In an ultra-competitive Real Estate market such as one we are experiencing; prospective buyers are looking for ways to be the one the seller chooses when competing with multiple offers.
Buyers are looking to get a leg up on their competition trying to be the winning bid. One way to achieve this is to add an escalation clause to their offer. It states that the buyer is willing to pay a specific amount over the highest bonified offer up to a certain amount. An example of this is a buyer who offers $200,000 and willing to pay $1,000 over the highest bonified offer up to $207,000. If the highest offer was $205,000. The would agree to pay $206,000.
The buyer should be mindful that if an appraisal is required for their purchase, the high-end price they are willing to go should be realistic. To further secure this as a viable option for a seller to consider, a buyer could add that they would be willing to pay the difference between the appraised price and the agreed-upon escalated sale price. In that case, the seller is assured they will not have to drop their price if the appraisal coming in below the sale price.
Though escalation clauses can be attractive to some sellers, they do not have to exercise that option especially if they are concerned about the appraisal not coming in at the escalated price. And there are sellers that state that they will not consider escalation clauses with any offer.
An escalation clause, done thoroughly, thoughtfully, and with realistic amounts, can entice the seller to choose their offer over if they choose to go that route.
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