Escalation Clause… What is it, and how to use it.

Blog #1

March 6, 2023

Escalation Clause… What is it, and how to use it.

Over the last few years, terms have been introduced and re-introduced due to the in-balance of supply and demand in the residential real estate market. An escalation clause is one of them.

An escalation clause is a useful and valuable tool for both buyers and sellers. The gist of the clause is that buyer A is willing to pay a specific dollar amount higher than buyers B, C, and D. Here’s an example: The sellers of a $500,000 home have requested interested purchasers’ best offers by a set day/time. Knowing there is tremendous interest in the property, Buyer A presents an offer to purchase at a price of $500,000 with an escalation clause of $5000 increments (the escalation) up to $530,000 (the limit). If the winning bid is $500,000, then that will be the purchase price, but if buyer B offers $515,000, then buyer A’s bid automatically escalates to $520,000.

We have used this tool successfully here at Better Homes and Gardens Murphy & Co. for both buyers and sellers and have several tips and strategies for navigating this challenging market.

To learn how we can help you stand out from the crowd and successfully market, sell, or purchase a home, please reach out to our family of agents! We look forward to working with you.

Kevin Murphy, GRI

Broker/Owner