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August 16, 2007
Escalation Addendum to Purchase Offer?
Anyone have any experience with something called an "escalation addendum" to an offer to purchase property? It states that the prospective buyer will raise his/her offer above other offers by specified increments until a maximum price is reached -- just like an eBay auction. I'm working with a buyer who wants to use one of these in her purchase offer for a house ... But I've never seen this used in NY state. It's common in the DC area, apprarently. DOes anyone know anything about this? Any reason why this can't or shouldn't be used here?
Comments
How would you keep a thing like that honest? What kind of an offer by someone else would trigger the escalation? If someone else bids higher then backs out later, are you stuck with the escalated bid or does it go back down to the earlier bid? And who decides when the escalation kicks in? The broker??? If I were bidding, I wouldn't cede that much control, nor would I, in essence, disclose my bottom line up front. Too much incentive for trouble, IMHO.
Posted by: slopefarm at August 16, 2007 9:55 AM
In this current environment, it also seems unnecessary.
Posted by: donatella at August 16, 2007 9:59 AM
Sounds fishy - maybe in a state like CA where a bidder has to enter an offical state bid form, but in NY it's basically done on a handshake until the contract is signed.
What's to stop the seller from having friends or other interested parties enter shill bids (like on Ebay)?
Posted by: guest at August 16, 2007 12:56 PM
12:56 back again.
The more I think about this whole thing the more wrong it seems.
Who is this document submitted to? The seller's agent? BIG conflict of interest there.
And I agree with 9:55 - who or what would invoke the escalation addendum? Ebay is an impartial third party (more or less) - their main concern is maintaining the marketplace.
Also, an agreement like this isn't a very smart way to negotiate - it communicates to the sellers that your limits aren't really your limits and sets a bad precedent for other aspects of the negotiation (ie: repairs, concessions, etc.). As a seller, I wouldn't want to deal with someone using one of these either as it makes you seem wishy-washy and unpredictable.
Posted by: guest at August 16, 2007 6:49 PM
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