As we head into the Spring market there is still the possibility of having a shortage in the Northern Virginia housing inventory. When there is a shortage of homes we usually find multiple offers on one property which will leave many disappointed buyers making offers but never getting the home. Agents working with buyers should prepare them for these situations and educate them about the Escalation clause offered by the Northern Virginia Board of Realtors. It is a tool used by agents to help their buyer clients in a sellers market stand a better chance of having an offer accepted.
In these scenarios where multiple offers exist, the selling agent will inform their client of all offers and will also inform the other agents that there
are multiple offers and they may want to use the Escalation clause to secure the home for their clients. This inevitably leads to bidding wars with the home going to the best offer. In most cases the highest offer wins, but not always.
Here is how it works:
Let's say you found a home and you place an offer of $100,000. The sellers agent informs your agent that there are multiple offers. You decide that you really want the home, and are willing to pay as much as $110,000 for the property. Of course you don't want to pay $110,000 unless you have to which is how this clause will help you.
The Escalation clause will read that you the buyer are willing to increase what you will pay in increments of $1000 above any other offer up to $110,000. If the highest offer the seller gets is $105,000 then you will get the home at a price of $106,000. These changes to the original asking price are binding upon ratification by both parties.
In Virginia when filling out this Addendum, the party must select the option to waive or not waive the appraisal of the home, which in some cases can influence the sellers decision. If you are purchasing a home using an FHA or VA loan then you will not be able to waive the valuation.
Hearing the Escalation clause is like music to a sellers ears, they will get the most money possible for their home and eliminate the negotiations. For the buyer it is not such a bad thing either since they have the opportunity to get the home they really want. Buyers should be aware of the market and discuss their strategy with their agent beforehand. If the need for the Escalation Addendum is present it may help you seal the deal and get the home of your dreams.
If you have any real estate or area related questions or you're interested in buying or selling a home in Northern Virginia, contact or call Cleo 1.703.609.7407 & put our team of Northern Virginia home experts to work for you!