Escalation Clause

Escalating Clause

Have you heard the term escalating clause?

It’s not new but it is now becoming more common in this very hot market.

As escalating clause states that you will pay, for example, $5,000 more than any other offer to a maximum of $650,000, or whatever your top price is.

This seems like a great strategy to compete but not overpay. And sometimes it is.

Unless multiple people have this clause and then the seller’s agent can push everyone’s price up. And sometimes, sellers don’t want the complication. We once lost an offer with this clause because the seller just wanted a clean simple offer instead, especially if the other offer has fewer or no conditions.

The other outcome of an escalating clause may be that the potential buyers just want to tie the property up. They pay a high price…for now, then they want to negotiate the price again after the condo review, appraisal, or home inspection. They have tied it up, the other buyers have moved on and then the seller feels more inclined to negotiate rather than start over. 

What works better?  A great agent that will pick up the phone and negotiate instead of just trying to submit the highest price.  Some offers aren’t about price. A specific possession day may be more valuable than $5,000 if it means that the seller has to move out early and rent a place for a month and then go through the hassle of moving again into their home.  Your agent, should reach out, let them know your details, that you’re qualified, that you love the house and want to pay a fair price, and that you may be negotiable on not only the price but the other details as well.

Position yourself as the best offer, not just the highest offer.