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What I'm Hearing ...

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  • creepycoug
    creepycoug Member Posts: 24,410
    paws said:

    creepycoug said:

    pawz said:

    DawgsCanDance said:

    From you perspective, so when you put in a bid which doesn't "win" is it now customary for the selling agent to invite higher bids with [or without?] an idea of the price to beat, or is the custom to just have one round of offers and the best offer wins...

    A lot of things can happen however, usually in a multiple offer situation, there is one-round of offers at a given Offer Review Date. Brokers operating under the Northwest Multiple Listing Service (NWMLS, which covers most of WA St) will submit with an Escalator Addendum, NWMLS Form 35E, with the Buyer's offer. Basically what that form says - if you are the buyer - is you are willing to pay x-amount over any competing offer up to y-price.

    For example: Say the List Price is $1M for a property. You might offer $1,000,000; up to $1,200,000; in $10,000 increments. So if someone else made an offer of $1,132,000, you would then be compelled to purchase the property for $1,142,000 - $10k more than that competing offer.

    Let's say a competing offer was for $1,193,500. You would only have to pay $1,200,000 because you said that was your max, you DON'T have to go to 1,203,500.

    If a competing off was $1,215,000; well you're OUT because you max was $1,200,000. So when articulating that top end of your range, you really need to know your walk-away price where you will have no regrets if you don't get the property.

    Another scenario that can happen lets say its the same home but 10 offers came in. 3 of those offers were at $1.193M, $1.197M, and $1.196M. The seller might go back to the top 3 offers and ask them to resubmit with their "highest and best".


    One important caveat to the Escalation Addendum is that the Competing Offer that drove up Buyer's price MUST be produced in it's entirety. The Listing Broker can't just call Buyer's Broker and say, "you won't believe it, we got a competing offer to infinity. You now owe infinity + $10k"




    The business end of the NWMLS 35E states:

    1. PURCHASE PRICE. If Seller receives a Competing Offer for the Property prior to accepting this offer, with a Net Price equal to or greater than the Net Price of this offer, then the Net Price of this offer shall be increased to $______ more than the Net Price of the Competing Offer. In no event, however, shall the new Purchase Price of this offer exceed $________.

    The term "Net Price" means the state Purchase Price (or the maximum price if the Competing Offer contains a price escalation clause) including any price adjustments such as credits to Buyer for closing costs or credits to Seller.

    Very good intel. @paws . I knew none of that. Of particular importance is the requirement that the competing offer be "produced". That's a good industry convention. So, if, say, someone was caught manufacturing a competing offer with bullshit, you could arguably rescind the contract, or sue for breach and damages would be easy to prove: you paid more than you would have w/o the phantom competing offer.

    Thanks for this. Very good info.
    Hi there? How may I help the swarthy Cuban?
    Damn it. Sorry dude. You may help by joining the Finance Club. Hang out for a while. You don't even need to PM @IrishDawg22 to get yourself dialed-in. This is a relatively friendly, "abuse-free" zone on HCH.

    @pawz
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  • pawz
    pawz Member, Moderator, Swaye's Wigwam Posts: 22,515 Founders Club
    DawgsCanDance said:

    Thanks for the information, it’s very helpful... yow that is a seller based extraction system to get people to bid the maximum

    I can see why it may appear that way, but actually not really. There are a number of nuanced layers I did not delve into.

    When the NWMLS drafts their PSA forms, I can assure you their goal is to produce a document that is the most fair for all parties involved given the circumstances.

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  • DawgOfTheAges
    DawgOfTheAges Member, Swaye's Wigwam Posts: 1,826 Founders Club
    pawz said:

    DawgsCanDance said:

    Thanks for the information, it’s very helpful... yow that is a seller based extraction system to get people to bid the maximum

    I can see why it may appear that way, but actually not really. There are a number of nuanced layers I did not delve into.

    When the NWMLS drafts their PSA forms, I can assure you their goal is to produce a document that is the most fair for all parties involved given the circumstances.

    Oh I can see that it is fair, ethical and above board fully disclosed... didn’t mean to characterize it as otherwise. B)

    however, the implication of the maximum bid escalator clause is a seller biased built in price manufacturing mechanism that the selling agent hopes they can employ in the early phases of the sale cycle to create the fear of losing the property with in order to boost value to maximum levels.

    the net effect is advantage seller under those circumstances, especially since the seller is not obligated to take the lower teaser offer that is introduced as an inducement to bid over the stated sale price
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  • pawz
    pawz Member, Moderator, Swaye's Wigwam Posts: 22,515 Founders Club
    DawgsCanDance said:

    pawz said:

    DawgsCanDance said:

    Thanks for the information, it’s very helpful... yow that is a seller based extraction system to get people to bid the maximum

    I can see why it may appear that way, but actually not really. There are a number of nuanced layers I did not delve into.

    When the NWMLS drafts their PSA forms, I can assure you their goal is to produce a document that is the most fair for all parties involved given the circumstances.

    Oh I can see that it is fair, ethical and above board fully disclosed... didn’t mean to characterize it as otherwise. B)

    however, the implication of the maximum bid escalator clause is a seller biased built in price manufacturing mechanism that the selling agent hopes they can employ in the early phases of the sale cycle to create the fear of losing the property with in order to boost value to maximum levels.

    the net effect is advantage seller under those circumstances, especially since the seller is not obligated to take the lower teaser offer that is introduced as an inducement to bid over the stated sale price
    I think the realities of the market - ie no supply - have more to do with the position of power the Seller wields than any perceived nefarious intent of a broker.

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  • creepycoug
    creepycoug Member Posts: 24,410
    pawz said:

    DawgsCanDance said:

    pawz said:

    DawgsCanDance said:

    Thanks for the information, it’s very helpful... yow that is a seller based extraction system to get people to bid the maximum

    I can see why it may appear that way, but actually not really. There are a number of nuanced layers I did not delve into.

    When the NWMLS drafts their PSA forms, I can assure you their goal is to produce a document that is the most fair for all parties involved given the circumstances.

    Oh I can see that it is fair, ethical and above board fully disclosed... didn’t mean to characterize it as otherwise. B)

    however, the implication of the maximum bid escalator clause is a seller biased built in price manufacturing mechanism that the selling agent hopes they can employ in the early phases of the sale cycle to create the fear of losing the property with in order to boost value to maximum levels.

    the net effect is advantage seller under those circumstances, especially since the seller is not obligated to take the lower teaser offer that is introduced as an inducement to bid over the stated sale price
    I think the realities of the market - ie no supply - have more to do with the position of power the Seller wields than any perceived nefarious intent of a broker.

    I was going to say, it seems you're not in the scenario of discussing escalator clauses without the right market dynamics.
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  • dflea
    dflea Member, Swaye's Wigwam Posts: 7,287 Swaye's Wigwam
    I can't even believe the shit going on in real estate in Thurston county presently. Multiple cash offers with escalation clauses, no inspection, accelerated closing dates - it's a seller's dream market out there.

    If you've considered selling your home, I'd say now would be a decent time to give the thought further consideration.
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  • DawgOfTheAges
    DawgOfTheAges Member, Swaye's Wigwam Posts: 1,826 Founders Club
    edited March 2021
    pawz said:

    DawgsCanDance said:

    pawz said:

    DawgsCanDance said:

    Thanks for the information, it’s very helpful... yow that is a seller based extraction system to get people to bid the maximum

    I can see why it may appear that way, but actually not really. There are a number of nuanced layers I did not delve into.

    When the NWMLS drafts their PSA forms, I can assure you their goal is to produce a document that is the most fair for all parties involved given the circumstances.

    Oh I can see that it is fair, ethical and above board fully disclosed... didn’t mean to characterize it as otherwise. B)

    however, the implication of the maximum bid escalator clause is a seller biased built in price manufacturing mechanism that the selling agent hopes they can employ in the early phases of the sale cycle to create the fear of losing the property with in order to boost value to maximum levels.

    the net effect is advantage seller under those circumstances, especially since the seller is not obligated to take the lower teaser offer that is introduced as an inducement to bid over the stated sale price
    I think the realities of the market - ie no supply - have more to do with the position of power the Seller wields than any perceived nefarious intent of a broker.

    Yah, I believe that we are actually thinking the same things even if it doesn't sound like it. What I'm intending to say is that the seller's agent is hoping to establish an advantage for the seller if they can [of course the seller hopes for that, and the good agent is going to do that, and that is certainly not a nefarious intention] ~ and that the ability to create that environment on behalf of the seller totally depends on supply and demand. I have also been breathlessly stating that the dynamic when it works, it is an awesome tactical strategy on behalf of the seller because it puts a lot of pressure on the buyer, which for a lot of buyers is a new frontier dynamic to consider.
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  • creepycoug
    creepycoug Member Posts: 24,410
    DawgsCanDance said:

    pawz said:

    DawgsCanDance said:

    pawz said:

    DawgsCanDance said:

    Thanks for the information, it’s very helpful... yow that is a seller based extraction system to get people to bid the maximum

    I can see why it may appear that way, but actually not really. There are a number of nuanced layers I did not delve into.

    When the NWMLS drafts their PSA forms, I can assure you their goal is to produce a document that is the most fair for all parties involved given the circumstances.

    Oh I can see that it is fair, ethical and above board fully disclosed... didn’t mean to characterize it as otherwise. B)

    however, the implication of the maximum bid escalator clause is a seller biased built in price manufacturing mechanism that the selling agent hopes they can employ in the early phases of the sale cycle to create the fear of losing the property with in order to boost value to maximum levels.

    the net effect is advantage seller under those circumstances, especially since the seller is not obligated to take the lower teaser offer that is introduced as an inducement to bid over the stated sale price
    I think the realities of the market - ie no supply - have more to do with the position of power the Seller wields than any perceived nefarious intent of a broker.

    Yah, I believe that we are actually thinking the same things even if it doesn't sound like it. What I'm intending to say is that the seller's agent is hoping to establish an advantage for the seller if they can [of course the seller hopes for that, and the good agent is going to do that, and that is certainly not a nefarious intention] ~ and that the ability to create that environment on behalf of the seller totally depends on supply and demand. I have also been breathlessly stating that the dynamic when it works, it is an awesome tactical strategy on behalf of the seller because it puts a lot of pressure on the buyer, which for a lot of buyers is a new frontier dynamic to consider.
    Agreed. But I also like the feature in the contract that requires validation of the last escalated price offer. Without that, the entire thing can be made up by the Seller. Also, by having it in the contract, you as the buyer have a basis upon which to sue for damages (clearly demonstrable) should you later discover that there was not competing bid.
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