The Escalation Clause in Washington State

A post by Cynthia Larsen, Can you find out how much the other buyer has offered? has inspired this post. In the comments I discovered, to my surprise, that many brokers had not dealt with escalation clauses. There were opinions about disclosure, and ethics and the rights of buyers and/or sellers, and some opinions about what agents might or might not do, give the circumstance of multiple offers.

First, the normal disclaimer, I am not an attorney, never sat for the bar, and haven’t personnally consulted with an attorney in regards to this issue or this blog post. That said, here in the Northwest we’ve gone through several years and with no little trial and error, have developed a document that virtually all agents in Washington use when preparing an offer where other offers might exist.

The Northwest Multiple Listing Service (NWMLS) is the mls for most of Washington State. NWMLS has over 2,000 member offices and over 21,000 registered agents.

In the 1990’s we agents saw a need for some direction when preparing an offer you knew would have competition. But it wasn’t  until 2003 or so that companies started coming out with their own addendums addressing the issue. Windermere, John L Scott and Coldwell-Banker are the big three around here and all of them had versions. Our small office had an attorney draft 4 possible clauses depending on the wishes and situation of the buyer. The biggest problem was that agents’ “made up” wording was full of stories and rarely were complete enough to ever be enforceable. Our four variations addressed whether the competing offer’s “price” meant the stated price or the escalated price, and also addressed the issue of a contingent offer verses the non-contingent offer. There were conflicting thoughts on what the buyer’s limit or “up to” clause meant.

To say the least, with all of the individual company forms floating around, it got confusing and then some. Finally, the NWMLS came up with a from they provided “as a courtesy to members” in hopes of helping agents have something in common. And like all forms provided by the NWMLS there are disclaimers and instructions. I provide the complete package (as revised in July, 2010) here for your review: Price Escalation Addendum to Purchase and Sale Agreement.

You certainly may not agree with the concepts involved in the process we use here. It took us some time to accept the sharing of details of another offer. It usually takes a buyer several episodes of coming in second or third or even fifth when vying for a great property. It takes grit to view a property for a few minutes, pay an inspector to get over there now, and waive financing, along with being willing to go $X,000 over a competing offer. But for a few years it was routine and we see it more than a little bit here in 2011.

Keep in mind that the buyer’s offer expresses some rules they wish the seller to agree to, but like anything else, the seller is entitled to respond in any manner they please. We’ve seen sellers and their agent reply, “Since you think it is worth $XXX,000 by your stated limit, we will simply counter you at that price. The escalation addendum is removed.”

And many areas are seeing multiple offers on bank owned properties. Has anyone seen a bank counter offer lately without multiple changes and conditions of their own?

I’m curious to learn how other areas of the country deal with multiple offers.

Book Review: Beyond Reason

Beyond Reason, Using Emotions as you Negotiate,  by Roger Fisher and Daniel Shapiro is an important book for every Realtor® to have in their library, or at least, on their Kindle. In an earlier post I wrote about types and styles of negotiating in How Do You Negotiate? This book hopes to decipher what is going on with the human element, or emotions, something that can change several times in any transaction.

You can’t ignore the emotional aspect of a negotiation. Emotions affect our bodies, or thinking, and our behavior. Getting emotional usually means that one is displaying their feelings in an unusual or excessive manner. This is not to say it is wrong to do so, but when party to a negotiation does so, the principal objective of the discussion is in danger of being lost. The single most effective way to interact with someone acting emotionally, is to confront the concern, not the emotion.

In order to do so, the wise negotiator will study and learn to recognize the five core concerns which stimulate many emotions. The core concerns are:
1. Appreciation
2. Affiliation
3. Autonomy
4. Status
5. Role

In assessing our own behaviour and that of others during a negotiation process we should be careful to address the core concerns in a manner that is fair, honest, and consistent. By this, the authors mean that dealings should be consistent with local customs and community expectations; they should be honest, i.e., not deceptive; and that they are appropriate according to the norms of others in the same situation.

Appreciation is met when the actions, thoughts and feelings of each party are recognized as having merit. Affiliation is attained when all parties are acknowledged as colleagues working toward a similar goal. Autonomy allows that each party in the negotiation is respected as having the freedom and ability to make decisions. Status is the recognition they all parties deserve to be in the discussion. Roles played by each person hold importance and should be seen as fulfilling.

It should also be remembered that emotions can be both positive as well as negative. Considering that in setting the stage for a negotiation is as important as knowing how to divert and convert negative emotions.

Beyond Reason addresses each of the core concerns with examples and discussion and is a book well worth a read, and even a re-read. Negative emotions can throw a transaction completely off track and the capable negotiator will be able to correct the tragectory by taking the initiative to recognize the core concerns and resolving issues there, rather than by responding emotionally himself.  

My copy, like almost all of the books I review is available for free. If you'd like it, just send me an email and one day soon it will arrive at your door in the US mail.(Book sent to Leslie)

Click on the book to join the
ActiveRain Book Club Group

Okay. I admit. I saw the Active Rain contest: Surviving your Serengeti: An ActiveRain Challenge and couldn’t resist the 2,500 points, just for entering. Then the quiz link caught my eye. I’ve seen similar things on Facebook and have successfully ignored them, but here was a chance to share with my ActiveRain friends the beast I truly am. A lion? The king of the jungle would surely be appropriate. Perhaps a rhino,  a really dominating creature. I went straight to the test.

A mongoose? There’s got to be some mistake. Wikipedia gives me this: a small carnivore and  the plural is mongooses. I’m a little less than thrilled. I’m going to blog about being a furry little rodent. You betcha!

I back arrowed to Google and tried the video link:

The Real Estate Team Concept: Is It for You?

I welcome comments with pros or cons for either model.

Some events in life require team participation and others thrive with individual effort. Throughout our schooling the concepts of team cooperation and team spirit were drummed into us even down to the level of the chess team. I will admit that the chess team was a place where one could learn to play that game well, and the better the team dynamics, generally the better a school would fare in a chess meet. But when a game was on the line, the ability and the effort of the individual determined the end result.

Due to the recent promotion of the team concept in real estate in the past few years, I’ve had to ask myself, “Does leading a team or being on a team add anything to my current position of real estate broker*?” And the second and more important question is, “Does working with a team bring any advantage to a seller or a buyer in the real estate market place over working with an individual broker?

Real Estate teams are composed in many ways, but the basic components include the team leader, brokers who work with sellers, brokers who work with buyers, and brokers or non-licensed personnel who work in the office with specific details such has IT, social presence, transaction coordination and other functions necessary to assist those working with clients.

As a broker, how does being on a team help me? The new broker will have an educational system in place and have the opportunity to work in a mentor-like environment. As problems are encountered, the broker will be exposed to solutions and increase their overall abilities. Generally, a team will be able to provide leads to each team member in greater volume than a the lone broker can usually generate. The team presence is often viewed as having more business than other brokers, and therefore they may be considered the brokerage of choice by more people.

A broker with years of experience, perhaps would want to start a team. The more successful the team, the more successful each broker will be. And actually, this is the model that real estate has thrived under for years. A designated broker (now known in Washington as the designated broker for a Firm) presides, and if his skills extend beyond being a representative for his clients, into the ability to manage other brokers, success will be his. If it turns out that this individual is not “manager material”, he eventually will leave the business or end up working as an individual again.

What does a team bring to clients? Ideally, a well run team provides the buyer or seller client with a ready contact anytime during business hours. The team has specialist you stay current with on all aspects of their specialty. Some buyers and sellers feel that they get more service when there are more team members, and because of that, their needs may be more readily met.

As a broker, how is working alone an advantage? Brokers who work as individuals know that they are totally responsible for satisfying their clients. This may result in being able to work with fewer clients but the broker remains in control of the transaction from initial contact, previewing, showing, writing the offer, presenting the offer and following up right through to closing. There is often personnel in the office that do some paperwork control for the Firm which centrally handle things that the individual broker can rely on. Often times forms are provided this way. Conference rooms are made available and so forth.

What does the individual style of broker relationship bring to the client? Some buyers and sellers choose an agent based on personality and trust. If not informed of the team concept early in the relationship, the client may not like being shuttled from one broker to another during the process. Often times personalities don’t mesh.

When looking for a real estate broker to help you with a purchase, a sale, or both, be sure to ask if the broker works on a team or if that broker works alone, and make sure that you are comfortable with the process you will be involved in. Closings at minimum take about a month and often take as long as six months. You want to be comfortable with the person or people you will often be in contact with.

*All real estate licensees in Washington State are now referred to as brokers. A broker is only an agent if he is in a contract (real or implied) with a buyer or seller to represent them in a transaction.

Image1: renjith krishnan / FreeDigitalPhotos.net

Image2: jscreationzs / FreeDigitalPhotos.net

Previously published on Puget Sound Professional Real Estate Group

Do you like organic produce all year around? Here in Ravenna and Ravenna Park Full Circle Farms delivers clients a delightful box of fresh organic produce every week or every two weeks, your choice. Full Circle is one of the few subscription farms that gives options.

You can pick up your produce at the Ravenna Community Center like a lot of your neighbors do. And in many other communities around the Puget Sound.

And it gets better than that. Gone for vacation?...just let them know. Want to substitute?...Their user friendly website makes it easy to eliminate those brussel sprouts and substitute avocado instead. We live about 4 blocks from the Ravenna Community Center and every Thursday enjoy picking up the pre-selected delivered items to grace our table for the coming week.

Full circle delivers local produce whenever possible, but we don't mind getting delicious grapefruit, tangy tangelos and lovely avocados from other regions during the winter. Eat organic and make it easy. For larger families, they have a bigger box.

If you'd like to live in Ravenna or Ravenna Park just let me know. I've been here for 25 years.

There was a time when Vashon Glacial Ice Sheet retreated to the north and Green Lake overflow found it's way to Lake Washington by way of Ravenna Creek, a process that has left this part of north Seattle with a ravine bearing the creek's name. A Realtor named Beck bought the land in 1887 and named it after the Italian city. In 1911 the City of Seattle acquired the land as a park which now amounts to 49.9 acres including the creek bed ravine, a softball field at the southeast end, a picnic area, and a wading pool/playground area on the high ground to the south of the ravine. Walking and running on trails among the old trees is a favorite activity of students and long time residents alike.

Cowen Park is now attached to the west end of the ravine and includes wide open play areas, and a play ground. In the northwest corner is the place where Ravenna Creek was day-lighted a few years ago through the efforts of many neighbors. Having the stream running again has increased the wildlife in the Ravine and the water flow as erased the problem of stagnant pools in the low areas.

The housing stock on the north and south sides of the park is mostly from 1900 to 1940. Many craftsman bungalows, Tudors and colonials can be found here. The south side is closely connected with the area just north of the University of Washington. This desirable are is sought after for it's proximity to the University and easy access to downtown Seattle. Many homes to the south have been converted to student rentals but homes between Ravenna Blvd and the park have retained their value as single family residences.

On the north side of the park is an area of about 300 homes bounded by 15th Ave NE on the west and 25th Ave NE on the east. Since there are no bridges, other than the 20th Avenue foot and bike bridge, across the ravine there is very little traffic here. Ravenna Park is one of the most desirable neighborhoods in the city.

There are only 4 homes for sale in the Ravenna Park neighborhood at this time. If you would like more information on them, please let me know.

Richmond Beach has a lot to offer the buyer looking for a convenient to Seattle location but out of the bustle of city noise. There is Richmond Beach Saltwater Park for one thing. Forty acres of fun on Puget Sound within easy walking distance of 19207 14th Ln NW. Along Richmond Beach Drive you'll find numerous small shops as well as your larger grocery, hardware and drug stores.

19207 14th Lane NW is a large townhouse style unit with 1870 square feet of finished space. There is a two car 380 square foot garage that holds cars, the water heater and much, much more.

There are 9 units in the Richmond Cove Condos divided into two buildings. Ground floors consist of the two car garage, a coat closet and a large bedroom with en suite bath radiating off of the large entryway. The bedroom and hall are serviced with electric wall heaters.

The main levels are designed for living life to the fullest. The large living room has a corner fireplace, is open to the beautiful kitchen with gas cook-top island, granite counter tops, and an array of cabinetry sufficient to accommodate the storage needs of the most completely furnished chef. The kitchen flows into the dining room and the dining room into the den. Your guests will have a marvelous time enjoying each other, and you while they enjoy your new digs. The laundry room is conveniently located at the end of the hall.

Let's venture upstairs. Two bedrooms await, each with it's own bath. The master is especially spacious. The main level and the upstairs are heated with gas fired radiant heat in the floors. Truely comfortable on these chilly winter nights.

At the end of the lane you'll find a large park-like open area used by the residents for bar-b-cues and socializing, for gardening in pea patch like plots, or for just enjoying the many birds that frequent the natural area. 

Yes, I know the beloved Seahawks are playing this Sunday and the game starts at 11:00. It will probably run until after 2:00, but I will be at the open house slightly before 1:00 PM. Two things I know for sure.

1. Everyone is not a Seahawks fan.
2. Someone will see this unit and know that the seller has priced it to sell.

  The details:

• 3 bedrooms
  
• 3.5 baths
  
• 2 car garage
  
• 1870 sq ft finished
  
• Year built 2005
  
• HOD $250/ month
  
• Price $319,000
• Listing #171195

The children have moved to the east coast. The time has come to join them. (At least the owner is not a fan of the Bears.)

The virtual tour tells the story. I'll see you there.

FIRST OPEN HOUSE SUNDAY 1:00-4:00 PM 1/16/2011

I got an email from a buyer a while back. I had met him at an open house I was holding. It wasn't my listing and he acted like he knew more about the listing than I did. Maybe so. There is a lot of information out there. I asked if he wanted to look at some comparable properties. He said maybe.

I got an email from him a few days later. "How would you negotiate for me?" he asked. I could tell from talking to him at the open that he had read about the bubble and then the shadow inventory, and he was sure prices were going down more. He told me about how much less than asking other homes were selling for. So I pretty much guess that more than anything, he wanted the deal of the century.

I wrote back: There are two ways to negotiate. you can negotiate from a position or you can negotiate from merit. If you want to negotiate from a position you are essentially saying that you won't go over $xxx,xxx for that house. Your reasoning might be comps or condition. But you take a stand and see if the seller rolls over. That would tell me that you don't really care about the house, you only care about getting a deal. On the other hand, if the house has merit, if it meets your needs, if you can afford it, if there isn't any other property that meets your needs as well, for the same price, then it's worth trying to find a way to make the purchase work so that the seller's needs are met as well.

He wrote back: No, I want to know how you will make the seller sell at a lower price.

I knew the seller had received an offer at a lower price and it didn't work out. It might now and I would help the buyer with it, but it had to make sense.

I wrote back: It sounds to me like you are trying to defeat the seller. That is one style of negotiating. It will work if the seller and his agent are both accommodaters. They may just roll over, and give you the house for what ever you want. But they didn't to the last person. If both the seller and you were compromisers, we might reach agreement, but you would have to give up some of your desired features. I really don't know what they are other than a lower price than the home is currently listed for. On the other hand, with an offer too low, as you suggested you might make, the seller might just withdraw. We would go no where with this if the other party will no longer speak to us. I suggest we try to collaborate with the listing agent and the seller. We'll need to negotiate more after the inspection and possibly after the appraisal.  Some how we can tweak their needs with ours, once I know what yours are. I need to know why you want this house so I can build a case for you. Or maybe, there is a better house somewhere else that will work as well.

Apparently this buyer, a buyer who wouldn't sign a buyer's agency agreement, a buyer who didn't seem to have needs other than to get a house for way less than the listing price, a buyer who is perhaps, not a buyer at all, didn't like my idea that we try to work with a plan that would accomplish the goal of closing a sale. He seemed to want a negotiator who would help him make it fail. I didn't hear from him again, nor did I pursue him as a client. I don't think he really wanted to be a homeowner. I think he only wanted a deal.

Today it was raining in Seattle and most likely that meant snow in the mountains. With two buddies I headed for the hills and we went on a snowshoe shoe adventure. Part hiking in the snow and part geocaching. From parking the hike was two hours up hill. A search of the area and we came up with the prize. Then back to the car. If you think Seattle is nothing bu rain all winter, have another think. Plenty of skiing, snowshoeing, snowmobiling and snowboarding within 90 minutes of the city. Get out and have fun.

Our neighborhood, year and a half long traffic circle project to remove ivy and replant with native plants has reached the end of stage three. Our first mission was to remove the well entrenched ivy that had been planted 30-40 years ago. No mean feat if you've ever tackled a significant swath of that invasive. Unfortunately I don't have any pictures of what the circle looked like with ivy everywhere.

The next step was to dig out some tree planting holes and break up the concrete under them so the roots of bigger trees we would be plants would have some room to grow. Then we bark-mulched the whole area. Neighbors went down periodically to do a little weeding. We wanted to wait through the summer to plant so that the annual rains would help out in that department.

Behind the scenes were those who knew how to get the grant from the city for the work done and those who researched the native plants and did the planting design.

Over the past few days, George pruned the Hawthorns as the city gardener advised and today Woody and I cleaned up the results of that pruning. It's looking good. I can't wait to see it flourishing in summer.

Thanks to everyone who has helped out. I look forward to seeing you often in the park for weeding and for fun.