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Answers (8)
- Tiffany Bond, "TiffanyBond"
- Contributions:3010
In my experience, the escalation clause is popular in 2 places...
1) In a seller's market
2) When a property is priced far below market and the seller wants the market to carry it up in a bidding war (almost like a slow-paced auction)
I have always seen #2 used in places like estate sales where the seller(s) wanted the property sold for a good price very quickly, but was not emotionally or financially attached to the property - so if it sold for the original low price they wouldn't be that upset. However, it is probably a tactic more banks will adopt since they meet the criteria of an estate sale.
It does have some disadvantages, like giving your price away. If your agent goes down this path (and I don't really recommend it with a foreclosure/short sale in a fragile market - because these sellers usually have no contingencies allowed), make sure they get proof that your offer was bumped up to "x" price by a valid offer (which is the norm to ask for in this situation).
In general, most markets have more than enough inventory that you need not engage in this sort of nonsense. Mostly, it is realestalkers that benefit from it becuase price is so much less important than getting the house.(http://seattletimes.nwsource.com/html/realestate/2009579643_realestalkers01.html)
1) In a seller's market
2) When a property is priced far below market and the seller wants the market to carry it up in a bidding war (almost like a slow-paced auction)
I have always seen #2 used in places like estate sales where the seller(s) wanted the property sold for a good price very quickly, but was not emotionally or financially attached to the property - so if it sold for the original low price they wouldn't be that upset. However, it is probably a tactic more banks will adopt since they meet the criteria of an estate sale.
It does have some disadvantages, like giving your price away. If your agent goes down this path (and I don't really recommend it with a foreclosure/short sale in a fragile market - because these sellers usually have no contingencies allowed), make sure they get proof that your offer was bumped up to "x" price by a valid offer (which is the norm to ask for in this situation).
In general, most markets have more than enough inventory that you need not engage in this sort of nonsense. Mostly, it is realestalkers that benefit from it becuase price is so much less important than getting the house.(http://seattletimes.nwsource.com/html/realestate/2009579643_realestalkers01.html)
- frisky1
- Contributions:448
They are absolutely designed for bidding wars. They either came out or got really popular in NJ about 5 years ago and I think the star-ledger did a story about them. They are not part of the sales contract but a separate form created by each RE agency (or their lawyers) so the language is mostly standard fill in the blank. If they are coming back, that's definitely a sign that we might be returning to a sellers market (I think temporarily) at least in first time buyers price ranges.
- Jeff Konstant, "jkonstant"
- Contributions:1970
It is perfectly legal to construct an offer this way. As noted above, "escalation clause" is a common term used in the real estate world. State law may prohibit a realtor from drafting one as it may be considered practicing law and many agents don't recognize the line they cannot cross.
I agree with Robeto, this behavior is risky and really no different than getting caught up in bidding wars. While you may or may not get burned this time, it's this sort of thinking that means you eventually will.
I agree with Robeto, this behavior is risky and really no different than getting caught up in bidding wars. While you may or may not get burned this time, it's this sort of thinking that means you eventually will.
- Mack McCoy
- Contributions:1097
I think you misunderstood. Go back and ask "what happened, again?" again.
- Michael Emery, "MikeEmery"
- Contributions:7277
It might be unethical and illegal if the listing agent lied about there being competing offers and just accepted your high offer. But that's pure speculation.
Couldn't the listing agent just go back to their client and say 'hey we got an offer for 150k but this other offer said they will pay 160k so lets just play them off of each other to see how much we can get'.
I've never seen it done in Minnesota so I have no idea if it's common or even legal here. I've never seen a form that Tiffany has described but I am curious as to whether it works to the benefit of the buyer or the seller.
Couldn't the listing agent just go back to their client and say 'hey we got an offer for 150k but this other offer said they will pay 160k so lets just play them off of each other to see how much we can get'.
I've never seen it done in Minnesota so I have no idea if it's common or even legal here. I've never seen a form that Tiffany has described but I am curious as to whether it works to the benefit of the buyer or the seller.
I doubt it is either illegal or unethical, but I would argue that it is probably a terrible idea. Recent history has shown us, that the 'buy a home at any cost' attitude will generally cost you quite alot when that market area changes.
- frisky1
- Contributions:448
Its done in New Jersey. Most major RE agencies in NJ have an escalation clause form (prob very similar to the one Tiffany refers to) which does exactly what you saw on TV (I think I saw that episode). I remember it becoming widely popular about 5 years ago during the bubble.
- Tiffany Bond, "TiffanyBond"
- Contributions:3010
To the best of my knowledge it is neither illegal or unethical. In fact, in the Seattle area, there is an escalation clause form. It may vary in your state.
Question to agents: is offer unethical?
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