An escalation clause is when you offer to pay “$x” above the highest offer, but not to exceed “$x” purchase price, which should be the maximum you are willing to pay for the home. As an example, if the home is listed at $100,000 and there are several offers, you may choose to write in something like this. “$105,000 or $1,000 above the highest offer, not to exceed $110,000.” In this example you are offering $105,000, but if there are offers above $105,000 you are willing to pay $1,000 more but not higher than $110,000. In a recent multiple bid situation I had a buyer write in an escalation clause and the sellers decided to go with his offer ($105,000 in this example). They felt the escalation clause really showed home much they wanted the home.
Make sure you know if the seller and listing agent are open to escalation clauses. If a seller and listing agent are expecting several offers and escalation clauses are on several it can become difficult to compare the offers. I’ve see where this was the case, and the seller decided to accept the cleanest offer with no clauses. On the other hand, if there are only a few offers on the table and the seller and listing agent are open to escalation clauses this tool may help your offer stand out. Click here to see more about your individual toolkit!
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