Could an escalation clause help you buy a home?

On Behalf of | Jun 12, 2022 | Residential Real Estate

The real estate market is hotter than ever, and would-be buyers are struggling to gain an advantage in a bidding war.

Could an escalation clause in your next offer help you secure a home? Quite possibly, it could be the best way to give you a fighting shot at getting the home of your dreams – without paying more than necessary.

What’s an escalation clause?

Basically, escalation clauses allow you to start with the lowest reasonable offer you think the seller might take and automatically increase your offer relative to any others the seller might receive – by whatever increments you set and only up to the maximum you’re willing to pay.

For example, maybe you offer $145,000 on a home that’s listed for $150,000 – but you’re actually willing to pay $165,000 for the property if you have to. You can set your escalation clause to increase by $3,000 increments until you either surpass all other offers or reach your maximum. If another prospective buyer offers the seller $155,000 for the home, your offer would then automatically increase to $158,000.

The price you’re willing to pay for a home isn’t the only factor that may come into play when a seller has multiple offers to choose from – but it is a big one. Your escalation clause allows you to be cautious with your money but still stay competitive when a bidding war seems almost inevitable.

As with all real estate offers and contracts, there can be pros and cons. If you’re looking to buy a home in today’s market, it’s wisest to have experienced legal guidance throughout the process.