Escalation conspiracy?

[Anonymous]

Just out of curiosity, has anyone ever won a bid with an escalation clause that did NOT go to the max? For both houses I have purchased (one in 2008 and one this year) both escalation clauses were fully maxed to win. It just seems remarkable that in each case there was one other bidder who just happened to be right under our max that triggered ours to go all the way. The first time, the realtor showed us what they said was the competing offer and it was literally a standard form with rather messy hand-written entries. It just left me feeling a little uneasy like there was some kind of collusion with the agents to max out the sale price. Wouldn't you know it, again this year, our escalation clause gets maxed out.

When I see properties like the CP that just went for $400k over at a point where most people agree that it is beyond what it realistically should be worth. I wonder whether there's some manipulation going on. I know I'm offending every agent on this board, but sorry, even buyer's agents have a conflict of interest in the real estate compensation system we have.

[Anonymous]

Anonymous wrote:Just out of curiosity, has anyone ever won a bid with an escalation clause that did NOT go to the max? For both houses I have purchased (one in 2008 and one this year) both escalation clauses were fully maxed to win. It just seems remarkable that in each case there was one other bidder who just happened to be right under our max that triggered ours to go all the way. The first time, the realtor showed us what they said was the competing offer and it was literally a standard form with rather messy hand-written entries. It just left me feeling a little uneasy like there was some kind of collusion with the agents to max out the sale price. Wouldn't you know it, again this year, our escalation clause gets maxed out.

When I see properties like the CP that just went for $400k over at a point where most people agree that it is beyond what it realistically should be worth. I wonder whether there's some manipulation going on. I know I'm offending every agent on this board, but sorry, even buyer's agents have a conflict of interest in the real estate compensation system we have.

One side will max before the other does. That's a certainty.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Just out of curiosity, has anyone ever won a bid with an escalation clause that did NOT go to the max? For both houses I have purchased (one in 2008 and one this year) both escalation clauses were fully maxed to win. It just seems remarkable that in each case there was one other bidder who just happened to be right under our max that triggered ours to go all the way. The first time, the realtor showed us what they said was the competing offer and it was literally a standard form with rather messy hand-written entries. It just left me feeling a little uneasy like there was some kind of collusion with the agents to max out the sale price. Wouldn't you know it, again this year, our escalation clause gets maxed out.

When I see properties like the CP that just went for $400k over at a point where most people agree that it is beyond what it realistically should be worth. I wonder whether there's some manipulation going on. I know I'm offending every agent on this board, but sorry, even buyer's agents have a conflict of interest in the real estate compensation system we have.

One side will max before the other does. That's a certainty.

(well, I guess it could be a tie.)

[Anonymous]

Anonymous wrote:

Anonymous wrote:Just out of curiosity, has anyone ever won a bid with an escalation clause that did NOT go to the max? For both houses I have purchased (one in 2008 and one this year) both escalation clauses were fully maxed to win. It just seems remarkable that in each case there was one other bidder who just happened to be right under our max that triggered ours to go all the way. The first time, the realtor showed us what they said was the competing offer and it was literally a standard form with rather messy hand-written entries. It just left me feeling a little uneasy like there was some kind of collusion with the agents to max out the sale price. Wouldn't you know it, again this year, our escalation clause gets maxed out.

When I see properties like the CP that just went for $400k over at a point where most people agree that it is beyond what it realistically should be worth. I wonder whether there's some manipulation going on. I know I'm offending every agent on this board, but sorry, even buyer's agents have a conflict of interest in the real estate compensation system we have.

One side will max before the other does. That's a certainty.

Of course. But OP is asking, if the first bidder maxes out at $1m, why does the second bidder with an escalation clause to $1.2m pay the full $1.2m? And not some increment between $1m and $1.2m?

OP’s experience could be unusual. But in all her purchases, it would seem the other bidders maxed out just a few thousand below her own maximum, which is possible across multiple purchases but seems statistically unlikely.

[Anonymous]

Exactly. Feels statistically unlikely that each time the next highest bidder was just below our max. Not impossible, but seems unlikely.

Curious to hear from anyone whose escalation clause DID NOT max out in order to win the bid. Are there a lot of you out there?

[Anonymous]

Anonymous wrote:Exactly. Feels statistically unlikely that each time the next highest bidder was just below our max. Not impossible, but seems unlikely.

Curious to hear from anyone whose escalation clause DID NOT max out in order to win the bid. Are there a lot of you out there?

It happened *twice* to the OP.

[Anonymous]

We had an escalation clause that was not executed. (years ago- AU Park)
Our offer was above asking and we had an escalation clause as well.

[Anonymous]

I find the entire concept slimy. People seem to treat it like some sort of official process and I don’t think it is.

[Anonymous]

The first time, the realtor showed us what they said was the competing offer and it was literally a standard form with rather messy hand-written entries.

That’s what almost every real estate contract looked like in 2008.

[Anonymous]

When I see properties like the CP that just went for $400k over at a point where most people agree that it is beyond what it realistically should be worth. I wonder whether there's some manipulation going on.

Not every property that goes over asking has an escalation. Some listing agents ask for best and final. There was a long thread about this in the past couple of days.

[Anonymous]

If realtors have good market data, they will have a reasonable sense of where the property should max out and will target that number for the top of the escalation to give their client the best shot at winning without having them wildly overpay. If everyone is valuing the property roughly the same way, the escalation clauses are probably somewhat similar and therefore the winning bid will max out their escalation.

[Anonymous]

We bought last year. Offered $25k over list with an escalator up to $50k over list. Our escalator was not triggered and we got the house for our base offer.

[Anonymous]

Anonymous wrote:If realtors have good market data, they will have a reasonable sense of where the property should max out and will target that number for the top of the escalation to give their client the best shot at winning without having them wildly overpay. If everyone is valuing the property roughly the same way, the escalation clauses are probably somewhat similar and therefore the winning bid will max out their escalation.

+1 It's not an exact science but after a few failed offers last year as a buyer I was getting pretty good at guessing how much houses would go for (and declined to put offers on a couple of houses because we knew we wouldn't get them).

[Anonymous]

I sell real estate and have had buyers win without going to their escalation cap many, many times.

[Anonymous]

House priced at 1.2, our escalation was 1.37 and we settled at 1.3.