July 23rd, 2021 7:35 PM by Linda Holley
It's a RED HOT real estate market today! Median prices in June are up 23% from last year and nearly 90% of homes are sold the first month; median price of homes across the US just hit $363,000.
Florida Realtors now have an Escalation Addendum to Contract, released July 22, 2021, which is a means for Buyers to be more competitive.
- Highest and Best Offers - Buyer completes initial offer and may decide to increase the purchase price by a certain amount ("Escalation Amount") over the purchase price - up to a Maximum Purchase Price.
- There are legal ramifications for Sellers and Buyers and both Parties should seek the advice of legal counsel prior to signing!
- There is not a requirement to complete this form - it's just a means for the Buyer to be more competitive.
- The language in the new Escalation Addendum is specific to the Florida Realtors Contracts.
- To use the Escalation Addendum, there must be a "bona fide" offer from a competing Buyer (an offer that was not created by the Seller or anyone trying to reach the Buyer's Maximum Purchase Price).
THINK ABOUT IT!
- Buyers:
--Know what you can REALLY afford. Will the adjusted purchase price reflect the true value of the home? Would you be able to get financing if the home does not appraise at the purchase price? Do you have the cash to pay the difference between the appraised value and the adjusted purchase price?
--Indicate how you'll pay for any Escalation Amount and submit proof of funds if paying cash for the Escalation Amount.
-- If the increased Purchase Price exceeds the Maximum Purchase Price, your offer is the Maximum Purchase Price. (That's why you need to seek legal counsel!)
- Sellers:
-- Time is of the essence! Pay attention to the time you have to accept the Buyer's offer. You must respond to Buyer's initial offer before it is withdrawn. You can't accept or work with an offer that has expired or withdrawn if you are in a multiple offer situation. Hopefully your Realtor wears a watch!
-- Submit a copy of the competing offer to the Buyer redacting the other Buyer's ID information at or prior to the time you accept or counter Buyer's offer in writing.
-- Know how Buyer intends to pay for any Escalation Amount in addition to the other terms of the contract. Get the documentation that he/she has the means to pay for your home at the agreed-upon purchase price. The Escalation Clause does not bind Buyer's lender to the terms of the contract (if getting a mortgage). Operate in good faith and present only bona bide competing offers.
BOTH PARTIES! Use care and diligence in this transaction for the reasons stated above. Calls to Florida Realtor Legal Hotline indicate that in this market, Buyers often offer to pay cash when they don't have funds in hand for the Escalation Amount. Sellers are asking for proof of funds to verify that a Buyer is able to contribute cash towards any amount paid in an escalation scenario.
Here to help you with your Sarasota real estate needs!
Linda Holley, Realtor, GRI, SRES, HomeSmart International, LLC 941-914-4914
www.LindaHRealtor.com
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