Escalation Clauses

Want to avoid overpaying for real estate in a competitive market?  Want buyers to be aggressive in bidding for your home?

As controversial as it is effective for both buyers and sellers, this real estate power tool is the focus of what turned out to be an exceptionally vigorous lecture on just what you need.

hello hello hello hello yahoo i’m very energetic i am i got a lot of energy today feeling good about myself feeling not so good about me well i feel good about i’m just saying feeling i’m randall i’m the skunk pig so uh i’m with my remember the skunk pig yeah they’re the javelinas oh yeah no i’m just here with the preschool feeling good today lots of energy yes this is my handsome husband randall bro best smelling skunk pig you’ll ever see in your life we are here today to talk about something kind of technical yeah uh kind of controversial but if you if you want to invest in real estate uh or get a good price when you’re home uh you need to know about it and that is a escalation escalation clause now uh in the heyday when everything was going crazy we saw a lot more use of this yeah we are still seeing use of it but it might be dying out a little bit but an escalation clause is a really good thing to employ if you’re up for it correct so we’ve been doing escalation clauses for a while and then when the market went crazy with cobit and everything that everyone kind of discovered them it was kind of the thing to do right so just to be clear an escalation clause is a clause it’s a phrase on your offer your the contract that you are submitting to the seller that says let’s just say you know i might i offer 500 000 but i am willing to beat any competitive offer by x dollars and you know that what that x is we you know that’s part of the strategy does that have to be how high do you really want to how high do you want to go so typically you know i offer 500 000 and but i’ll offer 2 000 more than any competitive offer up to and including say 520 yes yeah that would be an escalation clause to 520. and uh kind of weird uh here’s the thing it kind of makes the situation work more like an auction so it allows the buyer to raise their bid if they’re in a competitive situation and obviously from a buyer’s standpoint that’s a good thing you don’t have to pay more than you need to that’s right in order to beat us so maybe you could beat a competitive offer at 512 instead of just flat 520 yeah right so just yeah so as an example let’s say you offered you know the 500 000 escalating to 520 uh let’s say there was a competitive offer at 5 12 well you would get it at 5 14. you would beat the 512 at 5 14. let’s say someone else escalated to 5 15 when you would get it to 5 17. but it’s still you know you’re going to max out at your limit of 520. but instead of paying 520 you might get it like you said 512. yeah which you know yeah would you know you’d like that yeah so uh buyers like the idea of escalation clauses um sellers maybe not so much we do have sellers uh listing agents who will put in mls oh no escalation no escalation just bring best and final yeah best and finally technically speaking if we send in an escalation clause they have to present they still have to present it they might not but they should and uh it is in our opinion it is a mistake for a seller to say no escalation costs and that is the reason why is that buyers will get much more aggressive if they’re allowed to do an escalation clause what they don’t want to do is to go thirty thousand dollars over list price when all they had to do was five thousand right so if you tell them no escalation clause they’re not going to go to 550. they’re going to go to 505 you know because they don’t want to leave money on the table so our opinion in seeing the dynamics of the situation seeing buyers facing very competitive situations our buyers will go much higher as part of an escalation clause than they would ever do just putting a single best and fun and the best thing about it is because people will say yeah but how will i really know there was a competitive offer and i want to say yeah well the other side has to present yeah they got to give the other offers so that you can see for sure yeah they did get an offer for 5 15 but i will win it for 517. yeah you have to have proof of that so it’s not just taking word taking someone’s word um so you do kind of have a little check and balance there so don’t worry about that yeah if you if your listing agent is pushing you back as a seller against escalation clauses um number one not in your best interest that’s our opinion and number two i’ve actually come across a number of listing agents who just kind of have trouble with the arithmetic honestly if you’ve got it i understand because if you’ve got a lot of offers and you’re trying to you know break them out yeah it’s a little extra you know it can be i’ve actually been in a situation where it kind of had to work yeah and it’s a lot of work it’s a lot of good through the calculation but making a mistake buyer or seller escalation clauses are a good thing that’s why they do auctions yep you know and the way it works real estate is set up there it’s not well you can do an auction there are systems where you can actually do an aux auction for real estate they do that for distressed uh real estate um you know repossessions and that sort of thing but typical real estate transactions they don’t an escalation clause is is a way to introduce an auction-like mechanism and it benefits both buyers and sellers that was a lot of words that was a lot that was a lot of words other than that i have let me help you catch you bro my god thank you oh lord i feel very passionate i think anyway it’s a useful tool that we’d like to share with you guys especially our buyers and give you a little education about it yeah don’t be afraid of them um they can be great be your best friend they can be your best friend you’re my best friend i would never put an escalation clause ahead of you yes you would of course you depends on the deal depends on the there you go there you go that’s the truth folks that’s the truth so anyway that’s our little lecture and escalation on escalation clauses yes if you are looking to buy or sell a home do not hesitate to reach out to us yeah the pic prescott pickle lady hotline is 713-302-1964 yes it’s a it’s a houston number we haven’t changed it like most people relocating the press it is a houston number that’s where you find her if you’re looking for free information the place to go people is pickle411.com.com pickle41199 or somewhere in between there is free and vigorous information waiting for you cigarettes yeah i don’t know whether whether you’re looking for real estate information events restaurants well i think the escalation clause lecture you just gave was quite vigorous yeah it was very vigorous yeah but other vigorous things that people 411. you’ll enjoy it yeah you’ll learn something all free it’s cool all free we don’t charge people we should charge [Music]