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What Is an Escalation Clause?

by: Jeff Quintin, on May 10, 2021 - Buyers in South Jersey faq Home Buyer Tips Ocean City Real Estate

Here’s how you can win a deal using an escalation clause.

If you’re a buyer in the market, you’re up against some heavy competition. Most listings are receiving multiple offers, so if you want to win the home you’re bidding on, you’ll need a powerful offer. That’s why today we want to talk about one strategy that can help you gain a competitive edge when it comes to purchasing a home: an escalation clause.

An escalation clause is a section of your contract that states you will pay a certain amount above any other offer but not more than a limit that you set for yourself. To help illustrate how this works, suppose that you’re looking to buy a $500,000 property that has multiple offers on it. In this market, you’d want to make at least a full-price offer. In addition to full price, you’d write in the contract that you’ll agree to $5,000 above any other offer that comes in, up to the set limit of, say, $550,000.

If you want to win the home you’re bidding on, you’ll need a powerful offer.

You can also write in an escalation clause without a cap on it. If you don’t set a cap on your escalation clause, you’ll have an even better chance of winning the bidding war because your offer will automatically exceed any offers that come in higher than yours.

If you have any questions about escalation clauses or buying a home in today’s market, feel free to reach out to us. We’d love to help you.