Are Escalation Clauses worth the risk?

How close to edge will you dare dance to win?

As a professional, are you willing to enter this vast wasteland of murkiness and uncertainty known as “Escalation Clause” while advising Home buyers and Sellers?

“Purchase price: $1,000 above the highest competitive offer up to a maximum of $358,000

Most experts will say that these clauses “are not unethical or illegal, but they are brim full of risk as they set up HUGE potential for mis-execution resulting in backfiring on the good intentions to serve the clients well.” Some of the (Many) concerns are:

  • an offer with an escalation clause doesn’t have a defined price

  • How does the Seller provide proof of following the rules of the clause without compromising confidentiality obligations to all parties?

  • Just to add a little more fuel on the fire. At what point does it begin looking like an auction? And how many realtors are licensed auctioneers? And how would you defend it if the real estate commission interpreted it this way?

  • Too murky – Loosey Goosey

Sure! the Buyer might WIN the property in this multiple offer competition, but at what cost?

That Buyer may not even have a chance if the seller objects to what some call “game playing” and refuses to consider offers with escalation clauses.

Or . . . The Buyer could win the bidding war but lose in the long run having agreed to pay an inflated price that’s beyond any appraiser’s opinion of the value . . . Who will make up the difference?

What happens if more than one offer has an escalation clause? Does that constitute an “Auction?” Very few real estate agents are licensed auctioneers, so this dances into illegal territory (Practicing something you’re not licensed to practice).

Hmmm . . . These are the kinds of questions that tumble through Real Estate Sales Professionals’ minds in this hyper-paced market.

It all begins with THIS question:

How can I gain a competitive advantage for MY client without compromising my ethical and legal obligations?

We at Pareto Realty are ALWAYS thinking and strategizing (even as we sleep) and often gain the necessary competitive advantage through CREATIVITY and SURPRISE!

Connect with one of our “Vital Few” REALTORS when you’re in the mood to move 🙂

Published by Barry Owen

Strategist-CEO of Pareto Realty Real estate sales Professional Inviter-Facilitator-Practicer of Open Space Technology Opening safe space for people & organizations to self-organize around issues & opportunities BarryOwen.US Invite-Listen-Love

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