Escalation Clause versus waiting to make a counteroffer?

[Anonymous]

In your experience, does using an escalation clause give you an advantage over just waiting for the seller agent to tell you there is a higher offer and deciding if to counter or not? I know without the escalation offer, the seller's agent is not legally obligated to tell you the amount of the higher offer, and you have no way of verifying if it's a bluff or not. This is a scenario where your first offer is already competitive (over asking, no contingencies), so it's not a low ball offer that would get dismissed. This is in a competitive neighborhood, the listing price is around 1.35 millions.


And yes, I have asked my agent, but he is saying you could go either way. So wondering what people's real life experiences have been. Thanks for any input!

[Anonymous]

Escalation clause is better IME.

[Anonymous]

They often will have multiple offers so if yours isn't at the top they just will reject yours and move on. So I'd consider escalation clauses instead.

[Anonymous]

Don't do escalation. Agents abuse them and will just tell other buyers that you've made an offer at the top of your escalation. Also, you never know what games are played to trigger the escalation.

In almost all situations, if you don't do an escalation but your offer is competitive, agents will try to get you to counter -- so that's the better route. There's still abuse here (agents sometimes lie and say that there's a higher offer when there isn't), but it's not as terrible.

[Anonymous]

Escalation clauses are for suckers. That gives the seller an incentive to wait as long as possible to shop for better offers. It is better to make a good offer upfront and give them a short deadline to decide like 24 hours. If they are not willing to do that you would have gotten screwed using an escalation clause anyway, so just move on and find another property.

[Anonymous]

There is also no way to ensure honesty with escalation clauses. Agents are not allowed to show you offers from other buyers because it would be illegal. So they can make up stuff if they are dishonest and you don’t have a way to confirm whether they are being truthful with you.

[Anonymous]

Okay this is just one perspective from a seller.

We had a deadline with seven offers. Most had escalation clauses.

I honestly can’t remember if we circled back to people who didn’t? My memory of it is that people knew they needed to bring their best and final offer? I’m assuming my agent called everyone who lost and nobody submitted a new offer.

It was my understanding that the escalation clauses required verification of the other offer, minus identifying info. We never discussed trying to get to the top of the escalation clause that won, it just went one step above the next highest one. It was like an automated auction.

In our situation I’m sure sellers could do it either way they would just need to make it clear to everyone what their plan was, because things moved very quickly after the offer deadline - everything was signed within a few hours.

[Anonymous]

My experience is that the agents communicate verbally about the potential competition and may mishear (bad cell phone reception, new secretary, etc.) so we got the wrong information. The agents are picking up a call while doing something else, and may not really be checking notes. They are not typing into a portal or text message, so miscommunication happens more easily than if the numbers are written down.

That said, the fall market moves more slowly so I might take a risk at this time of year and save some money. In a hot area in the spring, go with an escalation clause.

[Anonymous]

Anonymous wrote:My experience is that the agents communicate verbally about the potential competition and may mishear (bad cell phone reception, new secretary, etc.) so we got the wrong information. The agents are picking up a call while doing something else, and may not really be checking notes. They are not typing into a portal or text message, so miscommunication happens more easily than if the numbers are written down.

That said, the fall market moves more slowly so I might take a risk at this time of year and save some money. In a hot area in the spring, go with an escalation clause.

What??

[Anonymous]

Where I've seen it useful and to the buyer's advantage is when the seller's agent announces that that are taking offers until a certain deadline (usually 2-3 days after going on the market).

[Anonymous]

You make your best offer with 24 hours deadline.

The last thing you should do is to allow seller to shop around due to your offer.

[Anonymous]

Anonymous wrote:Where I've seen it useful and to the buyer's advantage is when the seller's agent announces that that are taking offers until a certain deadline (usually 2-3 days after going on the market).

It’s called that those buyers are idiots and they go fleeced.

[Anonymous]

Anonymous wrote:My experience is that the agents communicate verbally about the potential competition and may mishear (bad cell phone reception, new secretary, etc.) so we got the wrong information. The agents are picking up a call while doing something else, and may not really be checking notes. They are not typing into a portal or text message, so miscommunication happens more easily than if the numbers are written down.

That said, the fall market moves more slowly so I might take a risk at this time of year and save some money. In a hot area in the spring, go with an escalation clause.

That is called negligence and those people should be permanently barred from being a real estate agent. They should also owe punitive damages to victims of their negligent behavior.

[Anonymous]

We sold in July. We had 5 offers the first day, 3 with escalation clauses. We did not go back to the others at all, we took the 2 highest clauses and chose the one with better terms, that ended up being #2 in price, but the $5k extra on the top one didn’t beat out the better terms. I’d guess no escalation, you won’t get the chance to counter.

[Anonymous]

Not all sellers are going to bother with making counteroffers. We didn't, we just too the highest escalation that waived all contingencies.