Posted on May 25, 2019 - 09:43 AM
by Novosad Realty Partners
Buyers of homes under $300,000 frequently face stiff competition when writing offers. It's not uncommon for homes in this price range to attract multiple offers and sell for well over full price.
How do buyers get their offer to stand out in this mix when there may be 4 or 6 or more bids on the table? How do they avoid paying too much for a property that later might not appraise for full loan value?
One technique is to include an escalation clause in the contract. This provision states that the buyer will increase their offer by 'X' amount over the next highest competing offer, up to a not-to-exceed ceiling purchase price. For example, on a $200,000 listing, the buyer offers that amount and then says, "Buyer agrees to escalate this offer by $1,333 more than the next best competing offer, up to a maximum sales price of $206,333. If this clause is used, seller to provide proof of competing offer."
If the next highest offer stops at $205,000, the escalation kicks in and our buyers gets the home for $206,333. If the next highest offer was for $206,000 or better, the buyer folds and is out of the running as the escalation clause would exceed the self-imposed ceiling of $206,333.
This is one small way it pays to have a Buyer's Agent on your side when purchasing a home. Whether buying or selling a home, please let us know how we can assist with your real estate needs.
This guide provides a brief overview of the home buying process, including costs and important timelines to remember. It is a great resource geared for first-time buyers in particular, but even "veteran" homeowners will find it useful.
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