Because of the current feverish real estate market, shrewd Realtors have dusted off tactics not seen since the heady home-buying days of the early 2000s to compete.
A previously uncommon trick of the trade that made a comeback in the past two years is the escalator or escalation clause — when a buyer promises to pay a certain amount over the highest bid made. Some escalation clauses are in the tens of thousands of dollars, committing a buyer to a much higher price but also increasing the chances of getting the home.
More:Tips to buying a home in hot real estate market; strategy and cash, not love letters
“They used to be extremely rare, and used only with multi-million-dollar properties,” said Mary Speer, a Realtor with Coldwell Banker in Delray Beach, about escalation clauses. “Now, really smart Realtors will do it with any property.”
How an escalator clause may help you win a bidding war for a house
How the escalation clause works depends on the contract and the buyer’s budget. Some escalation clauses go up in increments of $1,000 to $5,000 above the highest bid until it hits a specified amount and the buyer taps out.
Keyes Company Realtor John Sholar said he had 65 sets of people attend an open house in Jupiter on April 10. He got 14 written offers, four of which had escalation clauses. The winning contract had an escalation clause that was willing to go $60,000 over the asking price.
Other bidders may or may not know they are duking it out with an escalation clause, which some may say is unfair.
“When you are competing with six or eight or 10 other people, fair isn’t really what you are trying to reach. You are trying to get the house,” said Douglas Rill, broker of record for Century 21 America’s Choice.
Homebuyer David Duval was familiar with an escalation clause but had never used it when he was searching for a house in Jupiter last year and finding multiple offers on everything he looked at.
Echo Fine Properties Realtor Andrea Roth suggested Duval use an escalation clause that would go up in $5,000 increments to a specified amount. They went in above the asking price, included the escalation clause and gave the seller just three hours to respond.
“Our first notion was to give them overnight, but we said, nope, they can love us or hate us, but they have three hours,” said Duval, whose contract was accepted. “My advice; buyers need to move quickly because nothing lasts.”
* * *
The old ways to compete for a home are over
Sappy notes with pictures of babies and puppies are trifles in today’s feverish real estate market where speed, truculence, technique and deep pockets — not family portraits — separate successful homebuyers from strikeouts.
Shrewd Realtors have dusted off tactics not seen since the heady home-buying days of the early 2000s to compete in today’s market slugfest where just a month’s worth of inventory is up for sale and 45% of people are paying in coveted all-cash deals, according to a February Florida Realtors report.
* * *
To read all about how the real estate market for homes is getting downright nasty, support local journalism and consider a subscription to The Palm Beach Post. Take advantage of a limited-time offer for new subscribers: Complete digital access to The Post for six months for only $1. It’s easy to sign up; just click here.
* * *
As a subscriber, you’ll have complete access to our blanket coverage of Palm Beach County and its development boom.
Here are some of those Subscriber stories you’ll have access to:
STAR BUYS BOCA MANSION :‘Cash me outside’ girl, now Bhad Bhabie, buys $6 million South Florida mansion with rap star cash
UP, UP and AWAY?:Home prices still on the rise in Palm Beach County. Will higher interest rates slow them down?
MICRO APARTMENTS:West Palm Beach micro-apartment building sells for big money to hotel operator
MANHATTAN-LIKE:South Flagler House condos in West Palm Beach selling for upper Manhattan-like prices
THE RITZ:Related Group makes major return to Palm Beach County with Ritz-Carlton brand
GONE GOLF:New Delray Beach single-family home development will be built on old golf course
Kimberly Miller is a veteran journalist for The Palm Beach Post, part of the USA Today Network of Florida. She covers real estate and how growth affects South Florida’s environment. If you have any news tips, please send them to kmiller@pbpost.com.
Read More:Homebuyers in a tight market? Escalator clause may be for you
2022-04-26 10:01:21