Buyers should be wary of including ‘escalation clause’ in their offers
Home sales are still sizzling in most parts of the nation, but buyers sometimes unwittingly telegraph to sellers that their first offer is not necessarily their best.
Q. The housing market in our area is still hot, with many homes drawing multiple offers. To stay competitive with other buyers, our real estate agent has suggested that we include an “escalation clause” in any offer that we write that says we will increase the price that we are willing to pay (within reason) if another bid is made on the same home. Would this be a good idea?
A. There are a lot of real estate agents who say that including an escalation clause is a good idea, but an equal number who say that it is a bad one.
An escalation clause can take many forms. For example, with the housing market still redhot in many parts of the nation, such a clause may force the buyer, who has already made a full-price offer, to make an even higher bid if a different buyer would pay more.
I tend to side with the agents who say that buyers should never include an escalation clause in their purchase offer because it can put too much negotiating power in the seller’s hands.
To illustrate, let us say that Bob Buyer makes a full-price, $200,000 offer for Sam Seller’s home. Bob knows that the local market is still sizzling, so he includes a provision that allows him to offer an extra $10,000 if Sam gets a competing proposal that tops Bob’s initial $200,000 bid.
If Sam Seller is smart, he knows that the escalation clause that Buyer Bob included in the original offer suggests that Bob is willing to pay $10,000 more.
Sam would be foolish if he did not automattically make a counteroffer for the extra $10K above his original asking price, perhaps even if the “competing bid” came from a relative or tfriend who had no real intention of purchasing
the home.
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REAL ESTATE TRIVIA
Average rates on 30-year, fixed-rate loans tclimbed to 3.22 percent in the first week of this year, mortgage giant Freddie Mac (freddiemac.com) reports. That was up more than one-half of a percentage point from a year earlier and the highest level since May 2020.
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Q. I was looking at some real estate ads on the internet and saw a big home that was advertised as a “historic ‘carpet joint’ from the 1930s.” What does this mean?
A. A “carpet joint” is the term used about a century ago to describe a gambling parlor where people could make a wager and know that they would not be cheated. That was different from the “clip joints” or “sawdust joints,” where the games were often rigged.
Homes or other properties with such a reputation can sometimes sell for a lot more money than a similarly sized home without such a storied past. That is because some buyers will gladly overpay for a property with a “history” — good or bad.
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Q. Several months ago, you wrote about how homeowners can keep a dog from wandering onto their property. I have the sweetest German shepherd and always keep her in my yard, but a friend of mine said that the cautionary “Beware of Dog” sign on my front fence could set me up for a lawsuit if my dog bites an intruder. Could it?
A. Maybe so. A handful of judges in dogbite cases have ruled that the simple act of posting a “Beware of Dog” sign indicates that the homeowner presumes that the dog may be dangerous and that the plaintiff who was bitten — whether a postal-service worker or even a burglar — is entitled to monetary damages.
Not surprisingly, a judge is more likely to award money to someone who has been bitten if the dog has taken a chunk out of another person’s leg before.
Your letter states that you securely keep the dog in your yard. Though she apparently has not attacked someone previously, it may be wise to replace your current sign with a less-threatening “Dog on Premises” sign that you can find at most hardware and homeimprovement stores for less than $10.
Doing so will alert a mail carrier, pizzadelivery person or even a thief that you have a canine without suggesting that they need to beware that your dog may bite. If they read the sign and then proceed to your front door, a judge may rule that the person assumed some or all of the responsibility, if bitten.