Escalation clause...yes/no?

[Anonymous]

Anonymous wrote: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.

So you have no idea how the clause works. They don’t "push you to the upper end" other offers do

I sold earlier this year, we looked at the 3 highest price offers, then the better terms of those 3. With no escalation, you might not be in the top 3.

[Anonymous]

Anonymous wrote: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.

We sold our home a few years ago quite easily simply because of this.

Our agent found out that there was a potential buyer who really wanted a home in our neighborhood. And not just any of the 50 homes, but one with a view (so that leaves about 20 of them. This was about 9 months before we were to put the home on the market. In the end, we only had to do minor prep work (touchup paint, fixing minor issues and cleaning the carpet). then we allowed the home to be shown to them. We negotiated an offer within 2 days. They waived inspection (but asked to do one just so they would know what they needed to prepare to do before moving in).
They lived nearby in the neighborhood (there are 2000 homes in our neighborhood). And had targeting wanting a home with a view on our street. So we knew they would jump on our house (as 8 of them had sold in the last 4years). We negotiated to get close to what we thought we could get on the market. Who knows if we took a loss by not listing. I just know I didn't have to "refinish " cabinet fronts or do any more repairs/touch ups. I was looking at $50-60K of things our realtor said we needed to do to list it. We got 200% over what we had paid 8 years prior, and only big maintenance had been painting the exterior ($18K). We perhaps could have gotten another $50-80K, but Figured the longer we waited, the roof could start with issues, develop a leak, new hot water heater (it was 7.5 years old then). And most importantly we didn't have to actually get it fully ready for market.

So when someone wants in a specific area, they will typically pay a lot. So If you get in a bidding war with someone like that, you will need an escalation clause. Most of the sales around us have one. Just make certain that before you escalate yourself that they Prove to you they have a competing offer.

[Anonymous]

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

Yup---on a 40+ year old home. No way

I just gutted (did not move walls, and did not replace pipes in the walls) a 25 yo home. (similar cost of living area). I spent over $650K to do it all---new roof, paint exterior, new boiler/furnace, added Mini Splits (for AC), new doors interior and exterior, new flooring, new appliances, cabinets, blinds, etc. And my cabinets were good but not highest end (my cabinetry cost 45K all in (all wood, dovetailed, soft close, some glass doors, etc) , but if I had used the same ones I did in my condo a few years prior it would have been $70K. My hardwood floors were not cheap but definately mid level pricing, same with the tile (got my high end tile for 80% off) and LVP. You are not doing much remodeling for $150K, definately not the entire home unless it's only 1K sq ft

[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.

This---the cash offer will help if offers are similar. As a seller, I prefer a cash only offer. So if I had two offers and one was slightly lower and cash only I might take it. But I'm talking a $1.5M home listed, offers of $1.60 Cash and max escalation of $1.6 + $25K, then I might just take the cash offer. But any more difference and I'm taking the highest offer (as long as they are strong candidates and are preauthorized for a mortgage---more than just a preapproval that means nothing)

The closing with cash are so quick and simple. In our area you can close with a cash offer in 21 days sometimes a bit less. A mortgage will take 4-6 weeks typically. So when we sell (or buy) we always want to close ASAP to avoid any issues that could delay.

[Anonymous]

Anonymous wrote: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.

Just remember if the financing falls thru, putting home back on the market 3 weeks later could cost you more than $50K. Timing can be everything with real estate.

[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.

It really depends what you can afford. If you can afford to escalate and it's a home you love, why not?

Did home search decade ago for a cross country move. Had given ourselves 6 days to find a home---had to so when we moved in 3 months we had a house in a school district we could stay for our kids to finish MS/HS---one kid was already in HS so it was key.

After 2 days of viewing homes (and we had already narrowed it down with on line searching/research for areas and schools) we found the place we absolutely loved and it was by far the best place. So we paid full price and would have paid another 10-20% if needed.
We needed to have a home to live in, in the school district (both HS and MS had to be what we wanted long term) we wanted. We have animals so finding a place to rent with them in that specific area would be hard.

So we likely "overpaid" at the time. But in reality, not so much. Sold it 8 years later for 200% more. So not an issue long term.

[Anonymous]

No way.

[Anonymous]

Anonymous wrote:

Anonymous wrote: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.

So you have no idea how the clause works. They don’t "push you to the upper end" other offers do

I sold earlier this year, we looked at the 3 highest price offers, then the better terms of those 3. With no escalation, you might not be in the top 3.

They absolutely do. You’re telling a seller what you’ll pay for the house. What’s your max price?

[Anonymous]

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

Um, you clearly don't know how to read.

[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!

No one is renovating a 40 year old house "to the studs" weirdo.

[Anonymous]

We received multiple offers with escalation clauses. We went with the offer that waived financing and the inspection and could close in two weeks. It was not the highest offer, and it wasn't even at their highest escalation. We probably left $10K on the table but we had already moved out, so consider that waiving the financing and inspection and if you can find a way to close quickly, people will take that into consideration even if someone else's offer is higher.

[Anonymous]

Op your Reno budget is not happening.

[Anonymous]

Anonymous wrote:

Anonymous wrote: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.

Just remember if the financing falls thru, putting home back on the market 3 weeks later could cost you more than $50K. Timing can be everything with real estate.

Of course. Which is why our agent spoke to the loan officer of the higher bid who confirmed they had already been through full underwriting and income and assets were confirmed.

There was slight appraisal risk, but we felt the comps were there.

[Anonymous]

Anonymous wrote:

Anonymous wrote: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.

So you have no idea how the clause works. They don’t "push you to the upper end" other offers do

I sold earlier this year, we looked at the 3 highest price offers, then the better terms of those 3. With no escalation, you might not be in the top 3.

Oh, I understand it very well. You don’t understand my point. I was talking about a scenario where there are no offers close to yours but you already revealed your max so they are countering with it. What I am suggesting is that you only pay your upper end if competing offers actually exist.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: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.

So you have no idea how the clause works. They don’t "push you to the upper end" other offers do

I sold earlier this year, we looked at the 3 highest price offers, then the better terms of those 3. With no escalation, you might not be in the top 3.

Oh, I understand it very well. You don’t understand my point. I was talking about a scenario where there are no offers close to yours but you already revealed your max so they are countering with it. What I am suggesting is that you only pay your upper end if competing offers actually exist.

DP. Agreed that you are revealing your max for them to counter with in a one-offer situation. In addition, I've seen the escalation max used in mutliple offer situations. E.g, you bid $1M with escalation to $1.2M. Two other offers max escalation around $1.1M. Seller's agent nonetheless comes back to you and asks for additional $X over $1.1 to "get it done", because they know you're willing to pay more and really want the house. This is slimy and shouldn't be allowed with escalation IMO (it should work mechanically), but obviously seller is free to counter this way, and, surprisingly, I've seen this work for the seller, they end up getting $1.15, for example.