Escalation clause...yes/no?

[Anonymous]

R/E pros, what would you do in this scenario?

We're buying in a very competitive market with no inventory. This particular house is in an amazing neighborhood that everyone wants, the bones seem great but the interior has not be renovated for 40+ years and it will cost someone $150k-$300k+ to make it nice. We are willing to pay at ask or above ask, no financing contingency. Now wondering if we need an escalation clause? Some people think this leads to overpaying bc we're paying cash and may not need to outbid someone who needs a mortgage. The asking price is already $200k above Zillow estimate. The need for gut reno may deter some buyers but we can't be sure.

[Anonymous]

First of all, I live in a neighborhood like that. Try not to be overly attached to a particular neighborhood, BUT, if you are, then be willing to spend to make it happen.

There are roughly 70 houses in our neighborhood. Not many change hands, so when they do, you have to make it happen. Whatever that means.

[Anonymous]

I don't know where you are looking but the market is softening. Plus there is not as much demand for homes that need work compared to turn key homes. If the seller has not said that they have multiple offers, I would offer without escalation clause.

[Anonymous]

I wouldn't get emotionally attached unless you really want the house. Then do what you have to do.

Having an all cash offer helps and the fact it needs work also helps as many people wouldn't want to do that work... unless you're a developer who could flip the property and have it up for spring market. So factor that in. Also, the fact it is for sale in the fall helps as many people don't want to move their kids (that is how we bought our home in a vert competitive market).

Also, $150-$300K does not sound like enough in 2024. If the inside hasn't been updated in 40+ years you can assume water, gas, sewer, plumbing, electrical lines are all old and you might need to do a "to the studs" renovation. Maybe not, but take into consideration you may pay more for a renovation and if you have the $ just do it right!

[Anonymous]

I would include the escalation clause, but if they try to push you toward the upper end, just tell them they already have your best offer.

[Anonymous]

lol $150k budget. No chance.

[Anonymous]

Anonymous wrote:I wouldn't get emotionally attached unless you really want the house. Then do what you have to do.

Having an all cash offer helps and the fact it needs work also helps as many people wouldn't want to do that work... unless you're a developer who could flip the property and have it up for spring market. So factor that in. Also, the fact it is for sale in the fall helps as many people don't want to move their kids (that is how we bought our home in a vert competitive market).

Also, $150-$300K does not sound like enough in 2024. If the inside hasn't been updated in 40+ years you can assume water, gas, sewer, plumbing, electrical lines are all old and you might need to do a "to the studs" renovation. Maybe not, but take into consideration you may pay more for a renovation and if you have the $ just do it right!

+1

Do you love the house? Does it have good bones? Do you love the street?

[Anonymous]

Decide on the maximum you will pay for the house and make the offer accordingly. Don’t automatically expect the sellers to take your all-cash offer if someone else is willing to pay more with a mortgage.

[Anonymous]

never!!!!!

[Anonymous]

Anonymous wrote:lol $150k budget. No chance.

+100000 That will easily double.

[Anonymous]

I will also note that we recently listed our house and we ended up with several offers within 24 hours.

One was cash and while it was tempting, it was significantly ($50k+) below the other offers. We took an offer with financing contingencies.

All that to say, cash is helpful but you still need to be in the ballpark. You could skip an escalation clause and just do a best and final.

But you could still lose out.

[Anonymous]

The truth is that most houses in hot neighborhoods likely only get one offer, and nothing about what's been described about this house suggests that it will be different. In fact, it seems like this house may be overpriced. I personally would not offer more than ask, and I definitely would not escalate.

As with any house, I would just be at peace with the fact that I might lose. Other houses will always come on the market, even in hot neighborhoods.

[Anonymous]

Anonymous wrote:Decide on the maximum you will pay for the house and make the offer accordingly. Don’t automatically expect the sellers to take your all-cash offer if someone else is willing to pay more with a mortgage.

We're a military family who's sold more than once and have taken the mortgage offer three times now. Cash buyers act like they're doing you a favor, and we consider it our duty to sell to people who can't afford such a thing.

[Anonymous]

Anonymous wrote:The truth is that most houses in hot neighborhoods likely only get one offer, and nothing about what's been described about this house suggests that it will be different. In fact, it seems like this house may be overpriced. I personally would not offer more than ask, and I definitely would not escalate.

As with any house, I would just be at peace with the fact that I might lose. Other houses will always come on the market, even in hot neighborhoods.

I don't know where you live, but houses in a lot of close-in DMV neighborhoods get multiple offers. I was talking to a realtor who listed a house in our neighborhood in Arlington. He told me it went for $200K over listing and they received 8 or 9 offers.

As long as you tie the escalation clause to the highest offer and include a maximum price you're willing to pay, I don't see why you wouldn't include one.

[Anonymous]

If you have 8-9 offers these days then you listed too low. It didn't sell for $200k over market value. It sold for market value. It didn't happen because the market is still crazy, it happened because you listed low.