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It doesn’t matter if it’s a sellers’ market or one that’s more in favor of buyers; if a house is desirable and priced appropriately, the chances are you’re going to find yourself in a bidding war.

Makes sense, right? If you love the house, most likely other buyers in the market will as well. So, not only do you have to act fast, but you need to pull out all the stops in order to get your offer accepted.

But that doesn’t mean you want to offer more than you have to in order to get the house! It’d be nice to be able to submit an aggressive offer that’ll beat out every other offer, yet not go more than a few bucks higher than the next highest offer, right? Well, you can pull that off with the use of what is known as an escalation clause.

Simply put, an escalation clause allows you to submit an initial lower offer, which will automatically bump up in specific increments above any other offer that comes in, up to a certain capped amount you set. This has been a popular practice recently in Mammoth Lakes.

For instance, if you made an offer of $500,000, and another offer came in at $510,000, if you had an escalation clause that said to offer $1,000 over any higher bid, your offer would go to $511,000. If nobody offered higher, your bid would effectively be the highest. But let’s say you capped it at $515,000. Your bid would continue to bump up until someone went over that amount, but wouldn’t go higher, protecting you from paying more than you wanted to.

That said, while escalation clauses can be useful in helping you win a bidding war, they can also cost you the house. We have used escalation clauses (when appropriate) for our buyer clients with about a 70% success rate. So, let’s look at the pros and cons to using one, so you can decide if it’s the right decision for you:

Pros

  • It can give you the edge by showing the seller you’re serious and are willing to pay more than any other buyer.
  • It can make negotiating easier. You don’t have to stress much going back and forth with counter-offers. It automatically happens if (and only if) another bona fide offer triggers the price bump.
  • It can help you stay within the range you’re willing to pay rather than get caught up in the heat of the moment. If and when the price goes above your capped amount, your price will no longer continue to bump up.

Cons

  • It may annoy sellers by showing that you’re willing to offer a higher amount and make them wonder why you wouldn’t just offer to pay that to begin with.
  • It could invite sellers to counter higher than they may have, or simply counter at the highest price you indicated that you’re willing to pay.
  • It’s not always just about price. Another lower offer could still be chosen over yours because of better terms or contingencies offered. Your REALTOR® should do their best to find out what is important to the sellers (ie. price, longer/shorter escrow).
  • If not written properly, it could cost you if you don’t include a cap on your price or a requirement for the seller and their agent to verify the legitimacy of other offers.
  • The listing agent may simply prefer buyers to make their best and final offer instead of invoking an escalation clause. Submitting one to an agent who dislikes them can turn them (and therefore their client) off. This has happened in our business in Mammoth Lakes – an agent did not like escalation clauses and passed on that dislike to her seller clients.

The Takeaway:

Regardless of the market conditions, a well-priced house is likely going to fetch a lot of interest and offers. Using an escalation clause in your offer can help you rise to the top of a multiple offer situation, but it can also have some downsides. So if you find yourself going after a house with multiple offers, know the pros and cons of using an escalation clause, and discuss whether or not it makes sense to use one with your agent before including one in your offer.

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Beautiful sunset tonight.

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Sonja was very knowledgeable and competent in selling our house in Mammoth. She is very personable and answered all of our numerous questions with courtesy, humor, and patience. Despite a greatly slowed real estate market, she sold our house in a reasonable time frame. - Stuart F.

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#nofilter Sunday evening neighborhood stroll. ❤️reflections, water, blue skies and fluffy clouds ☁️ #lovewherewelive ...

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If you have a light fixture you want to keep and take with you to your next home, take it down and replace it before you put your house on the market. You can also leave it up and "exclude" it from the sale within your listing, but it can cause issues if a buyer sees it and wants it. Avoid problems by removing it ahead of time.

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Beautiful day at the village. I love the clouds and like to look for shapes or object -- what do you see?

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Amazing two-bedroom condo next door to Canyon Lodge! Ski all season long in this cozy mountain home!

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Hope everyone is having an amazing time at the Mammoth Trail Fest! If you haven't already make sure to check out this awesome event the rest of the weekend!

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Beautifully updated two-bedroom slope side condo just listed for sale. Check it out!

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What does “Months of Supply” tell us about the market?

To break it down simply:

📊Balanced Market = 6 to 7 months of supply
There are a relatively even number of buyers and sellers.

📈Seller’s Market = Fewer than 6 months of supply
There are more buyers than homes for sale, thus sellers hold the upper hand.

📉 Buyer’s Market = More than 7 months of supply
There are more homes for sale than willing and able buyers, thus buyers have more negotiating power.

Have a question about current market trends? Reach out at any time! We’re here to help you decode the lingo and make the most of today’s market 👨‍💻

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SNEAK PEAK! This two-bedroom condo next door to Canyon Lodge will be listed for sale in the next 24 hours!

Check out an early video tour now on our YouTube!

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I love working with awesome realtors like Heidi Vetter! How thoughtful is this?!” @vetter_heidi ...

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If your agent isn't available, don't call a random agent to show you a house you're interested in seeing if you plan on having your agent write an offer if you like the house. Agents don't get paid for simply showing houses, so it's inconsiderate to ask an agent to show you a house they have no chance of selling to you.

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The Mountain & Adventure Film Festival is entering its 9th year, this 3 day, free festival celebrates the best adventure films and athletes of the year. Films are shared nightly, outdoors, in the Mammoth Mountaineering Supply parking lot. Runs Thursday September 22nd - the 24th!

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