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BROKER CORNER

Multiple Offers and Seller Protection Clauses

2/10/2021

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Multiple Offers are a big thing in Atlanta.  Our very low inventory has created highly competitive situations for getting onto contract for houses in just about every price point.
We often see buyers’ escalation clauses that allow an increase in purchase price should another, competitive offer with comparable terms and conditions be presented to the seller.  These escalation clauses, however, can push the purchase price way above the appraised value.  The lender will lend only on the appraised value, so the gap has to be closed.
Several things can happen. 
1) The Purchase Price can be negotiated down to the appraised value.
2) The Buyer or Lender can request a rebuttal to the appraisal and supply evidence of an increased appraisal amount.
3) The Buyer can pay the difference between the appraised amount and the purchase price in cash.
Paying the difference in cash, in this highly competitive market, is often the solution for the Buyer that is willing and has the cash.  Remember, the Buyer still has to make a down payment for the appraised price.  Cash amounts over the appraised price are added to the required funds to close.
Campbell and Brannon has offered the following 2 clauses to include as Special Stipulations to protect the Seller if the appraisal is less than the purchase price:

OPTION 1: If the Property appraises for less than the Purchase Price but more than $_____, Buyer shall be deemed to have waived the appraisal contingency and shall fund the difference between the new loan amount and the Purchase Price.
OPTION 2 (when using escalation clause): If the Property appraises for not less than $______ below the Purchase Price, Buyer shall be deemed to have waived the appraisal contingency and shall fund the difference between the new loan amount and the Purchase Price.
Of course, the Buyer can reject inclusion of the above clauses to avoid the obligation to pay the difference in purchase price and appraisal.  As the so often the case, the buyer with extra cash to sweeten the pot will most often win the multiple offer games!

ESCALATION CLAUSE:
In the event of multiple offers, Buyer agrees to pay $XXXX more (contemplating Purchase Price and Buyer concessions (net)) than any other offer presented to the Seller with comparable terms and conditions so long as the other offer is an arm’s length transaction and is presented to the Seller before the OFFER DEADLINE DATE. In no event shall Buyer pay more than $XXXX. Listing Agent shall notify the Selling Agent of the highest offer, and, upon receipt of such notice, Buyer shall execute an addendum to this offer reflecting the final purchase price and amount of Buyer concessions within XX days. Buyer shall have the right, but not the obligation, to request that the Broker of the Listing Agent verbally confirm with the Broker of the Selling Agent such competing highest offer exists and is upon comparable terms and conditions. Comparable terms and conditions shall mean similar contingency requirements, similar requests for seller concessions, and ability to close in a similar time frame. This does not in any way bind or obligate the Buyer to counter upon receipt of any other offer.



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