Should You Use an Escalation Clause?
Escalation clauses just might be a home buyer’s most powerful secret weapon. You’ve probably heard by now that we’re in a “seller’s market” and that many homes are receiving multiple offers from buyers. This can become an arduous process for prospective buyers, but utilizing an escalation clause may ease some of the frustration.
Here’s how they work: Let’s pretend you’re submitting an offer on a home for $200,00 but you and your real estate agent are aware that another offer or two could also be coming in shortly. Your agent may suggest using this Escalation Clause, which is essentially an addendum to the contract that states that you will raise your offer price if and only if the sellers receive another offer that is higher than yours. Typically, this escalation clause will state that your offer will raise in specific increments (let’s say by $1000) over the competing offer – but only up to a specific amount (up to $210,000 for example).
Escalation clauses, while pretty nifty, shouldn’t always be used. In fact, they’re typically only considered when your agent learns that other buyers are seriously interested. But in today’s busy market, this isn’t uncommon! Be sure to speak to your EveryHome agent for individualized assistance.