How do I communicate to the seller that I don’t want to lose the house to another buyer?

 

How do I communicate to the seller that I don’t want to lose the house to another buyer?

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When submitting an offer, especially when you know yours is not the only offer on the seller’s table, you might want to communicate that you don’t want to be outbid.

You also don’t want to pay more than you have to.

If your offer to the seller is “$200,000 but I don’t want to lose to another buyer,” you’re communicating, not so subtly, that you are willing to pay more. Even if there isn’t another bona fide offer, the seller will counter for more money. Why wouldn’t they? You said you’d be willing to pay more or have lower seller concessions.

It’s against State Law for your real estate professional to communicate confidential information to another party. The listing agent cannot communicate to the buyer that the seller is willing to accept less, and the buyer’s agent cannot communicate to the seller that the buyer is willing to pay more.

The exception is if the client approves their real estate professional to do so (we’ll require that communicated in writing).

Escalation Clause

You could use an escalation clause. Here’s the gist of it: we’ll offer you $200,000 but if there’s another bona fide offer, we’ll beat it by $2,000 (or $1,000 or 1%, etc.) with a maximum purchase price of $220,000. It’s supposed to work like bidding on eBay.

Your escalation clause is just part of your offer so the seller isn’t bound by it. They don’t have to let you escalate your offer.

Also, when buying from a bank or government entity, escalation clauses may be ignored because they don’t want to provide evidence of others’ offers or because they don’t want to deal with the back and forth. For whatever reason, it’s why some government properties add a separate form for submitting your highest and best offer (i.e. “no escalation clauses here”).

Some additional tips are available in this article from REALTOR.com: Escalation Clauses: A Little-Known Bidding-War Strategy

Right of First Refusal

If you aren’t comfortable submitting an offer with an escalation clause because you fear it reveals too much about your highest amount (to which the seller may simply counter at that price without evidence of any other offers and the clause removed), you could have your buyer’s agent submit your offer (typically delivered via email) with a message like this:

“Dear Listing Agent, the offer is attached. My buyer has requested to be the first offer to be countered to even if theirs is not the highest initial offer, essentially a right of first refusal.”

It’s not technically a right of first refusal because, like the escalation clause, it can be ignored by the seller. They’re not contractually bound to counter to you first. However, it’s another way to communicate you don’t want to be outbid by another buyer without revealing your maximum.

Wikipedia has examples of legal right of first refusal.

Highest and Best / Best and Final

In a multiple offer scenario, it’s often best to simply submit your “highest and best” (a.k.a. “best and final”) offer as your initial offer.

In a multiple offer scenario, sometimes the seller calls for “highest and best” by a certain deadline. They’re not wanting escalation clauses or “let me know if I’m not the highest” stuff.

They want “best and final”.

Conclusion

Each deal is unique due to its combination of sellers, buyers, REALTORS®, brokers, lenders, and property.

In the end, it’s best to stay in great communication with your End Zone Realty REALTOR® so we can do our best to help you achieve your real estate goals.


Real Estate Answers: Buying

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