Escalation clause.... love it, or hate it?

Real Estate Agent with Coldwell Banker Residential

Escalation clause.  For those of you who asking "What the heck is an escalation clause?  It sounds painful."

An escalation clause is a tool used by buyer's agents, typically as part of a multiple offer situation, that says: "We will pay $X,XXX more than your highest offer".

I have found myself on both sides of an escalation clause.  As the listing agent, during multiple offers, we received five offers.  The property was listed for $350,000, and one of the offers said "We will pay you $2,000 more than your highest offer, with a maximum of $375,000.

The sellers were confused.  "Why didn't they just pick a number they're willing to pay, just like the rest of them did?"  "Should I be concerned, if we force them to pay more than they were hoping, that they'll try to get that money back during inspection?"   Surprisingly these particular sellers didn't like the idea of the escalation clause.  They thought it felt like "cheating".  So they chose the highest offer that didn't include an escalation clause. 

Recently as a buyer's agent, I found my buyer in a multiple offer competition.  I suggested an escalation clause as a tool we might use.  My buyer loved the idea.  The property was listed for 450,000... we wrote our offer for $465,000 OR $2,000 higher than your highest offer with a maximum of $575,000!!!  (my buyer was intent on getting this property and he was prepared to pay for it. And we weren't worried about appraisal since this was a cash deal).  We got the property... and it only cost us the $465,000 which turned out to be the highest price, without the necessity of escalating.

When using an escalation clause, of course, we do ask to see the cover page of the "highest offer"... that we'd be adding $2K to beat.  (Trust, but verify).

And, of course, there is a lot more to an offer beyond the purchase price.  Closing date, down payment, earnest money, closing date, inspection... this is merely one tool.

please make sure that the use of an escalation clause is legal in your region.

Posted by

 ALAN MAY, Realtor®   
Specializing in Evanston Real Estate and North Shore Real Estate

Coldwell Banker Residential Real Estate, 1710 Central Street, Evanston, IL 60201
847.425.3779      Cell: 847.924.3313      Email:

Evanston Real Estate & North Shore Real Estate
Licensed in Illinois



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Beth Atalay
Cam Realty and Property Management - Clermont, FL
Cam Realty of Clermont FL

Hi Alan, some agents are fans, some are not but regardless, it's our duty to inform our clients what's available. IMHO, many agents don't understand what an Escalation Clause is and stay away from it. If and when used properly, it can be a great tool, especially in a hot seller's market.

May 15, 2017 10:24 AM #21
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of Manchester NH's Leading Agents

I have more issues with them as a listing agent as many agents are not aware how they work an ddo not put a max. Those that put a max, sellers say raise it to their max. I prefer a highest and best offer scenario to get the best price and terms. 

May 15, 2017 12:34 PM #22
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Area Real Estate

It's a good tool to put into your kit. I use it when necessary & haven't had a seller yet say to me it's cheating.

May 15, 2017 02:21 PM #23
Ann Wilkins
Golden Gate Sotheby's International Realty - Oakland, CA
Oakland, Berkeley, Piedmont CA

I have received several of these offers.  Not crazy about them and haven't seen as many lately.  Buyers can get greedy and say "forget the escalation clause" I will only accept their max price stated by the buyer.

May 15, 2017 08:57 PM #24
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Alan I guess the most important point that NEEDS to be mentioned is a buyer and a buyer's agent better ask the listing agent to find out how the listing agent and the seller feel about the Escalation Clause, if that question does not come up the deal will be torpedoed or DOA.... just sayin, Endre

May 15, 2017 09:34 PM #25
Lloyd Binen
Certified Realty Services - Saratoga, CA
Silicon Valley Realtor since 1976; 408-373-4411

The seller who accepted the non-escalating offer is smart.  

The attorneys in the Legal Department of California Association of Realtors have always recommended against using an escalation clause.  They say it can lead to misunderstandings and problems, occasionally legal problems.  As you mentioned, there's more to an offer than the offered price.  For example, what happens if the highest non-escalating offer has  a contngency on the seller replacing the roof or some other seller concession.  And how can the escalating buyer confirm that the highest non-escalating offer is a bona fide offer and not a fabrication of a unehtical listing agent or seller?

May 15, 2017 09:38 PM #26
Dörte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear Alan,

They are a tool that can work. I use them, when it seems necessary.

May 15, 2017 09:53 PM #27
John Wiley
Right Move Real Estate Group- EXP Realty - Fort Myers, FL
Lee County, FL Real Estate GRI, SRES,GREEN,PSA

In my market I have not seen an escalation clause, so not sure of the value of it.

Interesting concept.

May 16, 2017 04:30 AM #28
Amanda S. Davidson
Amanda Davidson Real Estate Group - Alexandria, VA
Alexandria Virginia Homes For Sale

Alan, we see them pretty frequently here and as you said they can be a great tool. Offers on our last 3 listings had them and the winning contract for each one had an escalation addendum. I think it shows motivation as well but, can see why some agents have a love/hate relationship with them.

May 16, 2017 07:12 AM #29
Keller Williams Realty Partners SW - Cooper City, FL
Selling Broward County Homes with Passion!

I've never used one in my 14 years in the business...however my market is really thin on inventory and I wouldn't be surprised if we start seeing these clauses soon.

May 16, 2017 07:51 AM #30
Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents
Lyon Real Estate - Sacramento, CA
Put 40 years of experience to work for you

I was surprised when one of my team members wanted to use an escalation clause because we don't use it, for all sorts of legal reasons. I asked her where she got that idea, and she said from her Ninja training. But that's a national company and they promote it as though other states have no laws, LOL.

As a listing agent, if I get an escalation clause, what I see is a crazy motivated buyer and a buyer who will do anything to get into contract except name final and best, which doesn't strike me as a likely candidate.

May 16, 2017 08:08 AM #31
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

An agent submitted an offer with an escalation clause. There were multiple offers. The seller countered the buyer with the escalation clause at his cap amount, and the deal was done.

May 16, 2017 10:04 AM #32
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

These clauses were fairly regularly seen in the boom days, Alan May ... interesting to hear that our Chicagoland markets are once again putting them into play ...


May 16, 2017 01:19 PM #33
Brian L. Sirota, Esq.
Bristar Realty (Realtor/Attorney) - Orange, CA
For Solutions: (714) 501-7660

Alan, when such a tool exists, I think agents for both seller and buyer are duty bound to understand its use before they decide to love or hate it.   Clients are entitled to our complete counsel on which to make an informed decision.  

Having said that, I applaud your ability to use the clause discriminately!


May 16, 2017 01:32 PM #34
Brian L. Sirota, Esq.
Bristar Realty (Realtor/Attorney) - Orange, CA
For Solutions: (714) 501-7660

...on a slightly different note, in what way is this unfair?   It may give the buyer an advantage over other buyers, but to cry foul for that reason runs counter to our obligation as a fiduciary......  we're not in the business of helping competing buyers.  

May 16, 2017 01:44 PM #35
Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

It does not work here. May be in house listing. Most of the time it is considered not professional and get rejected.

May 16, 2017 06:19 PM #36
Katie B. Cullum
Castle Pines North, CO

Good evening Alan,

In my brief introduction to being an Agent in this crazy Colorado market, I've heard of Agents here not only using an escalation clause for their Buyer offers but some Listing Agents are ALSO asking for a RESOLUTION clause for exactly what the Buyer's are prepared to do in advance if the appraisal doesn't meet the escalation clause pricing! I think the key here is having the Agent AND Buyer's being well educated with these clauses and possible outcome senarios, good and bad!

Like you said - love it or hate it, I believe it is here to stay and in this competitive market, I'm sure it will further develop into additional hurdles to ultimately have us and Buyer's win the home.



:~) Katie

May 16, 2017 06:55 PM #37
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

I think that's a great strategy and especially for your buyer who successfully used it!

May 19, 2017 03:44 PM #38
Michael Mahoney
eXp Realty - Boston, MA
Boston Realtor with eXp Realty



This is a great post.  Recently as a listing agent who had "hot homes" the winner who went home with the prize each used escalation clauses.





May 22, 2017 09:32 PM #39
Cynthia Larsen
Safe Haven Realty - Cotati, CA
Independent Broker Serving Sonoma County, CA

I've tried an escalation clause twice. I'm batting .500 so far. If you have a buyer who can make up the difference (if  necessary) between the appraisal price and the offer price with cash, you have a good candidate. I see no problem with escalation clauses, and owning my own brokerage allows me to do so. It isn't against the law. Good post, Alan.

May 24, 2017 11:26 AM #40
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