best” offer or counter the specific buyer with their $Y cap. If you are going to put all your cards on the table, we are going to ask you to play your best card.

I always tell the buyer to expect it to escalate to the highest and best offer as the seller can merely counter the offer. It works better in non-competitive situations but choose your best number and the number you will not cry over losing if you lose by $1.