If a broker receives an offer to purchase that includes an escalation clause, what should they do?

The correct approach for a broker receiving an offer that includes an escalation clause is to present the offer to the seller as written. This is important because an escalation clause indicates that the buyer is willing to increase their offer up to a specified limit in response to competing bids. By presenting it as written, the seller can fully understand the terms of the offer and make an informed decision based on their own position and strategy.

Failing to present the offer as written could lead to a breach of the broker’s fiduciary duty to the buyer, as they may not have the opportunity to consider the full terms and the potential for escalation in their negotiations. Each component of an offer, including escalation clauses, has implications that could affect a seller's decision, especially in competitive markets.

In addition, engaging in negotiations on the terms of the offer before presenting it may complicate the communication and might lead to misunderstandings or misinterpretations of what the buyer actually intended. Properly presenting the offer ensures transparency and allows the seller to decide how to respond based on their own interests and the specifics of the real estate environment. This procedure upholds industry standards and practices for real estate brokers.