Both Listing Agents and Selling Agents should avoid using Escalation Clauses whenever possible. There is the potential for too many errors and, you may face a lawsuit if calculated incorrectly. I recently attended a continuing education class with 200 experienced realtors from around the State of Washington where the instructor asked us to determine which of two Offers to Purchase was the winning Offer and then determine the escalated price. One-third of the class selected Offer “A”, one-third of the class selected Offer “B” and, one-third of the class had no idea which was the winning Offer. Sounds scary, wouldn’t you agree? Then, the instructor requested the calculated purchaser/sale price for both Offer “A” and Offer “B”. She received no less than 6 different purchase/sale prices from each group. The NWMLS does not recommend using an escalation clause because of the risks involved.
If Buyers submit their Offers with an escalation clause;
1.)The Listing Agent should have an experienced agent double-check their calculations.
2.)The Listing Agent should submit the competing Offer to the Agent for the Buyer who submitted the winning Offer. The Buyers’ Agent and the Buyer should calculate and agree to the purchase/sale price.
3.)The calculated price should be entered on the front of the Offer to Purchase and initialed by all parties.
4.)The Escalation Clause should be removed from the front page of the Offer to Purchase and removed from the documents. All parties must initial where this change was made.
If you have any questions, please seek the council of you designated broker/branch manager and/or, a competent real estate attorney.