The Escalation Clause Rendered Useless

“In other words, an entire new world is pointed to, by this….It is authentically a new thing on the face of the earth.  Pieces such as this….” he picked up the pin once more briefly. Closing the lid he returned the box…”can be mass-produced….” The Man In The High Castle, Philip K Dick

We marvel at a new idea, something so special, perfectly suited for nearly no one, yet remarkably powerful for a bold and brave few. Being useless to the masses, its unique appeal makes the authentically new thing sensationally valuable. And then, because everyone wants one, we strip away its authenticity, its most powerful attributes, and render the idea useless. We  did this in the mid ’90’s with a brilliant marketing strategy known as Range Pricing and we just did it again with the Price Escalation Clause.

Savvy, capable real estate buyers, seeking a negotiating strategy to acquire property at a price more than they planned to spend, but at a price less than they are willing to lose the house over, hit upon the Price Escalation Clause (EC) It’s a simple and powerful clause shifting risk from the seller to the most qualified or boldest of a bevy of buyers.

The authentic EC looks like this: “This Offer price is changed to $1,000.00 over the purchase price, of any bona fide Offer Seller has in possession at the time of binding acceptance of this Offer. Said purchase price of this Offer shall not increase above $______________, regardless of the purchase price of said other bona fide Offer. Seller to notify buyer of the purchase price by written notice to buyer with acceptance of this Offer. Buyer agrees to pay any difference between purchase price and appraised value in cash at closing as necessary to satisfy mortgage financing requirements.”

The well versed seller sees safety in this remarkable offer of commitment from the bold and confident buyer. This buyer is a person the  seller wants to be in business with. This buyer knows what she wants and is willing to assume some risk to acquire the property. She fears nothing. She uses a tool that satisfies her desire to prevail.

Unfortunately we’ve lost sight of the purpose. No longer is the EC written as a tool to acquire a property, we’ve turned to mass production and churned out a contingency for the faint of heart who think they can eliminate competition to clear the field for their safety and security. The remarkable piece of authentic art the EC was, is now a plastic charm. In the hands of the unknowing user, what’s being represented as an EC is a useless garble of hidden security terms complete with a poison pill.

We’ve rendered the EC useless, and that’s not really a surprise. However, the smart Realtor and courageous buyer, there is an alternative. I hope you find it.