Escalation Clauses- Bidding wars

[Anonymous]

26 years ago we put in an offer with an escalation clause that we would beat any offer by $1,000 up to ($20k over asking). We paid $5k over asking, not the full $20. House long since paid off, but glad we had ethical realtors back in the day.

[Anonymous]

Maybe things are different now, but when we bought our current house eight years ago, there were enormous crowds at every open house and very clearly multiple bidders for everything. On one house, we went to the very top of our escalation clause and were the sixth-highest bid in the end. When we sold our previous house, around the same time, we got five bids, all with competing escalation clauses.

It’s possible that some agents in some cases might be ginning up straw bidders to push escalation clauses up, but the risk/reward calculus seems off to me, aside from the fact that I know many houses really do get multiple bidders.

[Anonymous]

Anonymous wrote:Maybe things are different now, but when we bought our current house eight years ago, there were enormous crowds at every open house and very clearly multiple bidders for everything. On one house, we went to the very top of our escalation clause and were the sixth-highest bid in the end. When we sold our previous house, around the same time, we got five bids, all with competing escalation clauses.

It’s possible that some agents in some cases might be ginning up straw bidders to push escalation clauses up, but the risk/reward calculus seems off to me, aside from the fact that I know many houses really do get multiple bidders.

I don’t know if straw bidders are a real thing or not, but if I were to use a straw bidder, I would make sure they showed up at the open house (or had a private tour) to make them seem legitimate in case of a dispute later.

[Anonymous]

When we bought our house 2 years ago there were 7 competing offers. We had the winning bid with an escalation clause and ended up paying $50k over list. It was well worth it as we love our house.

[Anonymous]

Anonymous wrote:My sister is a realtor. Never ever do an escalation clause. They don't even have to produce another contract and they use an imaginary one to create a fake bidding war.

And I'm a realtor, and that's total bullshit.

Does the imaginary offer have a preapproval or proof of funds?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Not a realtor but a buyer who looked into escalation clauses. I think the seller has to produce the offer at some point? Some listing agents just ask for best and final offers but I think they do go back to some buyers and negotiate price if they like their terms.

Sellers can get someone to write a fake offer to trigger an escalation clause. Asking for it to be produced doesn't protect against this.

That's incredibly paranoid.

No its not it happens every day.

Really? And how do you know that? The offer needs to have real people with a preapproval which will be checked by the agent and/or proof of funds. This is not happening.

[Anonymous]

Anonymous wrote:

Anonymous wrote:My sister is a realtor. Never ever do an escalation clause. They don't even have to produce another contract and they use an imaginary one to create a fake bidding war.

And I'm a realtor, and that's total bullshit.

Does the imaginary offer have a preapproval or proof of funds?

Is it required that an offer must have a preapproval or proof of funds in order for it to be used for escalation purposes? What part of the escalation clause language says that?

[Anonymous]

Anonymous wrote:Not a realtor but a buyer who looked into escalation clauses. I think the seller has to produce the offer at some point? Some listing agents just ask for best and final offers but I think they do go back to some buyers and negotiate price if they like their terms.

Yes, some agents ask for the "best/final". We tell them to show us a counter offer or we will stick with our escalator clauses. Shockingly, most of the time, nobody has a "higher offer" they are just trying to get you to escalate higher as a regular offer.

IMO, you tell them to produce their highest offer with proof and then you go from there

[Anonymous]

Anonymous wrote:My sister is a realtor. Never ever do an escalation clause. They don't even have to produce another contract and they use an imaginary one to create a fake bidding war.

Last 3 homes we purchased were with an escalation clause (as there were 2-3+ buyers for each one). We got all 3 of them. First, I know for a fact there were other buyers, because we only escalated $5K (on a $500K home) and got it, and at Halloween a neighborhood kid told us "you got the house we wanted to buy" and the parent was so embarrassed (we won out with a cash offer, escalation clause and no strings attached as we had been renting for last 2 years).
2nd house, saw the other offer, but ours once again was cash, no strings attached and we were willing to let seller rent back for 2 months.
3rd---realtors might have been playing games, but we only escalated one time and won the house and closed 18 days later

[Anonymous]

I've always wondered too. We paid $14,000 over asking back in 2012 in a series of escalations. Which felt substantial at the time but now is joke money when it comes to housing. I'll never know.

[Anonymous]

Anonymous wrote:Maybe things are different now, but when we bought our current house eight years ago, there were enormous crowds at every open house and very clearly multiple bidders for everything. On one house, we went to the very top of our escalation clause and were the sixth-highest bid in the end. When we sold our previous house, around the same time, we got five bids, all with competing escalation clauses.

It’s possible that some agents in some cases might be ginning up straw bidders to push escalation clauses up, but the risk/reward calculus seems off to me, aside from the fact that I know many houses really do get multiple bidders.

Exactly! In certain markets, escalation clauses go ridiculously high. We had friends list house for 3 days (weekend with open house) at $1.4K, they got 15 offers and sold for $1.85M (and they had purchased the home 7 years before for $850K).
We also got out "escalation clauses" on a home. We were willing to go up to 250K over (original price was $1.4M) and we got into a bidding war/escalation clause. The other buyer got it, and supposedly were willing to go much higher than it went (for some very specific reasons). We happily walked away

[Anonymous]

Anonymous wrote:

Anonymous wrote:Maybe things are different now, but when we bought our current house eight years ago, there were enormous crowds at every open house and very clearly multiple bidders for everything. On one house, we went to the very top of our escalation clause and were the sixth-highest bid in the end. When we sold our previous house, around the same time, we got five bids, all with competing escalation clauses.

It’s possible that some agents in some cases might be ginning up straw bidders to push escalation clauses up, but the risk/reward calculus seems off to me, aside from the fact that I know many houses really do get multiple bidders.

I don’t know if straw bidders are a real thing or not, but if I were to use a straw bidder, I would make sure they showed up at the open house (or had a private tour) to make them seem legitimate in case of a dispute later.

Okay, maybe some of the people who outbid us on houses were straw bidders. I know none of the multiple bids that came in for the house we sold were, though.

[Anonymous]

Anonymous wrote:My sister is a realtor. Never ever do an escalation clause. They don't even have to produce another contract and they use an imaginary one to create a fake bidding war.

+1000000. It’s all communicated verbally. No one is showing another offer to prove that there was one.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Not a realtor but a buyer who looked into escalation clauses. I think the seller has to produce the offer at some point? Some listing agents just ask for best and final offers but I think they do go back to some buyers and negotiate price if they like their terms.

Sellers can get someone to write a fake offer to trigger an escalation clause. Asking for it to be produced doesn't protect against this.

That's incredibly paranoid.

No its not it happens every day.

Really? And how do you know that? The offer needs to have real people with a preapproval which will be checked by the agent and/or proof of funds. This is not happening.

What the offer needs and what the realtor communicates are different .

[Anonymous]

Anonymous wrote:My sister is a realtor. Never ever do an escalation clause. They don't even have to produce another contract and they use an imaginary one to create a fake bidding war.

SMDH at the crap that gets thrown out about real estate and realtors.

That is 100% incorrect. First of all you ABSOLUTELY have to provide the full offer that you escalated against. It’s literally written into the escalation clause verbiage - which by the way, is a legal document. And if what you are saying is that your “sister” is telling you this is how it works, or what she does, she’s an awful realtor and will eventually lose her license. I would report her immediately if I suspected this was going on

-Realtor licensed in VA, MD, and DC