As I was getting ready to write today’s Market Update, I was thinking about something that’s become a very common occurrence in our area: multiple offers.
A few months ago I found myself working with several buyers that were all looking at our most competitive price point, right between $250,000 and $350,000. And as luck would (or wouldn’t) have it, I ended up in multiple offer situations with 3 buyers in the same week. When I got the call from the listing agent on the first offer and she let me know that there were 3 other offers on the table, I started to think to myself “Ok, what’s our next move?”. And then I remembered a conversation I had with one of my mentors about an ace he kept up his sleeve for just such situations: an Escalation Clause.
What’s an Escalation Clause and how does it work?
An Escalation Clause is a document that can be attached to an offer on a property that allows the buyer to automatically raise his offer above any other offer. Sounds easy, right? Well it is…kind of. You see, there’s some language that needs to be in the Clause, and some important information that the buyer needs to be 100% clear on prior to signing and submitting the offer with the Escalation Clause. As long as everyone’s on the same page, this can be a very effective tool in getting your offer accepted above all the others.
Is an Escalation Clause Fool-Proof?
No, because there’s other terms of a contract above and beyond price that may make another offer more attractive to a seller. But I’ve used the Escalation Clause 5 times in the last 12 months and my buyers were successful in purchasing the property in every one of those situations, including those 3 buyers that I mentioned above!
So why aren’t they used more often?
Simply put, I think it’s because a lot of agents don’t know about them. An Escalation Clause is not an official addendum to the Florida contract, and not all agents know how they should be drafted. But when written and used correctly, an Escalation Clause is a tool that can be used to bring about an agreement between the buyer and the seller, and can be VERY effective!