Feb. 26, 2006 - Escalation Clauses - Downtown Kirkland Condo Market

I wrote an offer yesterday with an escalation clause on a Downtown Condo that has been on market for 2-3 days. As I have said before, while there appear to be many things on market, most agents are waiting in the wings for something better than what is for sale at present.  This is what causes properties to be on market, as opposed to being sold. 

When that special property at the right price appears, it is likely to have multiple offers, as happened yesterday.  Just before we write an offer, we call and speak with the listing agent to determine how best to write the offer.  As soon as we hear there is another offer being presented in a few hours, we know we need to add an escalation clause.  Problem is that everyone knows this, so you have multiple escalation clauses in play. 

An escalation clause has an increment of increase and a cap.  Example: Asking price $450,000.  Offer might be $450,000 plus $1,000 more than any other offer in hand before this offer expires, up to a total price of $475,000.  You need a cap value,  as the reason everyone wants it is because of the location, condition and price.  If the price bids up too high, you might as well have bought something else on market that was overpriced by offering a lower bid.  So you have to be careful not to place your cap at a point where you wouldn't have bought it in the first place. 

It is amazing to me at times that no matter where I work in the Country, everyone seems to want the same thing.  They all want the thing that is not for sale, especially this time of year.  So as soon as something comes on market that fits the profile of what everyone REALLY wants ---multiple offers. 

There can be 150 properties on market, but everyone is waiting for that one property that isn't for sale yet.