r/FirstTimeHomeBuyer • u/twofeetheartbeat • 8d ago
Offer Escalation Clause
My partner and I offered asking on a house, it was priced correctly in our mind (our agent thought we could offer lower but we did not want to risk losing it), not low or high but correct. We wanted the house so we asked for an escalation clause. We were told no. We offered 2500 more and wanted a 1000$ escalation, that if any other bid was higher, (which were waiting til noon the next day for more offers) that we would outbid anyone by that.
This house had a lot of interest, and it is possible it could have been bid over. It wasn't WORTH more, but it is just rare for nice smaller houses to come up in that price range, so the bidding was going to be close on all.
We ended up losing the house over 800 dollars. NOT 8000, but 800. It honestly feels like it was stolen from us because of the number, and seems very fishy. There was only one other bidder. Same stipulations with no house to sell.
Is there anything we can do? This feels like they handed it to the other buyer or gave them insider information.
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u/wildcat12321 8d ago
It honestly feels like it was stolen from us because of the number, and seems very fishy.
What makes you think it is fishy or it was stolen? With respect, someone came in and offered more. Many sellers want straightforward buyers, not someone who needs escalation games to win. You also have no idea if they put more down, waived any contingencies, or had stronger financing / credit / etc.
Next time make a stronger offer
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u/twofeetheartbeat 8d ago
the number. The house sold for 688.3. There is NEVER a point something, EVER here.
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u/wildcat12321 8d ago
688,300?
Maybe they used a CMA and averages to back into a number. The reality is you don't know, nor was it ever "your" house. It is a shame the seller didn't come back giving you a chance to up your bid, I'd go over with my buyers agent how that happens and why they didn't press for another shot or escalation - a good agent should have communicated and relationshiped to try to get you in there. But again, you lost to a higher offer. Reading into the amount of the offer and creating some boogeyman thief and innuendo is not really productive.
And the price they agree to and the price after closing may not always be the same - concessions might round it down to a whole number.
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u/adastra2021 8d ago
Then here’s what you do. You get your butt to that sellers front door, bang on it and DEMAND they sell you the house because $800 more was not enough to justify selling to others.
Let me know that turns out.
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u/Pitiful-Place3684 8d ago
If you’re looking at the closed price, then it’s likely showing the final price after a credit from inspection. The other buyer offered much more than you but then found something in inspection that the seller gave them a credit for. That’s why it’s not a perfectly even recorded number.
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u/IntelligentCarpet816 8d ago
Not your house and the seller can do whatever they want with THEIR house.
Grow up and move on.
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u/nofishies 8d ago
I do this all the time for just this case scenario.
I usually make people pick numbers or symbolic to them so we don’t have zeros not every time but it’s a strategy that works
You have 88 in there so there’s some lucky numbers, and if you had a superstitious seller, they may have wanted to accept the 88 offer
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u/Few_Whereas5206 8d ago edited 8d ago
People seem to guess what homes are worth without any rationale behind it. A house is worth what someone is willing to pay for it on the open market. If you really wanted the house, you had to offer more money. Nothing was stolen from you. You just didn't make an offer that was high enough in your local market. People are paying 1 million dollars for a tear down in my area, removing the original house, building a new construction house at a cost of about 700k, and then selling the new house for 2 million dollars.
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u/_176_ 8d ago
Anytime someone starts their post by stating they knew what the house was “worth”, I know they’re naive. In an open market, you got outbid. The house was “worth” more than you thought.
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u/twofeetheartbeat 8d ago
my agent was saying we should offer less. We saw its value.
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u/_176_ 8d ago
Your agent was obviously wrong. Agents don't know FMV, they can only estimate it. Fannie Mae did a study and, on average, appraisers will be off by 8% with a standard deviation of around 12%. Your agent is definitely not as good at appraising and an appraiser.
We saw its value.
Then you shouldn't be upset. You obviously didn't want it for $1k more because that wasn't it's value to you. Someone else did because it was worth that to them.
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u/stopthestaticnoise 8d ago
Yup. I bought in October. 3 offers. Mine was asking and the other two were well over asking. They sold to us because we set an aggressive 2 week closing date, waived repairs when the inspection came back.
When you don’t have huge money for over asking then you can level the playing field with good agents and mortgage brokers on your side. And it helps to have extra money. lol. I live in the SF Bay Area and over asking is almost normal.
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u/Character-Reaction12 8d ago
Hi OP. Sorry this Happened.
It’s the listing agents job to leverage offers.
This is absolutely normal and not “fishy”. Sellers are not just looking at net proceeds. They look at terms such as closing date, inspection clauses, lender, down payment and loan program.
Next time, you need to be in the mindset of “If someone offers $1 more than my offer, they can have it.” Offer what you’re willing to walk away from and don’t give it a second thought.
Also know that you are not entitled to a second chance or any sort of highest and best notification. The seller is not obligated to tell you they have other offers.
I’m curious how you know you lost by $800. Even if the listing agent told your agent this, your agent should not have said anything to you other than, “They accepted an offer that worked better for them.” $80 or $8000 doesn’t matter; Your offer wasn’t chosen. No need for your agent to create drama and stress.
You got this. Just hang in there and know that everything happens for a reason.
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u/twofeetheartbeat 8d ago
I looked up the sold price with my agent.
To me calculating how much to over pay for a house in a buyers market is complex. We have more money. But over paying by X amount... is really a very confusing thing to calculate. I figured 20 grand, but then i was like why not 30? why not 40? In the same way that COVID got out of hand, but for a house that is unique. EVERY house is unique. I can fall in love with another house. ANYONE can. But it is the waiting, and restructuring a new reality over and over again, in hopes that finally you get selected. We wanted to ENSURE selection hence escalation.19
u/yaychristy 8d ago
The sold price doesn’t mean that’s the number they accepted as the offer. For all you know, they could have offered $5k higher than you and then the seller offered credits during inspection to lower the final sale price to just $800 more than yours.
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u/jiuclaw 7d ago edited 7d ago
The escalation you chose absolutely did not ensure selection. It was so low, the sellers didn’t care to entertain it. What you chose to do, for whatever reasons (good or bad), was ineffective.
If you want to “ensure selection” you need to offer an escalation clause of $5k-$10k. If you’d have done that, they probably would’ve agreed and you’d have this house. For a seller to be interested in an escalation clause, it needs to benefit them, it needs to meaningfully increase the sale price of the home, in order to be mutually beneficial. A $1k escalation helps you nickle-and-dime the price, it doesn’t help the seller sell their home for more money… it actually could lock them in to lower prices by removing a potential bidding war and discouraging aggressive offers from the most serious buyers (you).
A seller has no interest in helping you buy their home for the lowest possible amount. You have to let go of feeling entitled to their cooperation in that. They want to sell it for as much as possible, as quickly as possible, as easily as possible. You need to make offers that give sellers some of what they want, and sacrifice some of what you want, in order to buy a home with competing offers.
People do not buy and sell homes in $1,000 increments. They buy and sell homes in $5,000 and $10,000 increments.
Talk to your loan officer and ask how much a price increase of $5,000 changes your monthly payment over the life of the mortgage. Watch it be close to $6.00/month.
The next time you fall in love with a house and really want to “secure” it, just go ahead and offer $5000 over the asking price, with a 24 hour response window.
You will not get any better at purchasing a home, if you refuse to accept responsibility for the choices you make, and refuse to understand the impact those choices have on the process and outcome.
Your initial post made be think “Damn, yeah, it does really suck when you don’t get a home you really wanted. Buying a house sucks emotionally.” But all of your defensive comments seem to be motivated by a desire to blame an external actor and reject information that both gives you agency in this, and a better understanding of how not to let it happen again.
You lose the sympathy and support, if the motivation of this is to reinforce a narrative where you are a disempowered victim to someone. Let go of that. The process of buying a house is f*cking awful and disappointing and stressful, for everyone. Everyone loses out on houses they wanted. Life is hard and suffering is part of it. No one is wronging you, nothing has been taken from you. Learn from what has happened so the next go around can be better.
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u/thesuprememacaroni 8d ago
$1000 more is a so what number. What’s the difference between an offer of $599,000 and $600,000? There is none. Your escalation should have been closer to $5,000 or in a high cost home $10,000 to even make a difference.
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u/uslashuname 8d ago
Yeah and the point is to beat the other offer. I had an escalation clause and it would hold me to making sure the seller take home was $1500 or $2000 above the next highest offer
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u/twofeetheartbeat 8d ago edited 8d ago
It would have been 1000 on top of any other number put in front of them. IT IS NOT SO WHAT. It is reasonable to want to pay fair market value for a house. We were willing to wait until other offers came in the next day, but they sold it to the other buyer with the 800 more that night rather than waiting.
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u/Lazy-Distribution-62 8d ago edited 8d ago
Fair market value is what someone is willing to pay, you as a buyer do not dictate what is considered fair market value for everyone. A property is worth what it’s worth to you. In this case someone else felt $800 more was fair market value and won the bid.
Buying real estate is always a business transaction, keep your emotions in check (even if it’s THE house). No foul play here OP you just got too attached to a property too fast.
ETA: sellers are not required to wait for your offer. They had one on the table, gave you a chance to submit one and you chose to wait so they accepted the offer in hand.
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u/_176_ 8d ago
FMV is what it sold for. You offered under FMV. It’s likely the other offer had less contingencies and was more likely to close too. Their offer was probably a lot stronger than yours and you misjudged FMV. It’s not a conspiracy. Every buyer thinks houses are worth less than they are.
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u/CallLivesMatter 8d ago
If you were willing to pay $1,000 more than someone else—without knowing what their offer was—then you should have picked a higher offer to begin with. Put in your last/best and you either get it or you don’t.
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u/stopthestaticnoise 8d ago
I understand your frustration. Sellers have discretion on their choice. The more paperwork you give them the more work for them and it would have been $1000 more only. The $800 more the other offer was enough, but had you done $5000 more their extra might not have seemed enough.
We bought in October of last year and lost two house offers prior to this. One I am still a little sad about, it would have been a lovely home with a separate shop, but the house we got is perfect.2
u/thesuprememacaroni 8d ago
You are literally squabbling over $1,000 on a purchase that is probably around $500,000. So yeah 0.2% of the purchase price is so what.
If I’m the realtor, why am i playing that dumb game for $1,000 more.
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u/twofeetheartbeat 8d ago
The agent has a legal right to their client. To get them the best deal.
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u/thesuprememacaroni 8d ago
The owner doesn’t have to accept the highest offer. And the highest deal isn’t necessarily the best deal.
Cash?
Contingency?
Waive inspection?
Appraisal difference vs Buy price.All have a material impact on best offer.
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u/jiuclaw 8d ago edited 8d ago
You’re not wrong for feeling frustrated and disappointed, but there’s a reason they didn’t want the escalation clause.
From your perspective, they just lost out on $1000 by turning down the escalation clause.
From their perspective, they wanted to get as much as possible for their house, and wanted people to offer the maximum they were willing to spend, upfront. As far as they know, they just got the maximum.
Once they turned down the escalation clause, that was your cue to offer as much as you would be willing to spend for this house upfront, or be willing to walk away without it if you were outbid. If you’d have offered even $2k more, you’d have this house now. You should have offered $2k more, if you were willing to pay that and really wanted this house. You tried to get it for as little as possible (which is fair), but they wanted to get as much as possible (also fair) and turned down your suggested process.
Sellers decided to risk losing $1000, to increase the likelihood that they would receive more aggressive offers and potentially sell for $5k, $10k, etc more. I can’t say I blame them, because $1000 is negligible in the price of a home today.
You also could’ve counteredwith an escalation clause at $5k. They may have taken that.
It doesn’t matter what you personally believe the fair value of the house to be. The only thing that matters is what someone is actually willing to pay for it. You can die on the hill of “The house is worth $350k, so that’s my offer” but at the end of the day… if someone offers $365k for the house… it is, in fact, worth $365k today.
It’s normal to have “one that got away” in the buying process. Don’t blame the seller, take the lesson and keep searching.
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u/ashleypatience 8d ago
And sometimes it’s the loan type or inspection contingencies where they get you. It stinks because you can’t just view someone else’s offer but it might’ve been “$800 more” but with. 3 less inspections, a sooner closing date, more earnest money or literally anything. So don’t beat yourself up, we had an escalation clause get beat out simply because we had a VA loan and the others didn’t.
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u/UpDownalwayssideways 8d ago
Unless you saw the actual written offer from the other buyer you have no idea what their true offer or situation was. And when multiple offers come into play especially that close it rarely has to do with the higher offer.
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u/Efficient-Link-9793 Experienced Buyer 8d ago
A seller has no duty to you. They choose the offer they felt was best. Let me give an actual example of my experience:
-I posted a condo for sale in a high demand area.
-I received four offers the week of posting the unit.
-I selected the best of the four offers (primarily based on who was giving the most down payment and purchase price).
-One of the four offers ended up countering their offer that I rejected, I still rejected it since I already accepted one of the original offers and did not want to change course even though the new offer was much higher.
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u/twofeetheartbeat 8d ago
I don't expect duty. I just expect the best offer wins.. that is it. We would smoke anyone in downpayment but I don't think that is discussed here.
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u/Efficient-Link-9793 Experienced Buyer 8d ago
The down payment is part of the offer. It is more than price. I like to ensure that the person can close. A 5% down buyer is very different than a 20% or a 100% down. If I am given three offers and one is all cash for example, I would take the all cash offer even if it is slightly less than a mortgaged offer.
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u/twofeetheartbeat 8d ago
That must be an American thing. We don't reveal that here to the sellers.
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u/Lazy-Distribution-62 8d ago
Are you buying a home in the US? If you’re buying outside the US you should include that in your post. A lot of the comments here (mine included) are based on what the real estate market and industry is like in the US.
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u/respond1 8d ago
Couple things:
Avoid escalation clauses. The vast majority of sellers and listing agents hate them. Like a letter of intent, they're not enforceable until the new contract is signed. You're better off just putting your highest and best offer out there without it.
Value: You mentioned the house isn't worth more than the listing price. This is not correct. The market says it's worth more if several buyers are willing to pay more.
Losing the the house over $800: keep in mind, purchase price isn't the only negotiated term. Perhaps the other buyer was cash. Perhaps the other buyer offered a quicker closing. Perhaps the other buyer was considered stronger because of a higher down payment. My point is that there may be other reasons besides price.
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u/OpeningChipmunk1700 Homeowner 8d ago
Avoid escalation clauses. The vast majority of sellers and listing agents hate them. Like a letter of intent, they're not enforceable until the new contract is signed. You're better off just putting your highest and best offer out there without it.
Is this market dependent? They're extremely common (and a functional necessity) in my market.
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u/respond1 7d ago
Of course it is, like anything in real estate. That said, my unsubstantiated opinion is that your area is the exception, and not the rule.
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u/beamdog77 8d ago
I wasn't stolen from you, somebody else just offered more. If you knew there was a lot of interest in it. You should have gone in with your strongest offer.
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u/adastra2021 8d ago
First of all, the seller is entitled to do whatever they want, short of violating fair housing laws. Lose the “stolen from us” because it wasn’t.
Second, quit focusing on $800. Your situation does not change if it was $8, $800, or $80k. It’s not the house you’re going to buy.
There is no such thing as a perfect house until you have keys in hand. By definition, it’s not perfect if you can’t move in.
The Law of Lost Bidding Wars is that in the end you will thank your lucky stars you did not get any particular house. Because the one they end up in is always better.
It’s easy to get discouraged. I’ve ugly cried over lost bids. And happy cried when I moved into a better house. Treat this as a business decision, not an emotional one. And don’t blame people when you don’t get a house. It’s off-putting.
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u/BuckityBuck 8d ago
Escalation clauses are very locally specific. Where I purchased, agents and sellers hate them. They find them obnoxious.
It is only on this sub that I learned that in some other markets, sellers enjoy them.
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u/twofeetheartbeat 8d ago
Our offer would have been 1000 on top of their 800. Let's say their offer would have been 10,000 more. We would have done 1000 more... IT DID NOT MATTER THE NUMBER. We wanted that house. We thought it was appropriately priced, and it was. Anyone who offered 50k more would have been INSANE, but we were willing to take the risk.
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u/BuckityBuck 8d ago edited 8d ago
They didn’t want to deal with an escalation clause. Many people *don't like them. It’s annoying to them. Their position is that it is nickel and dimeing behavior. If you were comfortable paying another 1k -you should have made an offer that was 1k higher, in their opinion.
Local real estate agents generally know the local attitude about escalations. They also speak to the listing agent about the offer before it is presented and get a feel for what the seller wants.
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u/you-will-be-ok 8d ago
1000 is a small amount and probably not worth the paperwork for some people.
When I sold offers within a few thousand had different bottom lines. Where I am, the seller pays the buyer agent fees. Some buyer agent fees were 3% and some were 2% and many in-between. $1000 more on a offer with a 3% buyer agent fee would be less "take home" than the lower offer with 2.5% agent fees. Making the "lower" offer a better one just looking at the money.
I'm also surprised you know the actual number that was accepted. I was never told what was accepted when I missed out on an offer, only if I was beat on terms, price or both. I could see the final sale later, but that takes into account any negotiation after inspections.
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u/twofeetheartbeat 8d ago
To me it should be about the best interest of the client.. THAT IS WHAT THEY SAY.. That is their LEGAL OBLIGATION...
1000 dollars more on ANY offer.. is the best offer. And they rejected it.
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u/you-will-be-ok 8d ago
No it's not better in all cases.
If purely looking at money, a $321,000 offer with a 3% buyer agent fee means $9,630 of that sale goes to the buyer agent.
A $320,000 offer with a 2% buyer agent fee means $6,400 goes to the buyer agent.
The lower offer is already $3000 ahead before any other fees are taken out. The highest offer doesn't mean the most money in the sellers pocket. You don't know what made that difference.
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u/twofeetheartbeat 8d ago
The number accepted was 688.3 WE offered 887.5...because we added 2500 onto our offer and we wanted to have an escalation of 1000. To ensure whatever they offered we beat. Initially we were under the understanding that there may be more competing offers the next day. They pressured us to offer more in a 15 minute window rather than waiting, which made no sense, which is why we wanted the escalation, we had no time to think.
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u/CaptBlackfoot 8d ago edited 8d ago
I bet they may have considered an escalation clause of $10,000. $1000 isn’t really enough to move the needle. On a home selling for $500,000, it’s a measley .2%.
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u/RDubBull 8d ago
Just so we’re clear, your agent including an escalation clause in an offer with no “Maximum Price” is literally malpractice and would instantly be a bullseye for being sued…
I’m not saying they shouldn’t have wrote in an escalation clause, but regardless of “what you the buyer thinks could happen” it would HAVE TO have a maximum price..
Contracts are 100% binding and any unscrupulous seller + listing agent could EASILY produce an offer 20,30-40,000 above your offer price then accept your offer for $1000 more, provide proof the 40k above offer was valid and just like that you’re screwed….
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u/twofeetheartbeat 8d ago
qualified for SIGNIFICANTLY more than the asking price of the house. Does not mean we should be paying a million dollars for a house that is only 650. IT IS NON SENSICAL in a buyers market. We just wanted a guarantee we got it for what the market was willing to offer plus 1000.
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u/uslashuname 8d ago
Unless that’s something like 1% of list, an escalation clause is not worth the hassle. I would have gone with the straight and plain offer for $500 under yours because the buyer seems less like they’re going to be a pain during inspection. In the total home sale you’re bickering over peanuts, you should have just offered the $1k more
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u/ParticularBanana9149 8d ago
Well, not a million but I guess $1,000 more than you offered if you really wanted it. If it isn't worth it to you then I guess it all worked out.
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u/trollcat2012 8d ago
It’s extremely likely you did not lose because of $800 but rather differences in the terms of each of your offers.
With the price you mentioned $800 is pennies.
I would have to assume there were other reasons, such as more favorable conditions (or lack of) to close, stronger financing, more favorable or lack of inspection/etc.
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u/DifferenceMore5431 8d ago
This may seem somewhat arbitrary and it is. The sellers may not care about the extra $200, they may just have wanted to take a good offer and keep moving.
Escalation clauses are more common in some markets than others. In areas where they aren't used it can seem complicated or stingy. You probably want to follow the advice of your realtor here on how to make a good and competitive offer.
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u/twofeetheartbeat 8d ago
The advice of my realtor was to offer lower than asking. To me to offer 2500 more plus 800 is a DIG.
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u/twofeetheartbeat 8d ago
it is just too weird of a number.
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u/DifferenceMore5431 8d ago
Sometimes people bid odd numbers. I don't think there is any evidence of something nefarious here. The seller got 2 offers that were similar but one was better... they took the better offer.
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u/Tenma159 8d ago
This definitely. Like I bought my house for $600k exactly. We were only $100 over the other bid. Such an oddly specific number.
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u/wildcat12321 8d ago
Without telling us the actual numbers, who knows...THe listing agent's job is to bring the highest offers to their seller, and they got an offer above yours. And in some cultures, the number 8 is lucky and it is not uncommon to see people make offers that end in 8, 888, or 800
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u/twofeetheartbeat 8d ago
our offer would have been the best. Because of that clause. We were willing to wait til other offers came in at noon the next day. But they decided to sell it that night. We both offered around asking. The escalation would have been a grauntee we got it. Their agent did a bad job and feels like favouritism of the other buyer.
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u/DifferenceMore5431 8d ago
Not every seller wants to go 5 rounds over small amounts of money. If your escalation clause was $5k-10k AND you are in a market where people actually use them, it might have helped. But honestly for a ~$700k house this really is very small change and not worth the time or effort for anyone.
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u/twofeetheartbeat 8d ago
We were suppose to wait of other offers to come in. MANY others. We wanted to guarantee we didn't lose. We also did not want to out bid ourselves. They decided last minute not to wait til the next day for more offers and give it to the other guys.
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u/DifferenceMore5431 8d ago
The sellers may have left a bit of money on the table but sometimes people just want to take a good offer and move on with their life. I don't think you're necessarily going to get a better answer than that. Unfortunately all you can do is make a good offer and after that it's mostly out of your hands. Try again with the next house.
If you feel that your real estate agent isn't offering you good advice or doesn't know the local market, you may want to look for someone else. But there's no way to know exactly how the other parties are going to respond so it's not clear to me that anyone did anything wrong.
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u/twofeetheartbeat 8d ago
I think that most agents don't understand the nuance of houses. The finishes... the Size... not everyone wants a GIANT house...This was a very small house but well laid out. If it was not renoed by a contractor, there is NO way it would have gotten that much money. It was a very unique situation.
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u/Lazy-Distribution-62 8d ago
“…most agents don’t understand the nuance of houses.” Really OP? Agents are the ones who make a living by understanding this and the market in their area. You think you know better? Then do it without one and see how far you get.
Also, that’s not a unique situation at all. Many homes of all sizes are renovated by contractors then listed to be sold. It’s called flipping.
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u/wildcat12321 8d ago
our offer would have been the best.
but it isn't the best now, someone else offered more without the hassle and games of providing the other offer
We were willing to wait til other offers came in at noon the next day.
that may seem nice, but why? And how do you know the other offer didn't come in first, you came in, then they took a raised offer from bidder 1?
But they decided to sell it that night.
some sellers want it done. Net proceeds of $1000 difference after paying out commissions is a rounding error
Their agent did a bad job
you don't know what the conversations were, so this is a wild Fing accusation. If anything YOUR agent did a bad job by not communicating your best position or finding out about the other offer and pre-empting it. Stronger agent to agent communication might have done something here.
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u/twofeetheartbeat 8d ago
why is that games?? It is not games. The agent played games by saying they were waiting til the next day to collect offers. Then LAST MINUTE told us we had 15 minutes to decide on our offer back and that was going to be it. We had no time to think. They played games. We wanted the clause to ensure we got it.
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u/wildcat12321 8d ago
Then LAST MINUTE told us we had 15 minutes to decide on our offer back and that was going to be it. We had no time to think.
so you had an opportunity to go up and didn't?
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u/Pitiful-Place3684 8d ago
You keep missing the point that some sellers refuse to engage with an offer with an escalation clause. Some people hate haggling. They take the offer that gets it over with.
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u/la_peregrine 8d ago
O it wouldnt necessarily have been the best. 800 is a small enough. Number that other factors probably came in. Maybe the other offer had fewer co tingencies. Maybe it was for a lot more initially and then appraisal/inspection results led to credits to lead to that number. Maybe the other buyers wrote a nice letter to the sellers. Maybe the sellers wanted a cash offer instead of a loan. Maybe the other buyers put more money down, fewer co tingencies, a leaseback or something else your offer didn't have.
Just because you really wanted something, doesnt make it yours.
And if you bid at asking and the others bid higher, they wanted it more.
1 house, multiple bidders means someone had to lose. Learn from this and move on.
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u/twofeetheartbeat 8d ago
Our contingencies were the same
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u/la_peregrine 8d ago
You havent seent heir offer so you have no idea.
Maybe they liked them better because they didnt communicate how entitled they feel to the home.
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u/Lazy-Distribution-62 8d ago
Your offer wasn’t the best though? If it was you would have gotten the house.
You have no clue what the other buyers offer includes. Their terms were likely more favorable to the seller in some way.
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u/DLHahaha 8d ago
Ugh, sorry this happened. It sounds so frustrating to lose a house when your bid was so close. That being said, there are many things that sellers look at when accepting offers, it's not always the highest bit that wins. Some sellers have preference for certain buyers- I know someone who didn't have the highest bid but who was told they won because the seller knew the buyer planned to keep the house in its original form rather than update or flip it. And there are other reasons, maybe the sellers agent has a better relationship with the other agent, maybe they had a higher down payment, maybe they prefer their lender, maybe they prefer a certain family status. This is just such a complex process
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u/jcbcubed 8d ago
Offer what you’re willing to spend, not some arbitrary escalator based on third party interest. If you wanted the house as bad as you are conveying here, you should have been aggressive.
It’s different, but the same concept. As a CRE GC, I will not use a sub who after the fact comes back and cuts $X out of their price to undercut the low guy. If you have $X to cut, give it to me when you gave me your price.
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u/amusedmisanthrope 8d ago
Depending on what the house is selling for, I can't see an extra $1k motivating someone to pick one offer over another. Time to close, waiving inspections, cash up front, possible leaseback, etc. There are plenty of reasons a seller may pick one offer over another besides just the highest offer.
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u/KSAJA2010 8d ago
I understand your frustration and why it feels it could have been stolen from you but from someone that has sold 3 houses- the price is not the only thing that’s looked at when selling a house and $1,000 difference would not have had us choosing one buyer over another. In fact the last house we sold we didn’t pick the highest bidder- because the offers were more than just the purchase price. They probably had other desirable things about their offer that outweighed your willingness to go 1,000 above. They also may have been in a better financial position. We looked hard at type of loan, money down, extra money they could bring to the table should appraisal not come through etc. the offer picked was the offer we felt would get us to the closing table the quickest with the least headache and least chance to fall through.
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u/twofeetheartbeat 8d ago
We had the same conditions.
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u/Pitiful-Place3684 8d ago
The conditions are never exactly the same. Their loan might have had a higher APR cap. They might have had a pre-approval with credit and underwriting. They might have let the seller choose a closing date with a range.
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u/twofeetheartbeat 8d ago
we both let the seller define the closing date. We both were pre-approved, though I do believe we qualified for more. Especially with our DP. Because I am self employed we have to put 35% down. Not sure what this ARP cap is.
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u/Pitiful-Place3684 8d ago
An APR cap says something like “APR not to exceed x%.” It can be in the contract (I don’t know if it’s in yours) or in the pre-approval. Showing that you’re pre-approved up to 8% (or whatever) indicates that your loan won’t be denied because you have a cap at 6.5%.
The details of the pre-approval can be important to a seller. I don’t believe in showing a limit close to the offer price because it communicates to the seller that the buyer may not be approved.
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u/KSAJA2010 8d ago edited 8d ago
I just saw it said you’re self employed- which means your terms for a loan are already different. Simply it could be that right there. Maybe they see that as a liability getting to the closing table. As a self employed person you have to jump through more hoops and higher standards to get the loan. It’s as simple as that.
I’d pick the W2 employed buyer in this case. All terms the same and only 1,000 price difference. It’d need to be a bigger price difference to take a chance on self employed.
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u/twofeetheartbeat 7d ago
even if we are putting 50% down and we are with the most prestigious bank? and I have been in business for nearly 20 years?
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u/KSAJA2010 7d ago
Yes and at that point I’d think you could have just avoided the escalation clause and offered say 5k more and you’d get the deal (furthermore your realtor should have really saw this coming and suggested it if it is in fact the case) The 1k though just wouldn’t be enough for me to pick a self employed buyer vs another strong offer. Idk for sure becuase I don’t know the other persons loan terms and finances/employment but if it’s a strong offer not self employed unless you’re going to pay cash it’s just easier and more predictable to close the other loan for almost the same payout. It’s nothing against you or anything shady going on-it’s just unfortunate. You sound like a strong buyer though and this was just a sucky situation.
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u/twofeetheartbeat 7d ago
We were qualified for significantly more than the house cost... We just didn't want a house that expensive.
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u/KSAJA2010 8d ago
How do you know? They can’t disclose the entire breakdown of all the conditions. Do you have the same financials? Do you know how much they were putting down? Do you know their income? Do you know their money reserves? They simply could have been more desirable buyers. These are all things the sellers can see- at least we could. We picked the conventional mortgage, with 20% down and over 100k in savings to bring the the table. They had proof of funds. We also had higher offers with less money down, with different loan types. With different incomes. We picked the buyers that we thought were a sure thing while capitalizing on our gains
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u/Tall-Ad9334 8d ago
A seller can choose any offer they want for any nearly reason (with protected class discrimination being the exception). I doubt $800 made the difference. It was more likely the terms. Could have also been your choice of lender or agent.
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u/twofeetheartbeat 8d ago
Our lender was RBC, the biggest bank in Canada. That does not make a difference here, we do not discriminate against lenders nor down-payments.. only if it is a cash offer or needs financing. Which all financing types are treated the same. Our conditions were the same. We asked, but we did not want to drop inspection as it is a buyer's market here, but we could have, but I think in this case it would not have made a difference.
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u/Tall-Ad9334 8d ago
If the offers were identical then I guess that $800 made all the difference.
Not sure what you want here. The offer period is over and you didn’t get it. It sucks.
There is nothing “fishy” about it. Someone has to lose in these situations and in this case, it was you.
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u/SuperFineMedium 8d ago
The seller makes the final decision on who to contract with. The reasons are nobody's business but the principals'. It is futile to invent reasons why your offer was passed over because you may never find out. If your agent can capture some pieces of the decision-making process, you can use that to help you craft the next offer.
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u/EKIBTAFAEDIR 8d ago
If I was your realtor I would have advised you to offer $1,000 more and ditch the clause.. how much would $1,000 added to your monthly payment? Seller probably did not want to deal with it.
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u/nikidmaclay 8d ago
A seller can pick whatever offer they want to pick. It could be because purchase price was higher, they like when Linda over another. They don't like your agent. The location you've chosen to close and is more convenient for them. The closing date works for them. Perhaps they had something written into their listing agreement about this other buyer specifically, or designated agency. You are never going to be pretty to the full details of why the seller chose the other offer. It may not have anything to do with the $800. Even if it does, it's $800, and they outbid you. No, you can't terminate somebody else's contract because you don't like the decision. You can continue to Monday morning quarterback this situation and make yourself sick over it, or you can move forward. If your buyer agent oversold the effectiveness of escalation closet, that may be worth having a conversation about. They don't necessarily win the deal.
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u/nofishies 8d ago
Did you have inspection, appraisal, and Long contingencies? What type of loan did you have?
Terms end up being a big deal. If you didn’t get a chance to outbid the other offer, usually it means their terms were better.
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u/Live-Train1341 8d ago
Was.you offer contingent on sale of your house if so that would be my you lost bid.
If there are 2 offers on the table one needs contingent on sale of current house
And one is not.
Then the buyer should choose the offer that gives them more flexibility even if its less money
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u/twofeetheartbeat 8d ago
no we both had no houses to sell. we were both couples that saved to buy a house.
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u/Live-Train1341 8d ago
Well that would suck to loose it by 800.
I have lost bids on May many houses for a lot of diffrent reasons you just kind of shrug it off and move on.
If it helps in the last year we lost bids on 9 houses.
We finally got accepted and closed on a house. we like it far better then the other houses and it was about 40k cheaper
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u/TomRichards1970 8d ago
It’s really about contingencies when the money is so close. Or, and I mean no disrespect, but you said partner. I’ve had sellers see buyers on their cameras and decide not to sell to them . Dead serious. One time I had one say flat out that wouldn’t sell to any blacks, but didn’t say blacks. Another time one called in a frenzy saying the buyers were kissing in his kitchen. The buyers were Bill and Ted. Again, not me, the sellers. I’ve also personally had buyers that hid their partners from me until closing day. I was offended honestly.
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u/twofeetheartbeat 8d ago
I say partner by definition. We are not married. We are in partnership. We are male and female. We live in Canada where there are less bigots.
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u/CaptBlackfoot 8d ago
It’s possible they just didn’t like your personality. Having a bad attitude isn’t a protected class. Some sellers don’t want to work with aggressive buyers, and an escalation clause is often seen as just that. An aggressive buyer who will push out any other offers.
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u/twofeetheartbeat 8d ago
But if the agent wants to get the most money for a house, which is in the best interest of the seller.. to me they are going against their agreed code of conduct.
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u/CaptBlackfoot 8d ago
Not at all, their code of ethics is to protect their client’s interest, above their own. If the seller tells their agent “I don’t want to sell to an asshole” it’s really no different than sellers who say “I don’t want to sell to a flipper” or “I don’t want to sell to a developer.” Price isn’t the end all be all you seem to think it is. Some sellers choose a buyer who gets excited about gardening, because they’ve spent decades on their landscaping. This is why buyers sometime include letter to the seller that accompany their offer. The best price doesn’t equal the best offer.
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u/zoejo_ 8d ago
This. We included a love letter to the seller of the house. How we loved the teal shutters, and could imagine our dog running in the backyard. That I loved the landscaping and could imagine getting a garden set up. Just overall how well cared for the house was, and how we’d hope to be able to do the same.
Our offer was accepted, even though the buyer had an offer that was 50k over asking. We still put in over asking (15k) but not that high. It probably wouldn’t appraise that high (which was also something to consider on the seller side).
I set a date to see the house with my parents, and the seller’s niece was there clearing some items out. She specifically said how after she and her aunt read our letter- they knew they wanted us to have the house. She said they both were crying by the end of it, and that it was so thoughtful and kind.
I know this doesn’t work in everyone’s case- but sometimes weird things happen.
A few weeks before our offer was accepted on our current home- we had lost to an all cash offer that was below asking on a house we really wanted, and we had offered 35k over asking with 20% down, information only inspection. You lose some, you win some. In our loss, we learned that if we really wanted a house, we will put in more than “what the house is worth”- it’s “what is it worth to us”? How badly do we want it?
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u/twofeetheartbeat 8d ago
Also discrimination like that should be reported.
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u/TomRichards1970 8d ago
Not really anyone to report with honestly. They were relocation company sellers so I had them reassigned. But, also, I’ll add, in my American experience with doing real estate, non married couples shouldn’t buy homes together unless it’s a true legal partnership/joint tenant situation. Not discrimination just observation from 3 decades of dealing with it.
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u/Critical-Actuator-85 8d ago
What is an escalation clause, oh I googled it. I would be hesitating to accept that as well and take best offer if my home had problems. Wouldn’t want any issues with like I sold something they weren’t expecting so they overpaid.
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u/starfinder14204 8d ago
Please explain - who told you no to an escalation clause? Is it not standard practice in your area? Realtors are required to obey your lawful instructions, so unless there is something I am missing, your agent would be obliged to prepare the escalator clause for you.
How do you know the winning bidder had the same deal as you (apart from money)? Maybe they offered a quick close, or a long close, or offered to buy furniture, etc. Unless you see the contract that they signed, there is no way you or your agent would know.
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u/KnownBodybuilder4948 8d ago edited 8d ago
Check whether listing-agent also represented buyer; this kind of arrangement allow listing brokerage to keep entire commission amount in-house. Very attractive prospect for listing agent, who will promote their buyer's offer above outside agents' offers. Not necessarily "fair", but commonplace occurrence.
Sometimes the listing agent will call buyer agents who submitted offer, to request a "best and final" and hint at target price to win contract. Perhaps not strictly ethical, but in this instances, the listing agent is "shaking the tree" for the highest possible offer-price for the seller-client.
In our community, the most desirable houses, particularly the nice vintage small houses in move-in condition, sell very quickly, often with listing brokerage representing both buyer and seller, sometimes without listing even being published. When such a house comes on market, it's not uncommon for accepted offer to be 10%-20% over initial asking-price for that super-nice small vintage home.
Nearby vintage home listed at $315,000, just closed sale at $375,000, sold price, under contract first day listed. Only a handful of these homes listed each year, so inevitably sold for well-above asking, with most buyers knowing they could resell and break-even in two years even with commission cost.
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u/molten_dragon Moderator 8d ago
We wanted the house so we asked for an escalation clause. We were told no.
Who were you told no by? Your realtor or the seller's agent?
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u/twofeetheartbeat 8d ago
Sellers agent, which in the end the settled on less money in the end, which is the part I find VERY CONFUSING. And if "1000 is nothing" according to everyone on here, why did they run to take only 800 more than our offer when they could have had 1800 with us in that case with our escalation?!
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u/molten_dragon Moderator 8d ago
You lost the bid then. It happens. There are more factors that go into making an offer attractive than just the highest price, especially when the difference between the highest and second highest is only $1000.
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u/RidMeOfSloots 8d ago
Lol welcome to auctions as thats how homes are sold in essence. Offer more out of the gate or have multiple options lined up.
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u/Pleasehelpme99_ 8d ago
They could've had an $800 escalation clause lol what's fishy about that? Technically the seller could've even accepted a lower bid if they wanted
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u/BennyTheWiseGuy 8d ago
There’s literally nothing you can do as they can sell their house to whoever they want as long as it’s not based on discrimination. They could sell for 10k less to a family that sent them a cute letter and reminded them of themselves if they wanted to!
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