In The Wall Street Journal, Professor David Reiss Explains Benefits of ‘Bump’ Clauses in Real Estate Deals

07/09/2018

Professor David Reiss, an expert in Real Estate Finance and Consumer Finance Law and founding director of the Law School’s Community Development Clinic, was quoted in a July 6 story in The Wall Street Journal about “bump” clauses, which allow a seller to enter into a contract with a buyer while continuing to market the property and then “bump” the original buyer if a better deal comes along.

Reiss explained that a bump clause tends to be a more popular tactic in “transitional” markets, where home sales are cooling but sellers have yet to adjust their expectations. “[It] can be a savvy technique to help the sellers feel they could still get a better offer,” he said.

While acknowledging the temptation to automatically bump the first buyer if a second offer is received, Reiss advised sellers: “Don’t get greedy.” He encouraged sellers to do their homework and look beyond price and contingencies. “[The first offer] is a bird in the hand,” he said. “If [the sellers] walk away and get stuck negotiating with a second offer that’s weak, they could end up with nothing.”

Professor Reiss’s teaching and writing focuses on real estate finance and community development. He serves as Academic Programs Director of the Center for Urban Business Entrepreneurship (CUBE), and he is a Fellow of the American College of Real Estate Lawyers . He is a frequently quoted expert on legal developments in the real estate finance sector and has written a regular column for The Hill. Reiss’s popular blog, REFinBlog, offers a roundup of developments in the law and practices related to the real estate finance industry.