Escalation Clauses - A Home Buyer's Secret Weapon
by Dallas Appraiser L.L.C. on 05/17/14
Title:
Escalation Clauses - A Home Buyer's Secret Weapon
Word Count:
584
Summary:
Today we discuss escalation clauses because much of the country is experiencing an extreme seller’s market.î By that, I mean there are more buyers than there are sellers, and that results in sellers getting more than one offer to buy their property. The seller can be picky about the terms under which he is willing to sell. A potential buyer is apt to make one or more offers which are rejected before making a successful offer. If you are a buyer, how do you increase the chances that your offer will be the acceptable one?
Keywords:
escalation clauses, #Texas_Real_Estate, #DFW, #Dallas, #Appraisal, #Appraiser, #Texas, #Tarrant, #Mansfield, #Arlington, #Fort_Worth, #North_Texas, #Home_Appraisal, #Home_Appraiser, #Real_Estate, #De_Soto, #Euless, #Johnson
Article Body:
Today we discuss escalation clauses because much of the country is experiencing an extreme seller’s market.î By that, I mean there are more buyers than there are sellers, and that results in sellers getting more than one offer to buy their property. The seller can be picky about the terms under which he is willing to sell. A potential buyer is apt to make one or more offers which are rejected before making a successful offer. If you are a buyer, how do you increase the chances that your offer will be the acceptable one?
The obvious things a buyer can do is to have a strong pre-approval lender letter, and make an offer that is full price and is as clean (has as few contingencies) as possible. Is there anything a buyer can do beyond that? You bet your bippy!
Escalation Clauses
A buyer who really wants to buy a property can do the above, plus add an escalation clause.î An escalation clause simply states that the basic offer is full price, but if the seller receives one or more other offers at full price or higher before this offer is accepted, then this offer is increased by $500, $1,000, $5,000 (or whatever figure you choose) above the other acceptable offer. Of course, you choose the amount of the incremental increase based on what you think till take to get the sellers attention given the original asking price of the home.
Now, I can hear you thinking, That is all very well. I can see where that will get me the winning bid, but how do I make sure there really is another contract? More importantly, how do I make sure I can afford the home? Is not this awfully open ended?î
Yes, it is. So let us fine tune the escalation clause idea a bit.
First, make the escalation offer such that it will increase the sellers net proceeds (not gross proceeds) by $500, $1,000 or whatever. That way, your price is not artificially increased by a higher offer that includes a provision for the sellers to pay some of the costs that are normally born by the buyer.
Secondly, name an upper limit to which your offer can be carried. For example, your offer could state that you will pay the sellers an amount that will increase their net proceeds by $10,000 above any other acceptable offer up to a total price of $1,500,000. That puts a cap on how high you are willing to go.
Prior to making an offer like this, be sure to have a conference with your lender to be sure you qualify for the highest amount required by your offer. Obviously, you also need to be sure you know and can pay the mortgage payments on that amount. It is also a good idea to get a lender letter for this higher amount, so that the sellers will be confident you can do what your offer says you are willing to do.
The third bit of fine tuning is to require that the seller provide you with a copy of the acceptable competing contract as signed by the other potential buyer. Make sure the buyer is not a relative of the seller! With the written offer on hand, you can be sure everything is on the up and up.
In this hot sellers market, escalation clauses can be the key to closing a deal on your dream home. If a seller is motivated by greed, you will have them dead to rights.
Clauses - A Home Buyer's Secret Weapo
Word Count:
584
Summary:
Today we discuss escalation clauses because much of the country is experiencing an extreme seller’s market.î By that, I mean there are more buyers than there are sellers, and that results in sellers getting more than one offer to buy their property. The seller can be picky about the terms under which he is willing to sell. A potential buyer is apt to make one or more offers which are rejected before making a successful offer. If you are a buyer, how do you increase the chances that your offer will be the acceptable one?
Keywords:
escalation clauses, #Texas_Real_Estate, #DFW, #Dallas, #Appraisal, #Appraiser, #Texas, #Tarrant, #Mansfield, #Arlington, #Fort_Worth, #North_Texas, #Home_Appraisal, #Home_Appraiser, #Real_Estate, #De_Soto, #Euless, #Johnson
Article Body:
Today we discuss escalation clauses because much of the country is experiencing an extreme seller’s market.î By that, I mean there are more buyers than there are sellers, and that results in sellers getting more than one offer to buy their property. The seller can be picky about the terms under which he is willing to sell. A potential buyer is apt to make one or more offers which are rejected before making a successful offer. If you are a buyer, how do you increase the chances that your offer will be the acceptable one?
The obvious things a buyer can do is to have a strong pre-approval lender letter, and make an offer that is full price and is as clean (has as few contingencies) as possible. Is there anything a buyer can do beyond that? You bet your bippy!
Escalation Clauses
A buyer who really wants to buy a property can do the above, plus add an escalation clause.î An escalation clause simply states that the basic offer is full price, but if the seller receives one or more other offers at full price or higher before this offer is accepted, then this offer is increased by $500, $1,000, $5,000 (or whatever figure you choose) above the other acceptable offer. Of course, you choose the amount of the incremental increase based on what you think till take to get the sellers attention given the original asking price of the home.
Now, I can hear you thinking, That is all very well. I can see where that will get me the winning bid, but how do I make sure there really is another contract? More importantly, how do I make sure I can afford the home? Is not this awfully open ended?î
Yes, it is. So let us fine tune the escalation clause idea a bit.
First, make the escalation offer such that it will increase the sellers net proceeds (not gross proceeds) by $500, $1,000 or whatever. That way, your price is not artificially increased by a higher offer that includes a provision for the sellers to pay some of the costs that are normally born by the buyer.
Secondly, name an upper limit to which your offer can be carried. For example, your offer could state that you will pay the sellers an amount that will increase their net proceeds by $10,000 above any other acceptable offer up to a total price of $1,500,000. That puts a cap on how high you are willing to go.
Prior to making an offer like this, be sure to have a conference with your lender to be sure you qualify for the highest amount required by your offer. Obviously, you also need to be sure you know and can pay the mortgage payments on that amount. It is also a good idea to get a lender letter for this higher amount, so that the sellers will be confident you can do what your offer says you are willing to do.
The third bit of fine tuning is to require that the seller provide you with a copy of the acceptable competing contract as signed by the other potential buyer. Make sure the buyer is not a relative of the seller! With the written offer on hand, you can be sure everything is on the up and up.
In this hot sellers market, escalation clauses can be the key to closing a deal on your dream home. If a seller is motivated by greed, you will have them dead to rights.
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