On Sunday, May 2, 2021 at 4:37:40 PM UTC-4, Bill wrote:
On 5/2/2021 3:43 PM, DerbyDad03 wrote:
They submitted an offer at full asking price ($370K), no contingencies.
The offer included an escalation clause. The escalation clause would
automatically increase their offer to $1000 more than the highest offer
submitted, but not to exceed $410K.
That sounds like a system ready to be "gamed" --much like the people who
bid on their own stuff on ebay. Both the buyer's and the seller's
agents have an incentive to sell at a higher price. I'm not saying
anything shady might happen, but I don't like it! : ) If they want to
auction the house then (IMO, they should) auction it in the "light of day"!


Yes, it could be shady, but part of the process is that the seller has to
show them the offer (or at least a picture thereof) that triggered the
escalation clause.

Of course, as I joked to my son "Oh, you mean the offer that the
seller's sister submitted right after they had read yours?" ;-)

The California Association of Realtors says this in a FAQ:

"Should the buyer include a provision that allows for verification
of the next highest competing offer?

Yes. Since the buyer is making an offer dependent upon the
offers of other buyers, it makes sense that the buyer should be
able to verify that those other offers were in fact bona fide offers.
The buyer may include language such as: "Seller shall, upon
acceptance, provide buyer with a copy of the highest offer received.
Buyer has a right to contact that prospective purchaser making
that offer, or his or her agent, to verify the validity of that offer and
that the other offer is in fact a bona fide offer."

While still ripe for gaming, once you start getting third parties
(especially licensed agents) involved in the scheme things can
get trickier for the schemers.

This was for a house in Indiana. My #2 son is an RE agent in
Nevada. Escalation clauses are not legal there. I'm not sure
of Nevada's exact reason, but from my reading it appears that
some jurisdictions don't allow escalation clauses in a real estate
offer because there is no firm dollar offer being made.