Reply to If I had an a offer accepted without an inspection contingency

Forum Index » Real Estate

Reply to "If I had an a offer accepted without an inspection contingency"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]OP, have you used an escalation clause or just made an offer over ask? [/quote]

Just made an offer over ask. It was stupid, I should have used an escalation clause.[/quote]

The agent should have advised you better.[/quote]

Yes, I agree. I wish I had thought of this. I paid at least $50K over what it might have gone for.[/quote]

An escalation clause is not appropriate for the situation you were in. [/quote]

Why not? I wound up paying $100K over ask for a house that isn’t worth that.[/quote]

DP.

The escalation clause was not appropriate because you bid on the house before the Open House.  You bid high in order to stop them from having an Open House and put the house under competition.  Essentially you bid high to stop you getting into a competitive auction where you would have to outbid other competitive offers.  Escalation clauses only work if there is competition.  If there is no competition, then the escalation clause doesn't engage, but from the lowest offer, the seller has to agree to the low offer or decline.  The seller cannot activate the escalation.

So, let's say the house is on the market for $500K.  You put in a bid of $600K and the seller agreed to take the money in hand and cancel the Open House.  Let's say, instead, you offered $550K with an escalation clause up to $600K.  If the seller wanted competition, they might not accept the $550K because they think they'll get more for a competitive situation and want to go to the Open House.  But without competing offers, the seller cannot get more than $550K.  Their choice is to accept the $550K or decline.  They decline.  Now it gets to the Open house and say you repeat your offer or extend your offer until after the Open House.  But there is another buyer who also bids $550K, but they have an escalation clause up to $610K.  They will win the house for $601K because your escalation clause only went up to $600K.  In the first scenario, you win the house for $600K because you got them to cancel the Open House and you were the only offer.  In the other case, you have the escalation clause, but because they declined and went to Open House, you got beat out by someone with a higher escalation clause.

In any event, the escalation clause will never engage if there are no other buyers competing, so then the sellers have the option to accept or decline on the bottom offer.  If they decline, then you lose the "bid first, bid high" gamble.  And in neither of the examples does it matter what appraisal sites say the house is worth.  The thing that determines what the house is worth is what is the highest amount that a buyer is willing to offer.  You won that with your bid, so you set the worth of the house.[/quote]

OP submitted a new offer after the open house as the seller did not accept their full price offer before the OH. It was dumb to not use the escalation clause. It sounds like there were no other bidders.[/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics