Using the Escalation Clause

1. Using the Escalation Clause

2. **Delete this Slide After Reading** • To customize this workshop to your office, replace the image of the Escalation Clause form found on slides 9 as well as 31-33 with the form that is pertinent for your state. • Materials Needed: • Copies of the Escalation Clause form (one for every participant) to use as part of the activity on slides 27-29. • Copies of the observer’s score sheet from slide 28 (one for every participant). Printable score sheet can also be found in Escalation Clause folder. • Computer with Internet Access. • Speakers to play the video.

3. Changing Attitudes About the Market What is the Escalation Clause? The eBay Example An Example of the Escalation Clause at Work Using the Escalation Clause Introducing it to Your Sellers Practice Next Steps Today’s Agenda

4. What are buyers thinking about today’s market?

5. Attitudes are Changing Buyer’s attitudes then: “I think I’m going to wait for the price to come down.” Buyer’s attitudes now: “I love that house! I hope we get it before it gets sold!”

6. Attitudes are Changing Buyer’s attitudes then: “If we don’t get this one, we’ll find plenty of other houses we like.” Buyer’s attitudes now: “This might be our last chance to get our dream house.”

7. Attitudes are Changing Buyer’s attitudes then: “I’m not willing to pay anywhere near what they’re asking.” Buyer’s attitudes now: “I’d probably pay about 5% more than the asking price if it meant I could get that house.”

8. Attitudes are Changing “I’d probably pay about 5% more than the asking price if it meant I could get that house.” If you have a buyer with this attitude, you should be using…

9. The Escalation Clause

10. What is an Escalation Clause? “An Escalation Clause is simple language we include in your offer that allows you to make predetermined bid increments over all of the other bids up to your maximum purchase price.”

11. When should I use the Escalation Clause? In the early part of your Buyer Consultation. Using the Escalation Clause

12. What is the ultimate goal of the Escalation Clause? The ultimate goal of the Escalation Clause is to give your buyers the best opportunity to get the house they want while limiting the risk that they lose the house in a bidding war. It can help them save money by not overpaying. Using the Escalation Clause

13. eBay Example • Who has used eBay before? • The Escalation Clause is very similar: • You have the option to enter bid increments. • These increments allow you to increase your position so you put yourself in better position to be the highest bidder. • You can set a maximum bid you don’t want to exceed.

14. See a product you like and enter the bid

15. Manage your Bidding and Buying

16. It’s Just Like Using eBay

17. It’s Just Like Using eBay

18. Let’s Meet the Carters: How the Escalation Clause is Applied • Your client, the Carters, are interested in a house that is listed for $600,000. • The Carters told you that is the exact home they’ve been looking for. • - You understand there is a bid in on the house but you want to see that the Carters get the house they want at a fair price.

19. Use the Escalation Clause: How the Escalation Clause is Applied • Explain to them that there may be multiple bids on the home, so find out the highest price they are willing to pay. • - Identify what increments they are willing to automatically increase their bid to remain “in the running” for the house.

20. How the Escalation Clause is Applied • - The Carters said they are willing to pay up to $650,000 for that house. • - They have agreed to automatically increase their bid by $10,000 until they reach their $650,000 maximum to remain in contention for the house.

21. How the Escalation Clause is Applied Most they would pay for house: $650,000 Carter’s automatic increased offer: $630,000 Buyer’s new offer: $620,000 Carter’s automatic increased offer: $610,000 Initial offer from another buyer: $600,000 List Price: $600,000 The Carter’s offer of $630,000 was accepted!

22. How the Escalation Clause is Applied • - The Carters were willing to go up to $650,000 if they had to, but they didn’t need to go that high. • - However, without an Escalation Clause in place to put in their automatic bid, they may have been out-bid on the house they love. • - This is an example of how the Escalation Clause helps people get the house they want without having to pay their highest agreed upon price.

23. Blah, blah, blah List common objections and how to overcome push back from listing agent Dialogue to present the Escalation clause to Seller’s Agents

24. Add some slides from presenting offers in person workshop

25. The Escalation Clause is a tool for buyers, but you should promote this tool when you work with sellers. Say: Introduce it to Sellers

26. “I’d like to show you a tool Weichert uses called the Escalation Clause. When a Weichert agent is working with a buyer, this Escalation Clause is used with buyers so they can agree to automatically improve their bid on your home up to a certain point (within increments) to get them this home because they really want it… Introduce it to Sellers

27. When you have multiple offer bids, you have the opportunity to get the most money for your house. By Weichert having this form available to buyers, you are giving your home an opportunity to get the most money possible if the home receives multiple offers… Introduce it to Sellers

28. This clause makes it easier to get a deal done because it's automatically providing a counter offer up to a certain amount, which reduces the chance that: - A deal may fall apart - A buyer may lose interest - And it will save time so you can sell the house faster.” Introduce it to Sellers

29. Now you will have a chance to practice using the Escalation Clause. In groups of three, one person will play the role of the Sales Associate and one person will play the role of the buyer while the Observer evaluates the Sales Associate. Each person in the group will play each role. You will have 5 minutes to present the Escalation Clause and then we will switch roles. It’s Your Turn to Practice

30. Escalation Clause Observer’s Score Sheet Total Points: On a scale of 1 to 5 1 5  Poor ---------------------------------------- Best  *If Weichert Lead Network call, give automatic point for full contact information.

31. Score Interpretation 18-20 points: Excellent use of the Escalation Clause. 15-17 points: Very good understanding of the Escalation Clause but could be improved. Below 12-14 points: Will need to improve understanding of the Escalation Clause in order to be effective. 11 points and below: Need to develop a better understanding of the Escalation Clause before using it in a presentation.

32. Where do I find it? CT (T417) Addendum to Offer to Purchase (Multiple Offer Escalation Clause) DC (1319) Escalation Clause MD (PPEA) Purchase Price Escalation Addendum NJ (T293) Addendum to Contract of Sale (Multiple Offer Escalation Clause)

33. Where do I find it? NY (T415) Addendum to Binder/Offer (Multiple Offer Escalation Clause) PA/DE (T416) Addendum to Contract of Sale (Multiple Offer Escalation Clause) VA (K1306) Escalation Addendum

34. Introduce the Escalation Clause to all of your buyers. • Should you not have a current buyer, select a property in your office inventory that you believe is a hot commodity and role-play the scenario with a fellow Sales Associate taking this workshop and report back. • REMEMBER: Practice Makes Perfect! Two-Week Action Plan

35. Use AnEscalation Clause onEVERY Contract of Sale* *in states where we can use them.