If you’re working with an expired listings heavy clientele in Manhattan and or Brooklyn, then the bump clause could turn out to be your friend. If the expired listing is wary of decreasing the price of the home, for instance, since it didn’t sell at the higher price beforehand, the bump clause can help them overcome their hesitation.
Bump clauses leave the power in the hands of the seller (in your case an expired listing who probably wants to feel as if a little of the power is still with them). They can enter into a contract with a potential buyer but maintain the out that should they receive a better offer, they can ‘bump’ the original buyer to go for this new offer without repercussion. It’s harder on that first buyer, of course, but let the wary expired listings perhaps open up to the idea of trying to sell again if they retain this control.
Used often in cases where the potential buyer is also trying to sell their home and waiting on that to go through. Thus the expired listing seller can enter a somewhat unstable contract but have the ground to fall back on if they find a better offer.
If the expired listing sellers get a new offer, they must notify the original buyer. Typically then the buyer has a couple days to tell the seller they’ve sold their house, or that they’ve decided to waive the contingency. If this doesn’t happen, the original contract terminates. The original buyer gets back the money they put down, and the seller is free to enter into contract with the new buyer.
While the seller is waiting to hear back from the original buyer, they can continue to market the home and try to see if a better offer comes through. However, if the original buyer sells their existing home and notifies the expired listing seller, the seller can no longer market their home.
What this bump clause does essentially is to reassure the seller and make them feel more confortable moving forward with a somewhat risky buyer that there’s a bit of an out should they need it. This is huge for expired listings who may be coming from the perspective that they don’t want to lower the price of the home or they don’t want to enter into a contract with a buyer who is also trying to sell.
This bump clause also gives the seller a bit of leverage while continuing to market to other potential buyers. Since they’re already in a contract, the seller can stress that they’ll only use the bump clause should a better offer (and stronger in all areas) come through.
If you’re a real estate agent working to reach out to expired listings in Manhattan and Brooklyn, this might be something you could use from time to time in situations where the sellers are very wary!
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