What Is an Escalation Clause and When Should You Use One?

As real estate markets across the country heat up, competitive buying situations and bidding wars are becoming the norm. In many cities, the majority of new listings are receiving multiple offers. Real estate inventory continues to be extremely low, and growing buyer demand seems to be keeping pace with new homes coming on the market.
Home buyers in competitive situations are looking for any advantage that might win them their dream home over a competitor’s offer. Writing personalized home-buyer letters can create an emotional connection with sellers. Showing a clear picture of financial strength, whether through a strong pre-approval letter or proof of cash funding, can strengthen a buyer’s image.
Often, though, it all comes down to the final price. What a buyer is willing to pay for a home, versus a competing buyer’s offer, will be the deciding factor for the vast majority of sellers. When you’re deciding on what price to offer for a home, the situation may call for a single price or, in some cases, an escalation clause.
What Is an Escalation Clause?
An escalation clause is a real estate contract, sometimes called an escalator, that lets a home buyer say “I will pay x price for this home, but if the seller receives another offer that’s higher than mine, I’m willing to increase my offer to y price.”  In theory, an escalation clause is fairly simple. In practice, there are a lot of details involved.
How Does an Escalation Clause Work?
While escalation clauses vary significantly, the general escalation addendum has a few basic components:

• What is the original offer of purchase price?
• How much will that price be escalated above any other competitive bid?
• What is the maximum amount that the purchase price can reach in case of multiple offers?

For example, buyer Brown offers $100,000 for a home. Her Realtor adds an escalation clause that, in the case of a higher competing offer, will increase Brown’s offer in increments of $2,000 above the competing offer. Her escalation clause goes up to a maximum of $110,000.
If no other offers are submitted, Brown’s offer remains at $100,000. If buyer Green offers the seller $103,000, then Brown’s offer would automatically escalate to $2,000 above that, bringing Brown’s offer to $105,000. If buyer Orange offers $111,000 for the home, then Brown’s maximum of $110,000 will be eclipsed, and Orange will have the top offer.
Will the Seller Accept an Escalation Clause?
Some home sellers simply state that they will not accept an offer with an escalation clause. They would prefer that every buyer submits exactly what they’re willing to pay. Sellers sometimes prefer this method because it motivates buyers to outbid one another on the first try. It also streamlines the paperwork and the decision-making process.
Will There Definitely Be Multiple Offers?
Escalation clauses should only be used when the buyer is fairly confident that there will be multiple offers, or when the buyer expects to pay an escalated price. If a buyer submits an offer with an escalation clause, they’re laying all their cards on the table: The seller knows immediately how far the buyer will go to secure the home.
If that offer ends up being the only offer submitted, it technically remains at its original price. A Realtor representing the seller will know, however, to counteroffer to the buyer at a higher, escalated price, since the buyer is clearly willing to pay more. While there’s no guarantee that the buyer will agree to the higher price, it is likely that they will. A buyer gives up a lot of negotiating power and potentially leaves money on the table when using an escalation clause that goes unmet by a competitor.
Has the Seller’s Agent Clearly Stated a One-Day Review or Multiple Rounds of Offers?
In hot markets, there’s a wide variety of offer-review processes. Some state that the property is going on the market on Friday, and all offers will be reviewed the following Thursday. The seller and their Realtor will make a final decision that day. This situation can be ideal for the escalation clause, when a buyer knows it’s an all-or-nothing offer.
Other sellers take a back-and-forth approach. They may collect offers from buyers for one week, and then respond to a handful of the best offers by saying “Send us your highest and best offer.”  This technique is particularly disliked by many consumers and professionals for its lack of clarity, but it’s important to know that it exists.
Before writing an offer, a buyer’s Realtor can inquire to feel out the details and make sure the buyer is prepared for the situation. Writing an escalation clause on the initial offer in a multistage situation could put the buyer in a weak position during the second round. It’s perfectly legal for a seller’s Realtor, with the seller’s permission, to reveal to all potential buyers what the top initial offer is and to ask everyone to beat it. In this case, the escalation clause would flesh out that buyer’s maximum, and they would lose a competitive edge.
Bid With Careful Confidence and Know That Each Situation Is Unique
If you’re considering an escalation clause, your Realtor is probably knee-deep in researching the circumstances around the seller’s process of reviewing offers. The Realtor’s knowledge of normal practices and probable outcomes in your market will make your offer much more likely to succeed.
Escalation clauses can cause a lot of stress for home buyers, but when they’re boiled down to the basics, they’re fairly straightforward. Remember to be realistic, to be comfortable with how much you’re willing to offer, and to confidently go after a home at that price. Buyers shouldn’t be tempted to escalate their purchase price above what they are comfortable paying. At the same time, they should realize that inventory and interest rates are low, and aggressively pursuing a good home at a good price is necessary to winning in a competitive market. Potential buyers who are only looking to get a steal often end up not being buyers at all.
Sam DeBord is a Realtor® and managing broker at Coldwell Banker Danforth & Associates. Find him on SeattleHome.com.

Monthly Home Maintenance - December: Miscellaneous

• Clean your garage and get rid of anything you don’t use.
• Neatly organize all of your tools, garden equipment and appliances.
• Wander the house with a screwdriver and tighten screws on drawers, doors and furniture.
• Make a list of any small repairs that need to be made. If needed, go to your local hardware store and purchase the necessary items to make your repairs.

For a complete 12 month guide, please contact us @ sold@ClarkeTeam.com or 650-489-5399

Getting the most for your home

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First impressions count in real estate! To get a better idea what kind of face your home presents to a potential buyer, walk outside and up to your front door.  How does the front of your home look? Is your front yard neat and tidy? Are your gutters and paint in tip-top shape?
This objective look at your home can let you “see” it through the eyes of buyers. If your home makes a positive first impression a buyer will immediately be drawn in and want to know more. Visual appearance can make the difference between attracting big traffic—or feeling like you’re in a ghost town.
Buyers’ interest will increase when they see an attractive yard and tidy landscaping. Garbage of any kind is a no-no, as are parked cars, RVs, boats, and piles of “stuff” that can ward off all but the most resolute buyers. Trimming your trees and shrubs will allow for a better view from the street, and of course, mowing the lawn and sweeping the entryway will help to make an impact as well.
Simply paying attention to small details like these will help you market your home for top dollar. We can help you discover even more proven techniques to get your home noticed and get you the results you want. Please give us a call or send us an e-mail if you’d like to learn more about how we can help you move your home. 

Kelly Clarke
The Clarke Team
sold@clarketeam.com

Home Maintenance Series-September:Seals

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• Check the weather stripping around your windows and doors and make any necessary repairs in preparation for the winter months.

• Make sure your refrigerator door seal is tight.

• Caulk any drafts in your basement, such as around your dryer vent.

• Make sure your roof is in good condition and not missing any shingles, tiles or slates.

San Carlos Real Estate Market Takes Off!!

Spring has sprung and the market is HOT in San Carlos! The buyers are out there, and inventory remains low compared to demand. There are currently only 19 active single family homes available for sale in San Carlos.

We are seeing multiple offer on most properties and homes are often going above asking price. Check out the current sold vs. listing price trend at:

http://www.sancarloshomefinder.com/mimarket/zip/94070/

If you are considering selling your San Carlos home, now is a great time. if you are looking to buy, be sure you have your pre-approval ready and request a heads-up on exclusive properties before they come on the market.

Whatever your real estate needs, feel free to call or email us anytime to discuss how this information can benefit you! As always, we are happy to help.

Some Home Facts

Some Home Facts

￿The typical seller has lived in their home for nine years, which is up from 6 years in 2007.

￿Although 61% of sellers said that they reduced the price of their listing once, the average home

(not foreclosure or short sale) sold for 95% of the listing price.

￿In 2011, 37% of homebuyers were first time buyers, which is down from 50% in 2010.

￿In 2011, 88% of homebuyers used the Internet to search for a home.

￿The top 3 factors in choosing an area (neighborhood) were quality of the neighborhood,

closeness to a job, and affordability of the home.

Source: National Association of Realtors

Once you purchase a new home, how will you decorate it? Free iPad App Can Help!

Once you purchase a new home, how will you decorate it? CNN says Houzz is the “wikipedia of interior and exterior design.” It contains the largest database of home design ideas with more than 150,000 high res photos. Browse photos by style, room and location and save them to your virtual idea book for easy searching, saving and sharing. You’ll also find everyone from local designers to architects and contractors who can help you realize your ideas.
Cost = Free
Ease of Use = Simple

The Clarke Team
sold@clarketeam.com
650-489-5399

Strategic Marketing

Selling your property successfully and for top dollar takes a strategic marketing plan. we have designed a comprehensive program that utilizes a variety of marketing vehicles to position your home to the right buyer.

From staging your home in preparation for sale to advertising the property through print and via the Internet, from virtual tours to broker open homes, we will utilize a powerful array of programs to successfully market your home and quickly get the results you want.

For more information about selling your home, please call us today.

Rent vs. Own

There’s nothing quite like a home that you can truly call your own. A place where you can have the gleaming hardwood floors you’ve always dreamed of, a space to cultivate your own vine-lined patio, a way to provide a good neighborhood for your kids to grow up in, and a freedom from the whims of your landlord. These are the images that immediately come to mind, for many of us.
Yet some of the biggest advantages of owning a home are less romantic and more practical – in fact, there are financial advantages to owning a home:
• Tax Deductibility—You can deduct the cost of your mortgage loan interest from your state and federal income taxes. Since interest generally will account for most of your payment during the first half of your mortgage, the savings can be significant. Some of your costs at the time of closing (including prepaid mortgage interest) can be taken as deductions on that year’s income tax return, and points paid up front at the time of closing represent additional mortgage interest and may be taken as a deduction.
• Tax Deductibility of Property Taxes—You can deduct all of the property taxes you pay.
• Appreciation Potential—Real estate is considered a strong long-term investment because it usually appreciates in value. The effects of borrowing potential can increase as the value of the home appreciates.
• Capital Gains Exclusion—When it’s time to sell your home the amount of capital gains you have to pay is reduced. A homeowner can exclude up to $500,000 per couple if married and filing jointly, or $250,000 if single or filing separately for homes that have been the taxpayer’s principal residence for the previous two years.
• Capital Gain Treatment—Congress allows preferential tax treatment on gains from capital assets held for more than one year. This would be important for a homeowner who has gains in excess of the allowable exclusion.
• Principal Accumulation—Mortgages are designed to pay the interest for the time that the money has been used, as well as to retire the principal debt over a period of time. This payment plan means that part of the payment each month is for principal accumulation.
• Personal Enjoyment—Pride of ownership is a valid reason for wanting to own a home. You can personalize your home while enjoying the financial benefits.
For the best evaluation of your financial situation, consult your financial advisor. He/she will be the most qualified to discuss the financial consequences of a home purchase decision, as well as help you to establish a plan that will achieve your home ownership goals.

Your Home Is As Unique As You Are

Your home is a unique investment—one that reflects your personal desires. And since you may have lived in your home for some time now, it will undoubtedly have much of your own personality built right into it, as you’ve redecorated and maybe even remodeled it to suit your style.

In this market, homes like yours are a valuable commodity. We are certain that a buyer is out there who is prepared to pay the highest price the market will bear. Our job is to find that “just right buyer” and show them the inherent value of your real estate investment.

We would welcome the opportunity to schedule some time with you to plan how we can make sure that you get top dollar for your beautiful home. Please call us at your earliest convenience. We look forward to hearing from you.

Find Your New Home—Not More Frustration

Getting information on homes doesn’t have to be a frustrating experience. If you’ve been getting the run-around and feel like you’re not being given the information you’re looking for, we can put an end to that!

We treat our customers differently, and know how to listen carefully, so we can understand exactly what you’re looking for. we won’t bury you with useless information or withhold facts that are important to you, and we will always respond to any requests you have immediately. From help with listing notifications, to private showings and anything related to real estate, we would be delighted to be of assistance.

If you’re feeling frustrated, please don’t hesitate to call or reply to my e-mail at any time. We can provide you with time-saving tips and informative checklists to put the fun back into your search.

We are confident that we can meet and exceed your expectations and help you find the perfect home.

Are you ready to apply for your home loan?

Filling out a loan application doesn’t have to be a stressful event. Simply gathering the information you’ll need before you sit down with a loan officer to begin processing your application will save you a ton of time and aggravation.

If you are interested, we’ve prepared a mortgage worksheet that details all the information that you will need. Just call or e-mail us and we’ll get it out to you right away.

And if you haven’t selected a lender yet, we would be more than happy to provide you with proven contacts that have worked fabulously with us and our customers. They are all extremely professional and know how to find the loan that best suits your needs.

We hope to hear back from you soon and look forward to helping with all of your real estate needs.

How About a Hassle-Free Tax Season?

Happy New Year! January marks the beginning of the new year and it also marks the beginning of tax season. If you’re like us, you’ll begin optimistically in January saying that you’re going to get an early start, but on April 15th you’ll be scrambling to get the last forms mailed!
We’ve made a New Year’s resolution to have a hassle-free tax season. Here are four preparation steps that can help ensure a less stressful tax-filing process:
Step 1: Plan your filing strategy. If you do your own taxes, now is the time to upgrade your software. If you use an accountant, call him or her now to start the process. We have some great contacts if you are ready to try someone new.
Step 2: Consolidate your financial information. Set up a file to keep all your financial information in a central location. Include W-4 forms, various 1099 forms showing income such as interest, dividends and business profits, and any other key reporting statements. When it’s time to prepare your taxes, you’ll have everything in one secure location.
Step 3: Gather deduction documentation. Gather all documentation regarding expenses and deductions. If you don’t have a good system for tracking deductions, this is a good time to create one! Not only will you benefit this tax season, but you’ll be organized throughout the year and even better prepared for future tax years.
Step 4: Review your tax-advantaged investments. Many tax-deferred investment vehicles allow you to make contributions until April 15th for the 2011 tax year. Reviewing your portfolio now will enable you to take full advantage of various tax-advantaged instruments such as IRAs. Contact your broker or investment company professional to ensure you are maximizing tax-advantaged investments.
Paying taxes is never pleasant, but this year we’re determined to get an early start. We hope these strategies will help you have a hassle-free tax season this year!

Happy New Year!

We wish everyone a happy and healthy 2012.

Review of the Clarke Team: Excellent.

Review: My mother-in-law interviewed a lot of different people and chose The Clarke Team. It turned out that they also were a client of our shop. I worked with Judy, who was wonderful. She was very detailed and straightforward, which was helpful to me because it was a difficult escrow and she let me handle part of it. The property sold, so everything worked out as expected.

George Huddleston

Reviewed By: George H.
Review Date: 24 Jan 2011
Reviewer Location: Burlingame, CA

Review of the Clarke Team: Patient and Determined. They helped us find our perfect home.

Review: This was our first experience with The Clarke Team and it was much better than I ever dreamed possible.

My husband and I had difficult parameters as far as what we wanted in a house and the price we wanted to pay. We were looking for different things in a home. The Clarke Team helped us find the house of our dreams, which encapsulated the qualities and features that we were both looking for in one house.

Not only did Judy Clarke accommodate a bimodal desire in homes, but she was also entirely positive throughout the process. She handled everything with gentleness and sweetness.

Working with The Clarke Team was an amazing experience. They are the best listeners in the world. They get you the house you want and they have fabulous attention to detail. This attention to detail can provide insight about potential home defects they see. My husband and I had not two but three pairs of discerning eyes to spot the flaws as well as the positive features of the homes we looked at.

The Clarke Team never lost patience or determination to assist us in finding our perfect home.

Marciana and Denis O'Halloran

Reviewed By: Marciana & Denis O.
Review Date: 20 Jan 2009

: A Little Knowledge Will Save You A Lot Of Time and Money

Is it a buyer’s or a seller’s market right now? The answer can turn on a dime and not all buyers are up-to-date with the latest information on market conditions. It almost goes without saying that it can also have serious financial impact on your situation.

As Realtors, it’s our job to track all of the elements that go into creating our current market – from interest rates to supply and demand, to which kinds of houses are selling quickly. Market conditions will often vary even from neighborhood to neighborhood, and knowing this information can put you in a much better position to find better deals and more promising investment opportunities.

We would like to offer you our services and help you find the dream home you are looking for.

The Clarke Team
Realtors
sold@clarketeam.com
650-489-5399

Review of the Clarke Team: Working with The Clarke Team was an amazing experience

Review: I am very lucky to work with The Clarke Team. Kelly is my sister in law. Judy and Kelly Clarke are both great and very knowledgeable.
Working with The Clarke Team was an amazing experience. They are the best listeners in the world. They get you the house you want and they have fabulous attention to detail. This attention to detail can provide insight about potential home defects they see. They easily spot the flaws as well as the positive features each home that I visited.
The Clarke Team never lost patience or determination to assist me in finding my perfect home.

Reviewed By: Josephine D.
Review Date: 23 Mar 2009
Reviewer Location: Redwood City, CA

Review of the Clarke Team: The best decision I have made.

Review: This was my second time purchasing a home. Kelly and Judy made the transaction easy and smooth from beginning to end. We looked at homes with an open mind for sure and she gave me ideas along the way as to how to upgrade them. My budget was small and that meant not the best neighborhoods. She always researched the areas and made sure I new "There is a hospital and four way stop sign there. There are a lot of cars and apartments on this street" And when we found the gem she made sure It was the right choice. Comments like " There is a school 2 blocks away so we should drive by when it gets out to see how busy it is. There are nice well maintained homes and ample parking all around. It has been the best decision I have made to use the Clarke team in finding my Gem. Thank You.

Reviewed By: jessica l.
Review Date: 02 Apr 2009
Reviewer Location: Redwood City, CA

Review of the Clarke Team: All-around good experience: Quick, effective, and fun to work with.

Review: We decided to use The Clarke Team to sell our house because I knew Kelly from a previous business we had worked in together. I was confident in her personality and sales skills, and knew that she was a results person.

We challenged The Clarke Team a bit because we gave them a month to sell our house. However, they worked quickly and effectively to get things done. Within 4 days, they had an open house, and we received a full-price offer the following day.

They were incredibly organized, had a plan, and their communication was excellent. They managed the selling of our home like a project, setting our expectations in terms of what we needed to do and what we could expect.

The way that they interacted with us was very impressive, as we have had other agents that were not responsive and did not answer our questions. The Clarke Team also was fun to work with. They just get it -- all of the different aspects of the process, from the emotional to the financial/practical, that you are going through.

John Matterson

Reviewed By: John M.
Review Date: 12 Nov 2009
Reviewer Location: Vancouver, BC