oday we discuss escalation A buyer who really wants to buy a
clauses because much of the property can do the above, plus
country is experiencing an add an "escalation clause." An
extreme "sellers' market." By escalation clause simply states
that, I mean there are more that the basic offer is full
buyers than there are sellers, price, but if the seller receives
and that results in sellers' one or more other offers at full
getting more than one offer to price or higher before this offer
buy their property. The seller is accepted, then this offer is
can be picky about the terms increased by $500, $1,000, $5,000
under which he is willing to (or whatever figure you choose)
sell. A potential buyer is apt to above the other acceptable offer.
make one or more offers which are Of course, you choose the amount
rejected before making a of the incremental increase based
successful offer. If you are a on what you think it'll take to
buyer, how do you increase the get the sellers' attention given
chances that your offer will be the original asking price of the
the acceptable one? home.
The obvious things a buyer can do Now, I can hear you thinking,
is to have a strong "That's all very well. I can see
"pre-approval" lender letter, and where that'll get me the winning
make an offer that is full price bid, but how do I make sure there
and is as "clean" (has as few really is another contract? More
contingencies) as possible. Is importantly, how do I make sure I
there anything a buyer can do can afford the home? Isn't this
beyond that? You bet your bippy! awfully open ended?"
Escalation Clauses Yes, it is. So let's fine tune
the escalation clause idea a bit.
amount required by your offer.
Obviously, you also need to be
First, make the escalation offer sure you know and can pay the
such that it will increase the mortgage payments on that amount.
sellers' net proceeds (not gross It's also a good idea to get a
proceeds) by $500, $1,000 or lender letter for this higher
whatever. That way, your price is amount, so that the sellers will
not artificially increased by a be confident you can do what your
higher offer that includes a offer says you're willing to do.
provision for the sellers to pay
some of the costs that are The third bit of fine tuning is
normally born by the buyer. to require that the seller
provide you with a copy of the
Secondly, name an upper limit to acceptable competing contract as
which your offer can be carried. signed by the other potential
For example, your offer could buyer. Make sure the "buyer"
state that you will pay the isn't a relative of the seller!
sellers an amount that will With the written offer on hand,
increase their net proceeds by you can be sure everything is on
$10,000 above any other the up and up.
acceptable offer up to a total
price of $1,500,000. That puts a In this hot sellers market,
cap on how high you're willing to escalation clauses can be the key
go. to closing a deal on your dream
home. If a seller is motivated by
Prior to making an offer like greed, you will have them dead to
this, be sure to have a rights.
conference with your lender to be
sure you qualify for the highest
About the Author:
Raynor James is with http://www.fsboamerica.org - FSBO homes for sale by owner. Visit our "sell my home" page at http://www.fsboamerica.org/seller.cfm to sell your home yourself with a free 1 month listing.
Source: www.isnare.com
