When you’re making an offer on a home, especially in a competitive market, you may hear the term escalation clause.
Here’s what it means and how it works:
An escalation clause allows a buyer to automatically increase their offer price if the seller receives a higher competing offer. The clause states how much the buyer is willing to increase their offer above another offer and sets a maximum purchase price they won’t exceed.
For example: A buyer offers $400,000 with an escalation clause of $2,000 over any competing offer, up to $420,000. If another buyer submits an offer at $405,000, the original offer will automatically escalate to $407,000, still staying within the buyer’s comfort zone.
Once the offer with the escalation clause is verbally accepted, the seller provides a copy of the competing offer to the purchasers (with personal information redacted). This confirms the legitimate higher offer and establishes the final purchase price based on the terms of the escalation clause.
Escalation clauses can help buyers stay competitive without overpaying upfront. However, they should be used carefully, as sellers may also look at other terms and conditions of the contract, such as Inspections, to make the final decision.
Working with an experienced real estate professional ensures that an escalation clause is written clearly and used strategically to protect your best interests. 🏡
Mark Montross
Catamount Realty Group
85 Prim Rd., Suite 202
Colchester, VT 05446
802–825-1353
Mark@CatamountRealtyGroup.com