Tuesday, June 1, 2021 / by Shane Kilby
Win the Home You Want With an Escalation Clause
Now that the selling season is in full swing and we’re in such a hot market, many buyers are asking my team and me what they can do to be more competitive with so few homes available. If you’re asking yourself the same thing, one thing you can do is use an escalation clause.
Typically, you make an offer on a property that encompasses whatever you’re willing to pay for it (the highest and best you can). If you add an escalation clause to your offer, you’re saying you’re willing to pay above other offers to get the property. When you structure your offer with an escalation clause, you have to determine which increment your offer will increase above competing offers.
"An escalation clause is a great way to leverage your offer to be competitive in this hot market."
Let’s say, for example, you make an offer of $250,000 for a property and your escalation clause states you’ll pay $1,000 more than any competing offer up to $260,000. If another offer comes in at $255,000, your offer gets bumped up to $256,000. If another offer comes in at $257,000, your offer gets bumped up to $258,000.
An escalation clause is a great way to leverage your offer to be competitive in this hot market. Just make sure your offer states what you’re willing to pay, the incremental escalation number, and the price ceiling your clause is willing to meet.
If you have questions about this or any real estate topic, feel free to reach out to me or anyone in our office. I look forward to hearing from you.