Lowest Inventory of Properties For Sale

Yesterday’s front page Oregonian article is titled, “Want to buy a home? Good Luck.” Current inventory is just 1.8 months. That means that if no more homes were put on the market, the current active listings would all be sold in 1.8 months. That translates to Portland being a seller’s market. When inventory is under 6 months, sellers have to make fewer concessions and are able to get higher sales prices.

This leads us towards escalation clauses, an offer where a buyer is willing to beat another buyer’s offer of similar terms and conditions by a set amount of money. Seems simple but this is not territory not to be entered into lightly. Make sure that your offer is worded properly and that your agent has fully explained the process.

A partial list of things to consider:

1) What if there is another offer with an escalation clause? Have you capped your offer or is the sky really the limit?

2) You’ll never see the competing offers. Oregon real estate law does not allow for it. The listing agent cannot black out the name on the offer or provide any other proof of the existence of the other offer. There is blind faith that everyone is acting above the board.

3) The offer cannot just be accepted. It has to be countered by the seller in a counter offer to set the actual price since the buyer’s offer just said they’d pay more than another offer. While the offer is open, anything can happen. The buyer can walk away, the seller can accept another offer. The whole thing can potentially fall apart with no accepted offer.

4) The seller is not obligated to sell the property at any price but declining to accept an offer that meets the terms of the listing agreement may obligate them to pay their agent’s commission.

5) If the accepted offer is over the appraised value, the buyer may have to make up the difference with additional cash at closing.

6) Will the buyer have remorse after the sale because they paid more in the heat of the moment than the property might really be worth?

There is a lot more to escalation clauses and they need to be fully understood before entering into one. Just because you write an offer with an escalation clause does not mean you’ll get the property. They’re another intricacy that we don’t commonly see, but they are out there!

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