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Legal Tip: Dueling Escalation Addenda

The RIAR Escalation Addendum is a tool that lets a buyer increase his/her offer by a set amount to try to outbid other buyers in a multiple offer situation.  But how does it work if multiple buyers competing for the same property decide to use an Escalation Addendum?  Grab some coffee and read the following example.

Buyer #1 offers $300,000 and will pay $1,000 more than any other offer up to a cap of $325,00.

Buyer #2 offers $305,000 and will pay $2,000 more than any other offer with a cap of $320,000.

If the seller accepts Buyer #1’s offer, the amended purchase price would be $306,000 (Buyer #2’s original purchase price of $305,000 + Buyer #1, escalation amount of $1,000.)

If the seller accepts Buyer #2’s offer, the amended purchase price would be $305,000 because Buyer #1’s initial purchase price was lower than Buyer #2’s original purchase price.

The trigger of the escalation is based on net sales price, excluding seller concessions, and not the caps. The competing escalation addenda do not keep the negotiations going back and forth with each other up to the cap.

Questions?  Please contact the RIAR Legal Department at 401-432-6945 or email monica@rirealtors.org.

Rhode Island Association of REALTORS® | 7-30-20

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