Pros and Cons of Using an Escalation Clause

By
Real Estate Agent with Optima Properties BK 496540

 

 

An escalation clause is language inserted into a purchase offer for a home that’s intended to make sure a buyer is the highest bidder. It’s typically used when a buyer and their real estate agent strongly believe a house will receive multiple offers.

An escalation clause states that the buyer will pay a certain amount of money above the highest offer the seller receives. It generally includes a ceiling cap to make sure the buyer doesn’t agree to pay more money than they can afford.

An escalation clause can be a powerful technique when used correctly, but unfortunately it is seldom used as effectively as it could be. Such a clause increases, or escalates, a contract above its originally offered Sales or Contract Price when the Home Seller has received another Contract.  The intent of the Clause is to crush competing contracts by automatically and incrementally increasing the buyer’s offer price by a pre-determined amount above other offer(s).

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Comments (1)

Kristin Johnston - REALTOR®
RE/MAX Realty Center - Waukesha, WI
Giving Back With Each Home Sold!

Great information.  Thanks for sharing and enjoy your day!

May 21, 2021 07:06 AM