Want to know the sign of a hot market?  The use of the Escalation Clause in contract offers.

 

Here is how it works:  Buyers write the offer as normal, but fearing they will be in competition, set the offer price where they hope to get it, which may be under or over the asking price, but include a clause that says the price will increase to "X" (typically $1000) over the highest bona fide offer, up to a max of "Y" (usually some amount above list price), and provided a copy of said offer, striking buyer info. 

 

This clause has been around for awhile now, but has increased in popularity.  Out of 10 listings I sold so far this year, 4 attracted offers with escalation clauses, all of which ended up being in competition.  2 of the 4 "won" the sale, and 2 lost out, as their max was not high enough (one max was over list, the other was under).  Of the 2 that won, one got it at the contract offer (which was over list) and did not need to climb.  The other had to climb right to their max, also over list.  List prices ranged from $320,000 to $165,000 in Manchester (2), Ballwin and Affton.  All appraised.  The 2 in Manchester set record high prices for that model in the neighborhood.

 

As a seller, how do you go about attracting these clauses in offers on your home?  You could underprice your home to create a bidding war, but I feel that is a losing strategy and can easily backfire, and will not net your highest offer.  You could allow buyers in before hitting the full market, but I feel you will lose on this strategy as well, as they know buyer competition is little to none, and it certainly won't attract an escalation clause.  I believe it is accomplished by (1) Making your home look its best for a reasonable sum, usually less than feared (I specialize in itemizing repairs and improvements that will bring back the most return, estimate cost vs price increase, and bring a top STL stager to your home for free consult); (2) Have a professional photographer produce the best images of your home to use in all marketing and high quality brochures; (3) Utilize a 20 year marketing professional in writing ads; and (4) Heavily pre-market your home BEFORE showings begin, and allow all weekend to submit offers, so buyers and agents fear competition.  Here's the kicker - even when not in competition, many of my listings are attracting high offers, 4 of my 10 listings this year setting record high prices for their model, and 8 of 10 selling at or over list price!  Bonus - 7 of 10 sold after the first weekend of showing, limiting the amount of family interruptions and cost of ownership while on the market.

 

Hoeferkamp Real Estate knows how to leverage a hot market for sellers, by crafting the right strategy to attract Escalation Clauses.  There is still time to catch the fall market!