Escalation Clause Ethics

[Roxanne Brooks]

We found a home that suited our needs and desires. We were told that over 50 people came to the open house. (I think it was a sunny day) We were told there were expecting multiple offers and an escalation clause was advisable and to do your best and final offer.  The home was listed at $449K.  We offered $449K, with 5K escalations up to $489K.   We were called the morning of the offer review and told to put our best offer forward again as there was another better offer on the table.  We immediately as for a clarification.  Were we already outbid?  It turned out that no, we were not outbid.  The other offer was significantly less than ours as we would find out later.  The realtor saw our top offer encouraged the other offer which was  less than 10K over asking to but in a better offer.  In "fairness" they called us to offer the same opportunity.  The other offer came back at 10K above asking and therefore we had to pay 15K more for the property.  If is clear they were just trying to bump up the purchase price.   Since we were asked to give best and final offer, it seems unfair, dishonest and unethical to have been manipulated.  The copy of their offer showed they had used white out to change their offer and the escalation was changed to a one time 10K increase, that means the orginal offer was less than 10K over asking. It feels like someone stole money from us.  We got the house and are happy.  But I hate that this realtor is out there.  Their reputation is very tarnished I learned.  I am thinking of at least writing a complaint to her Broker about the ethics.  What would you do? 

[David Faulkner]

OK, I'm going to stir the pot on this one a bit, here goes ... personally, I think escalator clauses are chicken s$%t ... if I were selling a property (and I have been in this situation), I would NOT accept escalator clauses, but rather just instruct the buyer to send in their highest and best offer. I am not disclosing the details of the other offers, just the same as I am not disclosing the details of your offer ... that is the fair way to do it IMO. Otherwise, the only other fair way is public auction, where everyone knows everyone else's bid ... but selectively sharing that info with only some of the potential buyers but not others is chicken s%&t. It is the same with buyer's agents asking what my highest offer is ... WTF?!? I'm not going to tell you what my highest offer is ... why would I provide that info? Which is essentially the same as what you are doing with an escalation clause. I will tell you how many offers I have, but I won't tell you what the highest one is, and I won't even tell you if they are over or under asking price. That does not serve my interest as the seller, nor is it fair to the other potential buyers. If you really want the property, just put in your best and final ... otherwise, if you want to try to horse trade a bit put in a lower offer and try to negotiate but understand then that you are running the risk of getting beat out by a higher offer in the meantime.