We received the five offers and completed the highest-and-best round with all.
On the way over to the sellers’ house to discuss the results with them in person, Offer #6 arrives by email – and it’s all-cash with an escalation clause, which makes it a real contender. We have a horse race now!
Most agents would jump on the offer with the escalation clause, and call it a day.
But I had already discussed with agent of Offer #1 that escalation clauses aren’t fair to the losers – because every buyer at this price point would gladly pay an extra $5,000 to $10,000 extra to win.
With the sellers’ permission, I tempted #1 to raise their offer again – for the third time – after telling them about the cash offer. After a brief deliberation, they declined.
The cash offer was completing a 1031 exchange, and their relinquished property had already closed escrow – which means that they were in their 45-day identification period. Buyers in that position are feeling the pressure, and they have to buy something. If they don’t identify up to three properties within the 45 days that they might purchase over the next four months (they have six months from their escrow close date), then they will be forced pay capital-gains tax on that previous rental property.
Time is of the essence!
It is crucial for me to ‘read the room’. I’ve exhausted the other buyers #1-5, and the sellers are ready to sell their house. How much farther can I push it with the cash offer?
Rather than go back and forth with my auction format, we decided to just counter $50,000 higher, at $2,150,000, to the cash offer, instead of using the escalation clause. I called it in to their agent and told him that if that was acceptable, we’d send him a signed counter right away.
But then 90 minutes went by with no response.
We have an acceptable offer on the table with owner-occupants (those are more likely to close) and a good agent. The sellers had baked cookies and swapped stories with us for over an hour as we analyzed the different angles, and it was time to make the deal. During that time, the sellers got more comfortable with foregoing the extra $50,000 and opt for the sale that’s more likely to close.
I told the agent of the cash-offer that we were taking the other deal.
It happens regularly that sales are won and lost in hours, if not minutes. No lollygagging!
Get Good Help!
Me telling the story on video:
