Are Escalation Clauses an Effective Negotiation Strategy?-EP 141

2022-06-06

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On this episode of the Real Estate Fight Club Podcast, Jenn and Monica are going to duke out over whether or not escalation clauses are an effective negotiation strategy. Monica just doesn't understand how Jenn can argue against the escalation clause. Tune in now. Episode Highlights: As a real estate agent, you can work on negotiation if you have a couple of offers; But once you are getting into like 5-10, twenty offers and they all have escalation clauses, it's too much. From a listing standpoint, Monica thinks as a real-estate agent you are selling y...

On this episode of the Real Estate Fight Club Podcast, Jenn and Monica are going to duke out over whether or not escalation clauses are an effective negotiation strategy. Monica just doesn't understand how Jenn can argue against the escalation clause. Tune in now.

Episode Highlights:

As a real estate agent, you can work on negotiation if you have a couple of offers; But once you are getting into like 5-10, twenty offers and they all have escalation clauses, it's too much.
From a listing standpoint, Monica thinks as a real-estate agent you are selling your seller short and it's not a great strategy especially if you are the listing agent.
Monica's experience tells her that buyers will escalate higher than they will offer and if her responsibility is to get the best offer for her sellers, then an escalation clause will yield that.
Monica and Jenn discuss smart negotiating strategy without any escalations clauses.
Monica shares about a time when she was the listing agent and she asked them to remove the escalation.
Jenn’s opinion is that the escalation clause for the sellers is just too much. She wants you to tell her what you are going to pay and in the land of multiple offers, it just doesn't make sense.
If you are from the buyer's perspective, Jenn thinks it makes sense. But if you are from the listing side, you want everybody's best and final, which is the highest offer in the escalation clause.
Just from the seller's standpoint, Monica's argument is that it is better for you because you see more from the buyer's perspective in that case.
As per Christy, the tiebreaker for this episode, it is not good for either the buyer or the seller to have an escalation clause. But from the buyer's perspective, the reason she doesn't think it's good is because you basically show all the cards in your hand.
Christy explains her process and thinking in making an offer. She doesn't even want the seller to know that they qualify for more. And that's kind of what you are doing when you give an escalation clause.
An escalation clause opens the seller up to more scrutiny from the buyer side and it gives the buyer a little bit more control.
Escalation clauses are a double-edged sword because you are exposing yourself, says Christy.

3 Key Points:

Jenn says that the escalation clause for the sellers is just too much.
Monica explains that escalation clauses are a form of gambling in a way for the buyer if they are willing to take a chance.
Today's Tie Breaker, Christy Rojas, contributes to the topic to discuss why escalation clauses are not good for either the buyer or the seller.

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