Should I use an escalation clause?

Question

I put in an offer on a bank owned (US Bank)property today. The house has been listed for 200 days, and just over 2 weeks at its current price point. A few hours after my offer was submitted I get a call from my agent informing me that the listing agent has told her there are multiple offers and I should prepare a "final & best" In the current market with so many people laid off and scared and sales volume way down I find this to be HIGHLY suspicious and do not believe there are multiple offers.

I am strongly leaning towards my final and best being exactly the same as my original offer with the addition of an escalation clause where escalation is dependent on verified offers.

My question is this a good way to call their bluff or is there another option I am not aware of.

I am strongly leaning towards my final and best being exactly the same as my original offer with the addition of an escalation clause where escalation is dependent on verified offers.

My question is this a good way to call their bluff or is there another option I am not aware of.

Amy A. · Answer

I've had this happen to me many times and I believe they are usually lying.  One time I had an offer accepted in writing and later in the day received an email asking for "highest and best because there are multiple offers" from the agent's email account that he had linked to the listing website (not the email address that I had been conversing with him on).  It looked like an automatically generated email. When I asked him what the heck was going on, he said not to worry about it.

Several times I've been in "highest and best due to multiple offers" and when I refused to change my offer, the house stayed on the market.  One time they even lowered the price a few weeks later below what my original offer was!  When I made a new offer at the new asking price, again I was sent the same message that there were multiple offers.  That time I ended up buying the property.

The only time I've found there to truly be multiple offers is when the house is newly on the market and is priced aggressively.  Offer what you're comfortable with, which should be low due to the economy we're in, and good luck!

Russell Brazil · Answer

Let's say a lie increases the sales price by $10,000.  That equates to a gross commission increase of about $250.  After commission split, expenses, taxes, that increases their in pocket money by about $100.  Do you think an agent, particularly whose client is just a bank, would lie and risk going to jail for fraud so they can make an extra $100?  The economic incentive to lie simply is not there.  The economic incentive for an agent is to close the deal, and close it as quickly as possible.

Further, on REO's.....most listing agents simply dont even see the offers.  They are entered into an online offer system that goes straight to the bank's asset manager. The listing agent is merely a pass through of communication

Russell Brazil · Answer

First......you high suspicion is absolutely wrong.

Every novice seems suspicious of the multiple offers after many days on market, and they are all simply wrong.  An example, I had a property listed for 4 months.  Got an offer in.  I was then able to parlay that 1 offer into getting an additional 3 for a total of 4 hours within 24 hours.  Everyone was suspicious that I was lying when I told them I had multiple offers.  Guess what, they didnt think I was lying when the 3 of them were not able to purchase the property.  This happens all the time.  The 1 offer gives the listing agent leverage to get other tire kickers to finally put in an offer instead of waiting on the sidelines.

Second.....banks dont accept escalation clauses.

Justin Reid · Answer

@Russell Brazil

My suspicion comes from the fact I need to take someone’s word with no proof. That does not sit well with me. What is stopping an agent from making a false claim in order to get a buyer to bump themselves other than their ethics? What system of checks are in place to keep an agent from falsely claiming multiple offers? Genuinely curious.

Russell Brazil · Answer

And to further expound, it isnt an auction. The best price doesnt just automatically win.  There could be 1,000 offers.  If none of the offers are what a seller or bank are willing to sell the property for, then they wont sell the property.

Russell Brazil · Answer

Their records are subject to review by the government, real estate commissions, courts, law enforcement, local realtor board ethics committees.   Agents get caught for doing things all the time....they are just things where there is a higher economic incentive to commit fraud. Those incentives are things typically in the tens or hundreds of thousands into the millions of dollars.

Justin Reid · Answer

@Russell Brazil

So it does happen, most likely on higher end real estate. And what kind of record would there be with a phone call between agents?

Justin Reid · Answer

@Russell Brazil

I appreciate the insight & explanation. But how would an agent get caught. I understand the financial incentive is low, but from what it seems, so is the risk of actually getting caught.

Should I use an escalation clause?

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